KPMG unveils free board diversity disclosure tool

Tool reveals few boards report race, ethnicity or sexual orientation

Board diversity disclosure analytics are freely available through the KPMG Board Diversity Disclosure Benchmarking Tool, powered by ESGAUGE. The tool allows corporate and board leaders, investors, employees and other stakeholders to compare diversity disclosure practices by sector, index (Russell 3000 and S&P 500) and company size to help identify trends in board diversity disclosure.

Demand for companies to disclose their board diversity policies and demographics continues to grow. Until now, analysis of the level and types of disclosure by public companies had been available only through company-by-company review of proxies and other company disclosures.

“Diverse boards are more effective, and disclosure drives action,” said Senior Advisor, KPMG Board Leadership Center Susan M. Angele. “As stakeholder calls continue to grow for disclosure of board diversity as well as policies and practices, this tool will help measure progress and highlight gaps.”

 

Using the tool, the KPMG Board Leadership Center analyzed board diversity disclosure practices as of January 31, 2021. The initial information provides a baseline for benchmarking change over time. Key findings include:

Many companies do not include gender, race, ethnicity or sexual orientation in their public description of how diversity is incorporated into director search criteria.

  • Under U.S. Securities and Exchange Commission rules, public companies must describe if and how they incorporate diversity into their director search criteria. While almost all Russell 3000 companies (98 percent) refer to diversity in their disclosures, many do not disclose the types of diversity considered, and others use general definitions of diversity. Among companies that reference diversity, only two-thirds (67 percent) specify gender diversity, and only 61 percent specify racial or ethnic diversity when disclosing their board composition policies and practices.

Most Russell 3000 companies do not disclose the level of diversity of their boards.

  • Some companies report the level of diversity in their boardrooms by disclosing only the aggregate number or percentage of board members who are diverse, with varying levels of specificity:
  • Only about a quarter (26 percent) of Russell 3000 companies disclose the proportion of board members who are female, compared to 59 percent of S&P 500 companies.
  • Fewer than 1 in 10 (8 percent) Russell 3000 companies report the proportion of board members who are racially or ethnically diverse, while 25 percent of S&P 500 companies do so.
  • Only 1 percent of Russell 3000 companies and 2 percent of S&P 500 companies disclose the self-reported sexual orientation of their directors.

It is rare for companies to identify individual diverse directors.

  • Calls for more detailed disclosure about board diversity seek to understand the diversity that each director brings to boardroom deliberations. For example, the Diverse Corporate Directors Coalition’s “Call to Action for Equity and Inclusion in the Boardroom” asks companies to disclose disaggregated diversity information for each board member based on voluntary self-identification.
  • While gender disclosure may be inherent in the pronouns used in director biographies in company proxy statements, racial and ethnic background are primarily disclosed through self-identification. Likewise, LGBTQ+ status is only visible through self-identification and disclosure.
  • Only 5 percent of Russell 3000 companies disclose individual directors’ self-reported racial and/or ethnic backgrounds, and only 16 percent of S&P 500 companies do so.
  • It is extremely rare for companies to disclose the self-reported sexual orientation of individual directors, with only 1 percent of Russell 3000 companies and 2 percent of S&P 500 companies doing so. 

 

Media Contact:

Elizabeth Lynch

Elizabeth Lynch

Manager, Corporate Communications, KPMG US

+1 201-505-6316

 

 

Susan M. Angele

Susan M. Angele

Senior Advisor, Board Leadership Center, KPMG US

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