It's been more than three years since the Securities and Exchange Commission adopted a new rule requiring boards to disclose whether and how they go about recruiting more diverse directors.

It was a move intended to encourage the industry to increase board diversity. But for all the lofty discourse on the importance of recruiting women and minorities, it's not clear whether the SEC's move had much of an impact at all.

The focus has largely been on corporate boardrooms, but mutual fund directors are not excluded. According to a recent PwC report, mutual fund directors are increasingly faced with a range of new considerations, including those about their composition. But directors acknowledge the difficulty in achieving diversity goals. If the challenges that corporate boards face are any indication, mutual fund directors have an uphill battle. Sixty-five percent of the corporate directors surveyed for PwC's annual survey said it was difficult to increase racial diversity, and 55% said it's difficult to add gender diversity.

Specifically, the SEC required companies and fund firms to disclose whether diversity is a factor in considering candidates for board nominations. It also requires disclosure on how diversity is considered in that process, and how the effectiveness of the policy is assessed. It was a reprimand of sorts, something the industry might say was regulation by exposure, adopted with the hope that firms might re-examine their policies if forced to disclose them publicly.

The public discussion that ensued among regulators, recruiters and fund firms focused to some extent on what could be done to comply with the provision and beyond. Boards can incorporate diversity into succession plans. They can publicize that a nominating committee considers diversity in a candidate selection process. Those committees can create a wellspring of diverse candidates in preparation for a board opening.

Directors can take advantage of their network of contacts to identify female and minority candidates. They can determine whether the organizations that produce recommendations for candidates have policies on diversity. They can examine what directives they're giving recruiters and whether they need to be changed. And recruiters hired by the boards might also need to consider their role in the process, examining whether their searches are broad enough.

Management Practice, Inc. has offered some tips on the recruiting process in the past. The consulting firm to mutual fund boards says that diversity with race, gender, education and other areas can be achieved by strengthening existing annual board self-examination and assessment, ensuring that independent directors are free of conflicts. Boards should then be evaluated on how well they work as a whole and their ability to represent shareholder needs and the rules that regulate their operations.

The firm says there are usually two parts to setting the criteria for new fund directors. The first involves reflecting the shareholder base. The relevant demographic and psychographic material about the base can be found with the sales and marketing departments. That analysis might indicate that new fund purchases are often driven by women and that they should be proportionately represented on boards, the firm says. Secondly, fund boards should determine if they have the right talent in place for future needs.

They also need to outline how vacancies are addressed, assess the role of executive recruiters and consider the importance of new director continuing education and how it's reflected in nominating committee disclosures, the firm said.

The ultimate goal is to expand the range of viewpoints of directors and better represent the very different interests of shareholders. And if fund firms feel they've reached these goals, there's nothing wrong with going beyond the disclosure requirement to showcase the gender and ethnic makeup of their trustees, pointing to the wide range of skills, experiences and demographic backgrounds sitting on their boards.

The call for diversity is not going away, and it's one that resonates strongly with the public. It's clear that diversity could be a great asset, as it could lead to a broader and more dynamic discussion of topics for boards. And while it often seems that boards are somewhat uncommitted to challenging the makeup of their largely white male dominated industry, some studies have indicated that performance actually improves with diversity.

There is value in letting the public and investors know that the nominating committees have built that diverse wellspring of talent for their board and sending a message that firms are not only trying to grow assets, but are embracing civic, social, and fiduciary standards too. And in that process, they should be cognizant of not only communicating progress toward those goals, but communicating that they understand how diversity benefits their funds as well.

Jennifer Connelly is the Chief Executive Officer of Jennifer Connelly Public Relations.

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