CFGF Releases New Policy Brief: The Case Against Board Diversity Mandates

Washington, D.C – The Club for Growth Foundation released a new policy brief outlining the flaws in the Securities and Exchange Commission’s (SEC) recent push to impose diversity mandates on corporate boards.

The report was authored by Florida Atlantic University’s Siri Terjesen and highlights the decades of data showing increased gender diversity on corporate boards, the burdens associated with diversity mandates experienced by international firms, and the negative impacts these mandates have on overall economic growth. In addition to the policy brief, Club for Growth Foundation President David McIntosh and Terjesen published an op-ed in The Hill that summarizes the policy brief and the harm board diversity mandates inflict on firms, shareholders, and other stakeholders. 


Click here to read the full policy brief from Club for Growth Foundation. 


Click here to read Club for Growth Foundation President David McIntosh and Florida Atlantic University’s Siri Terjesen in The Hill. 



The Securities and Exchange Commission (SEC) has proposed and is in the process of developing a number of major changes to corporate governance in the U.S., which will fundamentally alter public companies’ ability to operate according to the best interests of shareholders and other stakeholders.


This policy brief addresses proposals to mandate gender diversity on corporate boards, and presents evidence from decades of research on women on boards and corporate governance. In contrast to the frequently cited “business case” for women on boards, the research evidence clearly indicates that quotas and other mandatory guidance for board gender diversity are a net negative to firms, shareholders, and other stakeholders – including the very women whom the initiatives are supposedly intended to help. Specifically, quotas often lead to the appointment of female directors with political or family connections. Evidence from Norway, which enacted the world’s first board gender quota, indicates that several public firms chose to delist from the stock exchange rather than to face growing regulations.


Around the world, leaders in private firms recognize the substantially increasing burden of public regulation, and choose to postpone or never list on the public market. These two strategic responses eliminate the public’s ability to invest in these firms. The brief also highlights the push by institutional investors, rather than the public, for these mandates, and the lack of concrete findings about the impacts of the mandates on financial performance.


Proposed and enacted corporate governance changes are part of a general trend from the Biden administration to enact new legislation and regulations that will slow and stall economic growth. As noted by SEC Commissioner Hester Peirce, the SEC is pursuing a breadth of new “radical rulemakings” that focus on “hot-button matters outside our remit… rush to the aid of professional investors… increase (small and emerging companies) costs and shrink their investor base.”2 Taken together such overreach removes protections of investor and public interest, results in discrimination of certain types of both surface (i.e., aspects of diversity that are easily observed such as gender, race, and age) and deep-level diversity (i.e., traits that are not visible such as socioeconomic status, family upbringing, and religion), and diminishes the U.S.’ ability to maintain a free and open market.



The case against SEC board diversity mandates


The Hill

The Securities and Exchange Commission (SEC) is pushing forward a series of bureaucratic mandates that would fundamentally limit public companies’ ability to operate in the best interests of shareholders and other stakeholders. These mandates also threaten to hurt the very people the rules claim to benefit.

As our recent policy brief outlines, a large body of research evidence highlights that corporate board gender diversity mandates are a net negative to firms, shareholders and other stakeholders, including the very women whom these initiatives are supposedly designed to benefit.

The sheer scale of the SEC-proposed overreaches will lead firms to reduce their exposure, with one probable response being that publicly traded firms will go private and delist from the U.S. market. Delisting is hugely detrimental to the public, as the average American will no longer have the ability to invest in these companies.

As the U.S. and many other economies around the world slide into an economic slowdown and recession, the priority of the SEC, the European Union and other governments should be to help firms succeed, rather than to introduce new obstacles in the form of counterproductive and stifling legislation and regulations.


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