The week in GRC: S&P 500 sees important board diversity step and data shows gender pay gap starts early in careers
– CNN reported that, for the first time, every company listed on the S&P 500 has at least one racially or ethnically diverse director. Roughly 11 percent of S&P boards were non-diverse in 2020. Monday also marked an important deadline for all Nasdaq-listed companies: they must complete a board diversity matrix that includes the total number of company board members and how those board members self-identify regarding gender, race, ethnicity and LGBTQ+ status. The results will be made public through annual meeting proxy statements or on company websites.
Starting in August 2023, companies trading on the exchange must have at least two diverse board members or explain why they are not meeting this diversity objective.
‘Disclosing this information to investors empowers shareholders to support companies that embody their ideals and pull investments from those that don’t,’ said Rep Carolyn Maloney, D-New York, who chairs the House Committee on Oversight and Reform, in a statement praising the move. ‘Beyond making moral and common sense, increased diversity also makes financial sense. Studies have repeatedly found that companies with more diverse leadership are better positioned to succeed.’
– According to The Wall Street Journal (paywall), broad new data on wages earned by college graduates who received federal student aid shows a pay gap emerging between men and women soon after they join the workforce, even among those who received the same degree from the same school.
The data, which covers roughly 1.7 mn graduates, shows that median pay for men exceeded that for women three years after graduation in nearly 75 percent of roughly 11,300 undergraduate and graduate degree programs at around 2,000 universities. In almost half of the programs, male graduates’ median earnings topped women’s by 10 percent or more, a WSJ analysis of data from 2015 and 2016 graduates shows.
For example, men who received undergraduate accounting degrees from Georgetown University earned a median $155,000 three years after graduation, a 55 percent premium over their female classmates, the analysis shows.
– The SEC proposed new rules aimed at preventing conflicts of interest in management and governance of clearing houses, Reuters reported. Under the SEC’s proposal, registered clearing houses would have to disclose more details on board composition, independent directors and nominating and risk-management committees, among other details.
‘I think these rules would help to build more transparent and reliable clearing houses,’ said SEC chair Gary Gensler in a statement. ‘This in turn would help ensure our markets are more resilient, protecting investors and building trust in our markets.’ The SEC’s plan would require clearing houses to identify, mitigate or eliminate conflicts of interest involving directors or senior managers, and to document such actions.
– Reuters reported that the combination of falling demand for legal services and increasing pay and overhead costs has created financial headwinds for law firms in 2022. The Thomson Reuters Law Firm Financial Index fell to its lowest point this past quarter since its 2006 founding. That marks a sharp change from a year ago, when the index hit an all-time high due to soaring demand in corporate practices. The index has fallen in each of the past four quarters. Law firms are not yet feeling a significant financial squeeze due in part to a nearly 5 percent increase in rates, but the numbers are a warning sign that 2022 may be the end of law firms’ recent financial boom, notes an analysis.
– According to the WSJ, the energy legislation passed by the Senate includes $27 bn for what are called green banks that funnel money into renewable projects, although some of the biggest beneficiaries could be private sector investors. The legislation allocates the money to a greenhouse-gas reduction fund, with about $20 bn earmarked for national or regional funds that would be overseen by the Environmental Protection Agency. The rest of the money is designed to go to state and local recipients.
Although often called green banks, such vehicles are public investment funds set up by governments. They don’t take in deposits from consumers and have a mandate to use debt-financing techniques such as direct lending or lines of credit to back infrastructure projects intended to lower carbon emissions. The goal of these funds is to prompt private sector banks and asset managers to put money into clean projects alongside them.
– Nielsen Holdings said its largest shareholder has reached a tentative agreement to support a $10 bn buyout of the TV ratings company by a consortium of private equity firms, the WSJ reported. Nielsen said Tuesday it is postponing its shareholder vote on the buyout deal as the consortium, led by Elliott Management Corp’s private equity arm and Brookfield Asset Management, seeks to complete the agreement with WindAcre Partnership, which had previously opposed the deal.
Nielsen said Tuesday that Elliott and Brookfield have reached a preliminary agreement with WindAcre through which the Houston investment firm would join the consortium and remain an investor in the privately held Nielsen with a portion of its shares.
– The SEC proposed amendments to Form PF, the confidential reporting form for certain registered investment advisers to private funds. The amendments, which the Commodity Futures Trading Commission (CFTC) is considering jointly proposing with the SEC, are designed to enhance the Financial Stability Oversight Council’s ability to assess systemic risk and boost the SEC’s regulatory oversight of private fund advisers and its investor protection efforts in light of the growth of the private fund industry.
‘In the decade since the SEC and CFTC jointly adopted Form PF, regulators have gained vital insight with respect to private funds,’ said Gensler. ‘Since then, though, the private fund industry has grown in gross asset value by nearly 150 percent and evolved in terms of its business practices, complexity and investment strategies.’
– Reuters reported that a UK government-sponsored report said financial services companies should set ‘stretching targets’ for appointing people from working class backgrounds to senior positions. The finance industry is already making efforts to appoint more women and people of color to boards and into roles like CEO but targets for socio-economic background have featured less in corporate diversity efforts.
A taskforce commissioned by the government and led by the City of London Corporation surveyed more than 9,000 employees across 49 financial and related professional firms and found the industry is out of step with society. The taskforce said 49 percent of all levels of seniority in the finance industry were from a professional background, rising to 64 percent for senior leaders. For the UK population as a whole, 37 percent of working people are from a professional background. Socio-economic background can amplify other inequalities such as those related to ethnicity and gender, it said.