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Remarks at Third SAIS Global Conference on Women in the Boardroom

Commissioner Elisse B. Walter

U.S. Securities and Exchange Commission

Washington, D.C.

Sept. 20, 2012

U.S. Securities and Exchange Commission

SAIS Center for Transatlantic Relations
Washington, D.C.
September 20, 2012


Good morning, and thank you, Susan, for that lovely introduction. I want to thank you for all of your tireless work as a true champion of women in the boardroom. Your accomplishments and the trails you have blazed over the course of your career are an inspiration to women and girls across the globe, and I hope, to men and boys, as well.

It is a pleasure to be here this morning with you and with so many others who are so deeply committed to bringing change to the boardrooms in the U.S. and around the world.

Before I continue, however, I should let you know that the views I share with you today are my own, and do not necessarily reflect the views of the Commission, my fellow Commissioners, or members of the staff. Please keep that in mind, as many of my remarks today will deal with matters that go beyond the Commission’s core responsibilities.

Now, I recognize that you were probably looking forward to hearing from our Chairman Mary Schapiro. She has asked me to apologize on her behalf and sends her heart-felt regrets. I know that she is disappointed that she could not take part in such an important dialogue.

And, I should also mention that this is a dialogue my colleague, Luis Aguilar, who spoke at your inaugural event, also believes is incredibly important. He has spoken extensively about boardroom diversity and played an important role in drafting and adopting the diversity disclosure regulations I’ll be discussing in just a few moments.

Unfinished Business

So, what exactly is this dialogue and why have we gathered here today?

This third annual Global Conference on Women in the Boardroom brings together corporate executives, government officials, and stakeholders — including institutional investors, executive search firms, and corporate governance experts — to discuss gender diversity in the boardroom. In other words, Susan has arranged for all the right people to be here, to join experts from around the world in a discussion of initiatives designed to achieve gender balance on corporate boards.

I know that you’re anxious to hear about these initiatives, and this conference is an important step towards the goal. Yet, it is certainly a stark reminder of how far there is to go in order to reach it worldwide.

Let me begin with just a few statistics to help put that distance into perspective.

According to the 2012 Women on Boards survey of the Governance Metrics International Ratings, the percentage of women directors on U.S. boards increased only marginally to 12.6 percent, just 0.5 percentage points, from 2009 to 2011. On a positive note, 71.1 percent of boards in the U.S. have at least one female director. However, the numbers begin to starkly decline beyond that — with only about 10 percent of boards having three or more women, and only 2% having female board chairs. And, board turnover in this country is sufficiently low that this can affect progress as well.

In some other parts of the world, the numbers are higher, but still not where they probably should be. Over 36 percent of directors in Norway are women, but that figure falls to 17 percent in France and South Africa and falls further in Australia, to just under 14 percent.

Globally, the percentage of companies studied having no female directors has finally broken the 40 percent barrier, but in the last year fell two-tenths of a percentage point to 39.8.

Companies with at least three women on the board, which some research suggests may be a “critical mass” and therefore significant for achieving true gender balance, rose 1.3 percentage points to 9.8 percent of companies worldwide. The survey also indicates that, for the first time ever, women hold more than one in ten board seats globally, at 10.5 percent of the directors covered by the study, or a 0.7 percentage point increase from the prior year.

I’m sure that many of you share my disappointment with these numbers. As someone who reluctantly admits to having entered the workforce in the 1970s, I take some solace in the fact that we really have come a long way since that time. And, I remain hopeful that we will see true diversity in the boardroom within my lifetime.

To me, the numbers say we’re moving, but we’ve got a lot more road to cover.

Exercising Voice

That road is, of course, about trailblazers like our SEC Chairman Schapiro. Before she returned to public service at the agency, she held not one, but two seats at the board table. With her boardroom experience and extensive regulatory background, she chose to exercise her voice in public service on behalf of investors over the past four years, bringing a number of important corporate governance initiatives before the Commission.

Each of these initiatives, including enhanced proxy disclosure, say-on-pay, NYSE Rule 452, and proxy access, among others, was championed by our Chairman as a way to enhance engagement with investors and increase accountability of directors to their shareholders.

In essence, by exercising her voice, Chairman Schapiro has enhanced the ability of others to use theirs.

I believe that these initiatives have amplified the voices of shareholders — the true owners of the companies in which they invest.

In his influential 1970 work, Exit, Voice and Loyalty, economist Albert Hirschman wrote that dissatisfied members of a larger whole — customers of a brand, citizens of a country or shareholders in a firm — have two choices in seeking change: walk or voice.

Although some disagree, I continue to be a strong believer in the voice alternative. To me, it is unacceptable to force investors to confront the exit alternative, also known as the “Wall Street Walk.”

As an SEC commissioner, I have a strong belief that investors who are aware of practices that either threaten or improve performance will use their “voice” — either through direct pressure or through the allocation of their investment dollars — to press the companies in which they invest to take appropriate action.

Recent history suggests that investors are exercising their voice in several areas.

For example, “say on pay” regulations have given shareholders the right to vote on executive compensation packages. Although the votes are non-binding, and companies are not required to revise packages even if they are voted down, I understand that disclosure is increasing and that boards and managers are taking communication with investors on this issue very seriously.

There is also evidence that our rule on disclosure of director qualifications is making a difference — that companies are discussing in greater detail how they determine the right mix of directors and in turn, are becoming more focused on the diversity of their membership. And, there is evidence that, in response, investors are more informed and more engaged.

I see this as real progress in terms of helping investors better evaluate whether a particular individual will add value to a company. Our regulations are putting better and more complete information in investors’ hands, and helping to enhance engagement between companies and investors.

