by Mitch Kokai
Senior Political Analyst, John Locke Foundation
George Leef’s latest Forbes column probes political correctness at the agency that oversees stock exchanges.
Would corporations operate better if their board members were chosen so as to ensure that women and major racial/ethnic groups were all appropriately represented? Many social activists believe so and their thinking has penetrated into the federal regulatory agency that oversees our stock exchanges – the Securities and Exchange Commission (SEC).
Back in 2009, the SEC instituted a requirement that publicly traded companies disclose plans they might have regarding the diversity of their boards of directors. That is to say, the racial, ethnic and gender characteristics of board members – as if those attributes were the essential, defining attributes of a person.
But now SEC Chairman Mary Jo White has concluded that the earlier rule was too soft, leading only o vague disclosures about board diversity. As we learn in this Wall Street Journal editorial, she wants a new rule mandating that firms “include in their proxy statements more meaningful board diversity disclosures on their members and nominees.”
Chairman White’s idea dovetails with the thinking of Canadian law professor Aaron Dhir, who has been crusading for rules to compel companies to consider “the socio-demographic composition of their boards” and of Representative Carolyn Mahoney of New York, who wants the SEC to force companies to identify each member of their boards according to gender, race, and ethnicity.
Advocating more diversity just for the sake of creating boards that “look like America” (as Bill Clinton famously described his cabinet) makes many people feel good. But Law professors, bureaucrats, and politicians don’t have much if any idea what business management entails, and they won’t suffer any of the costs if boards stocked with people chosen mainly to meet a quota push the company into poor decisions.