Improving Corporate Governance Through Diversity Act of 2021

II 117TH CONGRESS 1ST SESSION S. 374 To amend the Securities Exchange Act of 1934 to require the submission by issuers of data relating to diversity, and for other purposes. IN THE SENATE OF THE UNITED STATES FEBRUARY 23, 2021 Mr. MENENDEZ (for himself, Ms. WARREN, Mr. VAN HOLLEN, Mr. BOOKER, Mrs. FEINSTEIN, Mr. PADILLA, Mrs. GILLIBRAND, Ms. CORTEZ MASTO, Mr. WARNOCK, and Mr. BROWN) introduced the following bill; which was read twice and referred to the Committee on Banking, Housing, and Urban Affairs A BILL To amend the Securities Exchange Act of 1934 to require the submission by issuers of data relating to diversity, and for other purposes. Be it enacted by the Senate and House of Representa- 1 tives of the United States of America in Congress assembled, 2 SECTION 1. SHORT TITLE. 3 This Act may be cited as the ‘‘Improving Corporate 4 Governance Through Diversity Act of 2021’’. 5 VerDate Sep 11 2014 02:51 Mar 02, 2021 Jkt 019200 PO 00000 Frm 00001 Fmt 6652 Sfmt 6201 E:\BILLS\S374.IS S374 kjohnson on DSK79L0C42PROD with BILLS 2 •S 374 IS SEC. 2. SUBMISSION OF DATA RELATING TO DIVERSITY BY 1 ISSUERS. 2 Section 13 of the Securities Exchange Act of 1934 3 (15 U.S.C. 78m) is amended by adding at the end the 4 following: 5 ‘‘(s) SUBMISSION OF DATA RELATING TO DIVER- 6 SITY.— 7 ‘‘(1) DEFINITIONS.—In this subsection— 8 ‘‘(A) the term ‘executive officer’ has the 9 meaning given the term in section 230.501(f) of 10 title 17, Code of Federal Regulations, as in ef- 11 fect on the date of enactment of this subsection; 12 and 13 ‘‘(B) the term ‘veteran’ has the meaning 14 given the term in section 101 of title 38, United 15 States Code. 16 ‘‘(2) SUBMISSION OF DISCLOSURE.—Each 17 issuer required to file an annual report under sub- 18 section (a) shall disclose in any proxy statement and 19 any information statement relating to the election of 20 directors filed with the Commission the following: 21 ‘‘(A) Data, based on voluntary self-identi- 22 fication, on the racial, ethnic, and gender com- 23 position of— 24 ‘‘(i) the board of directors of the 25 issuer; 26 VerDate Sep 11 2014 02:51 Mar 02, 2021 Jkt 019200 PO 00000 Frm 00002 Fmt 6652 Sfmt 6201 E:\BILLS\S374.IS S374 kjohnson on DSK79L0C42PROD with BILLS 3 •S 374 IS ‘‘(ii) nominees for the board of direc- 1 tors of the issuer; and 2 ‘‘(iii) the executive officers of the 3 issuer. 4 ‘‘(B) The status of any member of the 5 board of directors of the issuer, any nominee 6 for the board of directors of the issuer, or any 7 executive officer of the issuer, based on vol- 8 untary self-identification, as a veteran. 9 ‘‘(C) Whether the board of directors of the 10 issuer, or any committee of that board of direc- 11 tors, has, as of the date on which the issuer 12 makes a disclosure under this paragraph, 13 adopted any policy, plan, or strategy to promote 14 racial, ethnic, and gender diversity among— 15 ‘‘(i) the board of directors of the 16 issuer; 17 ‘‘(ii) nominees for the board of direc- 18 tors of the issuer; or 19 ‘‘(iii) the executive officers of the 20 issuer. 21 ‘‘(3) ALTERNATIVE SUBMISSION.—In any 1- 22 year period in which an issuer required to file an an- 23 nual report under subsection (a) does not file with 24 the Commission a proxy statement or an information 25 VerDate Sep 11 2014 02:51 Mar 02, 2021 Jkt 019200 PO 00000 Frm 00003 Fmt 6652 Sfmt 6201 E:\BILLS\S374.IS S374 kjohnson on DSK79L0C42PROD with BILLS 4 •S 374 IS statement relating to the election of directors, the 1 issuer shall disclose the information required under 2 paragraph (2) in the first annual report of issuer 3 that the issuer submits to the Commission after the 4 end of that 1-year period. 5 ‘‘(4) ANNUAL REPORT.