I believe that our decisions to address corporate governance issues remain sound policy. For me, this is especially true when our actions serve to help investors with their decisions in exercising their voice. Specific, complete, and accurate information about a company’s corporate governance, particularly about directors and director nominee qualifications, is vital to an investor’s productive participation.

Breaking Down Barriers

Of course, I recognize that these sorts of disclosure requirements are clearly an indirect route for moving the needle on boardroom diversity. And, I note that we are still in the early days for these requirements.

Some have been encouraged by our efforts, stating that they are a step in the right direction. Others point out that the SEC’s role is more often than not disclosure, while the states and the exchanges through listing standards set substantive requirements. Still others were disappointed with the rules we adopted and believe that they are not having much of a positive effect.

Yet, I continue to believe that disclosure requirements can be effective. Enhanced disclosure, especially regarding a company’s diversity policy, whether formal or informal, should help investors better evaluate remaining barriers to diverse boards and the steps they might take to break down those barriers where they choose to do so.

And, from what I have seen recently, many of you are taking such steps — from writing letters to companies with zero women directors to databases of board-ready candidates, to designing programs that enhance sponsorships of women seeking board seats — all of these efforts seem to me to be important steps towards changing the culture and mindset that have served as barriers to true gender diversity on corporate boards. Of course, I should disclose that I am a proud graduate of the DirectWomen Institute — and I do have a special place in my heart for those who seek innovative ways to break down barriers to women serving on corporate boards.

I recognize, however, that the implementation of our disclosure-based rules can be an imperfect art in the early stages. There is always room for improvement. Let me give you an example of where this improvement might take place. As I’ve said publicly in the past, I have heard tales, at least I hope that they are tales and tall tales at that, that companies wait to make disclosures until after our staff issues comments, hoping that they will be what we call futures comments that don’t have to be followed until the next filing. To those of you here who are in the disclosure business, please don’t do that. Don’t shirk your responsibilities.

We are taking our own responsibilities seriously as well. In addition to our disclosure reviews, as many of you know, our agency has been tasked by Congress with responsibilities concerning diversity under Section 342 of the Dodd — Frank Act. That Section requires each of the financial regulatory agencies, including the SEC, to establish an Office of Minority and Women Inclusion — which at our agency, is under the direction of Pamela Gibbs. Her office is charged with not only looking internally, but also with assessing the diversity policies and practices of the entities regulated by the agency and developing uniform standards in this area. This is another way the SEC can have an impact. With any luck, by the end of the next proxy season, the SEC’s OMWI office will be taking a close look at our regulated entities to make these assessments.

Other Approaches Worldwide

Now, I know that other nations and regions are taking more direct approaches to address the issue of gender diversity.

In the U.K., the February 2011 Lord Davies report, Women on Boards, called for 25 percent of the largest British companies to include women on their boards by 2015. Less than three weeks ago, Viviane Reding, the European Union Justice Commissioner proposed that companies allocating fewer than 40 percent of board seats to women by 2020 face sanctions. Australia has a listing exchange disclosure requirement, and some countries like Norway and France do have quotas.

These are just a few of the strategies being adopted around the world. Although I have not personally formulated a strong view on any of these various approaches, I am interested in the trend lines as they continue to develop.

I also am very interested to see what happens at those companies that are dually-listed or listed in multiple markets where they may encounter the measures I’ve mentioned. I think this presents an interesting challenge for global companies and an opportunity for them to lead.

I have also seen recent news reports that European pressure to bring women into EU-based company boardrooms may result in a growing number of American women going to serve as board members across the sea. Hopefully, gaining this board-level experience abroad will help to lower the barrier created by the argument, which I find incredibly irritating, that women in the US don’t have board-level experience.

Research Supporting Board Diversity

But why does all this change we’re discussing today matter anyway?

As an SEC Commissioner, I would argue: because investors care and the companies they own are increasingly choosing to engage with them on this issue.

Regarding the specific conclusions of studies that have examined the relationship between board diversity and company performance, I would like to leave that to the experts in the field, a number of whom I understand will be here today. I also trust that engaged investors will analyze for themselves what these experts are saying in the growing body of research that supports gender diversity on corporate boards.

I will say, though, that I am intrigued by the research concerning the effects that a critical mass of women can have on a corporate board in terms of performance.

As a Commissioner who experienced the first ever Commission with a “critical mass” of women, I can proudly say that that Commission was one of the most engaged and effective Commissions in the agency’s history.


While it has been my pleasure to be your keynote speaker today, I hope you will understand when I tell you that I would like nothing more than to be your last keynoter. In an ideal world, advancements would come so rapidly that we wouldn’t need a fourth or fifth conference like this. And, from what I’ve seen so far of the work being done by many of you, it almost (but not quite) seems like this is one wish that just might come true. Thank you for the extraordinary and important work that you are doing.

So, let me close with a brief word to the executives, board members, recruiters, and other parties to the hiring process who are here today.

I hope to see that your commitment to your companies and the investors who own them is reflected in not only effective, long-term, strategic planning, but also in realistic assessments of the risks your businesses face and the implementation of actions necessary to best address those risks. I firmly believe that bringing a diversity of approaches, viewpoints, demographics, and personal histories to your board tables will help you do just that.

For the institutional investors here today — I hope that when you open your next proxy statements, you see transparent descriptions of companies’ diversity considerations and diversity policies, including information you need to understand them. I hope you also see board candidates who demonstrate that these policies are being actively pursued and that you feel confident when you judge what is best for your portfolios and those who rely on their performance.

I remain ever hopeful that when investors and companies enhance their engagement with each other on gender diversity and other diversity as well — when corporations thoroughly and effectively disclose their approach, and when investors use their voices to effectively press for change — then, not only companies and investors, but our global capital markets system should benefit.

Thank you.

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