MFDF Hosts Director, CCO Only Program on DEI, ESG Issues

Navigating the worlds of DEI and ESG can be fraught in the current environment, and fund independent directors are navigating a confusing collection of risks and principles when DEI and ESG come up in the board room.

On September 11, MFDF hosted a program with K&L Gates partners Craig Leen, Varu Chilakamarri, Fatima Sulaiman, and Lance Dial to address questions from fund independent directors and CCOs on Fund Governance of DEI and ESG in the Current Landscape. The critical importance of implementing, documenting, and following robust processes was a key theme throughout the discussion.  

Key takeaways included:

• A non-diverse board may present a risk of the perception of affinity bias. Boards may reduce this risk with a process for sourcing future directors from a variety of places and insisting from the outset that candidate slates are diverse. Defining required and desirable qualifications broadly may also help boards identify a diverse group of candidates.
• Similarly, boards will want to avoid the perception of discrimination and ought to have a process to evaluate candidates on their merits. Directors should be able to describe the process they use to create and review a candidate base.
• Directors may ask their counsel to review the language of existing diversity and governance policies for alignment with anti-discriminatory objectives. 
• Directors may inquire if advisers are making material changes to their diversity policies or hiring processes.
• For ESG oversight, directors should make sure that advisers follow the adage, ‘Do what you say, and say what you do!’  The SEC continues to focus on issues of materiality, disclosure accuracy and anti-fraud.

For additional insights relating to board diversity, see MFDF’s Board Diversity Resources.