Beginning today, applicants with the skills and experience to be a candidate for a corporate director’s seat can submit their profiles through the Diverse Director DataSource – “3D” program. Once a pool of talent is established, shareowners, companies, diversity groups and other organizations will be able to use the program to recruit board candidates.
The DataSource was conceived by the California Public Employees’ Retirement System (CalPERS) and the California State Teachers’ Retirement System (CalSTRS). GovernanceMetrics International (GMI), an independent provider of global corporate governance ratings and research, was commissioned to develop the database earlier this year. The system is now owned and maintained by GMI. According to Anne Simpson, CalPERS Senior Portfolio Manager, head of Corporate Governance:
This is a milestone in the development of 3D. We’re inviting people to now submit their information so that GMI can build this powerful resource for supporting board quality through improving diversity. 3D is an innovative resource that opens the door to finding candidates whose fresh ideas and new perspectives can help companies generate lasting, sustainable value and provide a check against the kind of ‘group think’ that played a significant role in the financial crisis.
Anne Sheehan, CalSTRS director of corporate governance at CalSTRS said:
Bringing value to corporate boards through diversity goes beyond race and gender and into a varied range of background, experience and perspective. Investors looking for ways to increase corporate value will find such voices in the corporate boardroom indispensable to boosting the bottom line.
CalPERS and CalSTRS began work on the Diverse Director DataSource two years ago, following the strong support of California State Controller John Chiang who spearheaded an effort to raise diversity among corporate boards. Chiang is on the board of both funds. 3D was developed with the help of corporate governance experts, institutional investors, companies, search firms and academics.
The program has been well received in other quarters as well. For example, Douglas Chia, Assistant General Counsel and Corporate Secretary, Johnson & Johnson says:
With this initiative, the institutional investor community is creating an important opportunity to expand the pool of qualified corporate directors beyond the traditional boundaries. This is a resource for those companies that understand that board diversity will give them certain strategic advantages.
Pilar Avila, Chief Executive Officer of New America Alliance provided the following comment:
New America Alliance believes that corporate board and executive diversity is at the heart of maintaining and increasing a company’s competitive advantage by inclusion of the broadest possible perspectives represented in the market. As America’s leading institutional investors, CalPERS and CalSTRS are providing an invaluable data resource for companies to find diverse board and executive candidates at a time when leadership diversity can make a significant impact to the bottom line.
“Companies face global challenges and need diverse talent on their boards to ensure they have the skills and experience to succeed,” said Ira Millstein, Senior Associate Dean for Corporate Governance at the Yale School of Management.
Will the 3D program generate potential directors who are more accountable to shareowners or will the system simply supplement traditional executive search firms? One thing that could make a difference is who invites the candidates to the dance. If nominations come through proxy access initiatives, the 3D program could make a real difference. However, with Rule 14a-11 overturned large funds seem reticent to use 14a-8 amendments for fear the whole idea of a federal rule will be dropped.
See GMI press release.