Diversity Disclosures Gain Momentum, But Are Plaintiffs’ Firms Lurking?
As we see more Form 10-Ks with new Item 101 human capital resource disclosures, it’s becoming clear that companies are taking this opportunity to tell their “diversity & inclusion” story. A WSJ article from Monday says that about one-third of S&P 500 companies are including at least some information on diversity in their annual report. A recent Semler Brossy report found some companies are also including HCM disclosure in their proxy statements – which makes sense as companies tell their stories about board oversight of human capital and related initiatives. Semler Brossy’s report says that of the proxy statement HCM disclosures reviewed, diversity & inclusion was the most frequent topic covered.
Companies want to do the right thing and tell all they’re doing on the D&I front, and stakeholders want to see this. At the same time, disclosures need to be accurate. They’ll not only be scrutinized by investors and other stakeholders, but also could attract unwanted attention from plaintiffs’ attorneys – as explained in a recent Keith Bishop blog.
Over the last year, we’ve blogged about several board diversity lawsuits that have cropped up. These lawsuits seem to have quieted down, perhaps as a result of California’s law mandating certain board diversity requirements for companies based in the state and Nasdaq’s proposed listing standard relating to board diversity disclosures. But, a D&O Diary blog provides a discussion of a more recent board diversity lawsuit – this one involving Micron Technology. We don’t know whether these lawsuits will continue or whether they’ll be successful, but they certainly are an unwelcome development for the companies involved.
As noted in the D&O Diary blog, the most recent lawsuit differs from prior board diversity lawsuits in that it involves a company based in Idaho – not California – and it was brought by a law firm not involved with the prior lawsuits. As much as companies carefully consider disclosures during what is usually an iterative drafting process, this most recent lawsuit serves as another reminder to consider disclosures relating to diversity and inclusion from all angles, including from the potential perspective of plaintiff firms.
-Lynn Jokela, TheCorporateCounsel.net March 3, 2021
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