Improving Corporate Governance Through Diversity Act of 2019

IIB 116TH CONGRESS 1ST SESSION H. R. 5084 IN THE SENATE OF THE UNITED STATES NOVEMBER 20, 2019 Received; read twice and referred to the Committee on Banking, Housing, and Urban Affairs AN ACT 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 VerDate Sep 11 2014 21:46 Nov 20, 2019 Jkt 099200 PO 00000 Frm 00001 Fmt 6652 Sfmt 6201 E:\BILLS\H5084.RFS H5084 pamtmann on DSKBC07HB2PROD with BILLS 2 HR 5084 RFS SECTION 1. SHORT TITLE. 1 This Act may be cited as the ‘‘Improving Corporate 2 Governance Through Diversity Act of 2019’’. 3 SEC. 2. SUBMISSION OF DATA RELATING TO DIVERSITY BY 4 ISSUERS. 5 Section 13 of the Securities Exchange Act of 1934 6 (15 U.S.C. 78m) is amended by adding at the end the 7 following: 8 ‘‘(s) SUBMISSION OF DATA RELATING TO DIVER- 9 SITY.— 10 ‘‘(1) DEFINITIONS.—In this subsection— 11 ‘‘(A) the term ‘executive officer’ has the 12 meaning given the term in section 230.501(f) of 13 title 17, Code of Federal Regulations, as in ef- 14 fect on the date of enactment of this subsection; 15 and 16 ‘‘(B) the term ‘veteran’ has the meaning 17 given the term in section 101 of title 38, United 18 States Code. 19 ‘‘(2) SUBMISSION OF DISCLOSURE.—Each 20 issuer required to file an annual report under sub- 21 section (a) shall disclose in any proxy statement and 22 any information statement relating to the election of 23 directors filed with the Commission the following: 24 VerDate Sep 11 2014 21:46 Nov 20, 2019 Jkt 099200 PO 00000 Frm 00002 Fmt 6652 Sfmt 6201 E:\BILLS\H5084.RFS H5084 pamtmann on DSKBC07HB2PROD with BILLS 3 HR 5084 RFS ‘‘(A) Data, based on voluntary self-identi- 1 fication, on the racial, ethnic, and gender com- 2 position of— 3 ‘‘(i) the board of directors of the 4 issuer; 5 ‘‘(ii) nominees for the board of direc- 6 tors of the issuer; and 7 ‘‘(iii) the executive officers of the 8 issuer. 9 ‘‘(B) The status of any member of the 10 board of directors of the issuer, any nominee 11 for the board of directors of the issuer, or any 12 executive officer of the issuer, based on vol- 13 untary self-identification, as a veteran. 14 ‘‘(C) Whether the board of directors of the 15 issuer, or any committee of that board of direc- 16 tors, has, as of the date on which the issuer 17 makes a disclosure under this paragraph, 18 adopted any policy, plan, or strategy to promote 19 racial, ethnic, and gender diversity among— 20 ‘‘(i) the board of directors of the 21 issuer; 22 ‘‘(ii) nominees for the board of direc- 23 tors of the issuer; or 24 VerDate Sep 11 2014 21:46 Nov 20, 2019 Jkt 099200 PO 00000 Frm 00003 Fmt 6652 Sfmt 6201 E:\BILLS\H5084.RFS H5084 pamtmann on DSKBC07HB2PROD with BILLS 4 HR 5084 RFS ‘‘(iii) the executive officers of the 1 issuer. 2 ‘‘(3) ALTERNATIVE SUBMISSION.—In any 1- 3 year period in which an issuer required to file an an- 4 nual report under subsection (a) does not file with 5 the Commission a proxy statement relating to the 6 election of directors or an information statement, the 7 issuer shall disclose the information required under 8 paragraph (2) in the first annual report of issuer 9 that the issuer submits to the Commission after the 10 end of that 1-year period. 11 ‘‘(4) ANNUAL REPORT.—Not later than 18 12 months after the date of the enactment of this sub- 13 section, and annually thereafter, the Commission 14 shall submit to the Committee on Financial Services 15 of the House of Representatives and to the Com- 16 mittee on Banking, Housing, and Urban Affairs of 17 the Senate and publish on the website of the Com- 18 mission a report that analyzes the information dis- 19 closed pursuant to paragraphs (1), (2), and (3) and 20 identifies any trends in such information. 