Updating D&O Questionnaires for the 2022 Proxy Season:
Diversity Takes Center Stage

November 8, 2021

It is time to begin updating your D&O Questionnaires for the 2022 proxy season.  This year, the SEC’s recently enacted rule concerning board diversity for Nasdaq-listed companies (discussed in our prior client alert), and certain state laws mandating either certain diversity composition of boards or disclosure of board diversity, necessitate changes to director and officer questionnaires to elicit self-identified diversity characteristics.

If companies determine to include board diversity characteristics in their proxy statements (and many companies are doing this both for accurate disclosure and for using the proxy statement as a more active shareholder communications tool), they should expand existing questions or develop new questions in their questionnaires to gather information regarding directors’ gender, race and ethnicity, and LGBTQ+ status. These questions should be optional, allowing directors to opt-out and not disclose information, and should explicitly request directors’ consent to include any information provided in the company’s SEC and other filings, along with the website or other locations where the company may provide such information. Nasdaq has provided certain sample questions as a starting point, which are located here.

State Law Initiatives

In addition to the SEC’s approval of the Nasdaq listing rule amendments concerning diversity, several states – including Hawaii, Massachusetts, Michigan and New Jersey – are considering laws mandating public company board diversity and/or board diversity disclosure.

California, Illinois, Maryland and Washington already have such laws in place (we previously reported on Illinois and California here).

Maryland. Maryland’s law requires disclosure on an annual report of the number of female directors in relation to the total number of directors.

Washington.  Beginning January 1, 2022, subject to certain exceptions, Washington will require public companies headquartered in Washington to maintain a board of directors composed of individuals at least 25% of which self-identity as women or, in the alternative, the company must disclose in its proxy statement or post on the company’s website a “board diversity discussion and analysis” that includes information relating to the company’s approach to developing and maintaining board diversity. The discussion and analysis must include a discussion of (i) how the board (or a committee of the board) considered representation of diverse groups when identifying and nominating board candidates or, alternatively, the reason that diversity was not considered, (ii) policies adopted to identify and nominate diverse board candidates, or, alternatively, the reasons for not adopting such a policy, and (iii) mechanisms used to refresh the board, like term limits or mandatory retirement of directors.

Accordingly, Illinois, California, Maryland and Washington headquartered companies should consider state specific requirements when developing this year’s D&O questionnaires.

Our Alert regarding tips for preparing for the proxy season in general will be forthcoming.

For further information, or for assistance with updating your company’s D&O questionnaire, contact your CFMB lawyer or:

GEOFFREY R. MORGAN
Partner

EMILY COLLINS
Associate