By Amy Leisinger, J.D.
A stakeholder has filed a rulemaking petition regarding the text of proposed rule changes regarding materiality in statements relating to civil rights, diversity, equity and inclusion, equal opportunity, or related topics. The petition argues that more must be done to ensure adequate representation in corporate culture.
Disclosures. According to the petition, under Regulation FD, it is material for listed companies to disclose: (1) their most current EEO-1 report; (2) whether it has been reviewed by its board; and (3) any remedial steps taken consistent with the Civil Rights Act; and (4) whether the firm has voluntarily complied with the Joint Standards of the Federal Financial Institutions Examination Council pursuant to the Dodd-Frank Act. Regulated traded companies often make statements in support of equal opportunity but do not admit deficiencies in this area, the petition explains. Institutions own 80 percent of equity markets, but investors have no standards to evaluate the risk from non-compliance, according to the petitioner.
"[W]hen companies have to be transparent, it creates external pressure from investors and others who can draw comparisons company to company," the petition states.
This is the goal of the of the disclosure provisions of the federal securities laws, and, as the petitioner states, "pension funds of African-American public employees have little way to prevent themselves from investing in firms which engage in systematic employment, environmental injustice and consumer discrimination against them."
Proposed changes. The Dodd-Frank Act created the Offices of Minority and Women Inclusion to begin to hold the financial industry accountable for diversity and inclusion, but few have offered data voluntarily, according to the petitioner. Regulated entities advertise support for "Black History" and what is being done to level the playing field. However, the petition explains, Bloomberg reports that only 25 of the top100 public firms are willing to disclose their equal opportunity hiring record, and companies regularly enter into settlements, particularly regarding employment discrimination and environmental justice concerns.
"By any analysis, the nation’s publicly-traded companies do not take the Civil Rights Act seriously, even to Congress or financial regulators," according to the petition. "The recent NASDAQ filing on board diversity indicates a growing industry consensus that action is both morally right and good for the bottom line," the petitioner concludes.