21 ‘‘(5) BEST PRACTICES.— 22 ‘‘(A) IN GENERAL.—The Director of the 23 Office of Minority and Women Inclusion of the 24 Commission shall, not later than the end of the 25 VerDate Sep 11 2014 21:46 Nov 20, 2019 Jkt 099200 PO 00000 Frm 00004 Fmt 6652 Sfmt 6201 E:\BILLS\H5084.RFS H5084 pamtmann on DSKBC07HB2PROD with BILLS 5 HR 5084 RFS 3-year period beginning on the date of the en- 1 actment of this subsection and every three 2 years thereafter, publish best practices for com- 3 pliance with this subsection. 4 ‘‘(B) COMMENTS.—The Director of the Of- 5 fice of Minority and Women Inclusion of the 6 Commission may, pursuant to subchapter II of 7 chapter 5 of title 5, United States Code, solicit 8 public comments related to the best practices 9 published under subparagraph (A).’’. 10 SEC. 3. DIVERSITY ADVISORY GROUP. 11 (a) ESTABLISHMENT.—The Securities and Exchange 12 Commission shall establish a Diversity Advisory Group 13 (the ‘‘Advisory Group’’), which shall be composed of rep- 14 resentatives from the government, academia, and the pri- 15 vate sector. 16 (b) STUDY AND RECOMMENDATIONS.—The Advisory 17 Group shall— 18 (1) carry out a study that identifies strategies 19 that can be used to increase gender, racial, and eth- 20 nic diversity among members of boards of directors 21 of issuers; and 22 (2) not later than 9 months after the establish- 23 ment of the Advisory Group, submit a report to the 24 Commission, the Committee on Financial Services of 25 VerDate Sep 11 2014 21:46 Nov 20, 2019 Jkt 099200 PO 00000 Frm 00005 Fmt 6652 Sfmt 6201 E:\BILLS\H5084.RFS H5084 pamtmann on DSKBC07HB2PROD with BILLS 6 HR 5084 RFS the House of Representatives, and the Committee on 1 Banking, Housing, and Urban Affairs of the Senate 2 that— 3 (A) describes any findings from the study 4 conducted pursuant to paragraph (1); and 5 (B) makes recommendations of strategies 6 that issuers could use to increase gender, racial, 7 and ethnic diversity among board members. 8 (c) ANNUAL REPORT.—Not later than 1 year fol- 9 lowing the submission of a report pursuant to subsection 10 (b), and annually thereafter, the Commission shall submit 11 a report to the Committee on Financial Services of the 12 House of Representatives and the Committee on Banking, 13 Housing, and Urban Affairs of the Senate that describes 14 the status of gender, racial, and ethnic diversity among 15 members of the board of directors of issuers. 16 (d) PUBLIC AVAILABILITY OF REPORTS.—The Com- 17 mission shall make all reports of the Advisory Group avail- 18 able to issuers and the public, including on the website 19 of the Commission. 20 (e) DEFINITIONS.—For the purposes of this section: 21 (1) ISSUER.—The term ‘‘issuer’’ has the mean- 22 ing given the term in section 3 of the Securities Ex- 23 change Act of 1934. 24 VerDate Sep 11 2014 21:46 Nov 20, 2019 Jkt 099200 PO 00000 Frm 00006 Fmt 6652 Sfmt 6201 E:\BILLS\H5084.RFS H5084 pamtmann on DSKBC07HB2PROD with BILLS 7 HR 5084 RFS (2) COMMISSION.—The term ‘‘Commission’’ 1 means the Securities and Exchange Commission. 2 Passed the House of Representatives November 19, 2019. Attest: CHERYL L. JOHNSON, Clerk. VerDate Sep 11 2014 21:46 Nov 20, 2019 Jkt 099200 PO 00000 Frm 00007 Fmt 6652 Sfmt 6201 E:\BILLS\H5084.RFS H5084 pamtmann on DSKBC07HB2PROD with BILLS