—Not later than 18 6 months after the date of enactment of this sub- 7 section, and annually thereafter, the Commission 8 shall submit to the Committee on Banking, Housing, 9 and Urban Affairs of the Senate and the Committee 10 on Financial Services of the House of Representa- 11 tives, and publish on the website of the Commission, 12 a report that analyzes the information disclosed 13 under paragraphs (2) and (3) and identifies any 14 trends with respect to such information. 15 ‘‘(5) BEST PRACTICES.— 16 ‘‘(A) IN GENERAL.—The Director of the 17 Office of Minority and Women Inclusion of the 18 Commission shall, not later than 3 years after 19 the date of enactment of this subsection, and 20 every 3 years thereafter, publish best practices 21 for compliance with this subsection. 22 ‘‘(B) COMMENTS.—The Director of the Of- 23 fice of Minority and Women Inclusion of the 24 Commission may, pursuant to subchapter II of 25 VerDate Sep 11 2014 02:51 Mar 02, 2021 Jkt 019200 PO 00000 Frm 00004 Fmt 6652 Sfmt 6201 E:\BILLS\S374.IS S374 kjohnson on DSK79L0C42PROD with BILLS 5 •S 374 IS chapter 5 of title 5, United States Code, solicit 1 public comments related to the best practices 2 published under subparagraph (A).’’. 3 SEC. 3. DIVERSITY ADVISORY GROUP. 4 (a) DEFINITIONS.—For the purposes of this section: 5 (1) ADVISORY GROUP.—The term ‘‘Advisory 6 Group’’ means the Diversity Advisory Group estab- 7 lished under subsection (b). 8 (2) COMMISSION.—The term ‘‘Commission’’ 9 means the Securities and Exchange Commission. 10 (3) ISSUER.—The term ‘‘issuer’’ has the mean- 11 ing given the term in section 3(a) of the Securities 12 Exchange Act of 1934 (15 U.S.C. 78c(a)). 13 (b) ESTABLISHMENT.—The Commission shall estab- 14 lish a Diversity Advisory Group, which shall be composed 15 of representatives from— 16 (1) the Federal Government and State and local 17 governments; 18 (2) academia; and 19 (3) the private sector. 20 (c) STUDY AND RECOMMENDATIONS.—The Advisory 21 Group shall— 22 (1) carry out a study that identifies strategies 23 that can be used to increase gender, racial, and eth- 24 VerDate Sep 11 2014 02:51 Mar 02, 2021 Jkt 019200 PO 00000 Frm 00005 Fmt 6652 Sfmt 6201 E:\BILLS\S374.IS S374 kjohnson on DSK79L0C42PROD with BILLS 6 •S 374 IS nic diversity among members of boards of directors 1 of issuers; and 2 (2) not later than 270 days after the date on 3 which the Advisory Group is established, submit to 4 the Commission, the Committee on Banking, Hous- 5 ing, and Urban Affairs of the Senate, and the Com- 6 mittee on Financial Services of the House of Rep- 7 resentatives a report that— 8 (A) describes any findings from the study 9 conducted under paragraph (1); and 10 (B) makes recommendations regarding 11 strategies that issuers could use to increase 12 gender, racial, and ethnic diversity among 13 board members. 14 (d) ANNUAL REPORT.—Not later than 1 year after 15 the date on which the Advisory Group submits the report 16 required under subsection (c)(2), and annually thereafter, 17 the Commission shall submit to the Committee on Bank- 18 ing, Housing, and Urban Affairs of the Senate and the 19 Committee on Financial Services of the House of Rep- 20 resentatives a report that describes the status of gender, 21 racial, and ethnic diversity among members of the boards 22 of directors of issuers. 23 (e) PUBLIC AVAILABILITY OF REPORTS.—The Com- 24 mission shall make all reports of the Advisory Group avail- 25 VerDate Sep 11 2014 02:51 Mar 02, 2021 Jkt 019200 PO 00000 Frm 00006 Fmt 6652 Sfmt 6201 E:\BILLS\S374.IS S374 kjohnson on DSK79L0C42PROD with BILLS 7 •S 374 IS able to issuers and the public, including on the website 1 of the Commission. 2 (f) INAPPLICABILITY OF FEDERAL ADVISORY COM- 3 MITTEE ACT.—The Federal Advisory Committee Act (5 4 U.S.C. App.) shall not apply with respect to the Advisory 5 Group or the activities of the Advisory Group. 6 Æ VerDate Sep 11 2014 02:51 Mar 02, 2021 Jkt 019200 PO 00000 Frm 00007 Fmt 6652 Sfmt 6301 E:\BILLS\S374.IS S374 kjohnson on DSK79L0C42PROD with BILLS