Mintz On Air: Practical Policies – Same Rules, Different Disclosures: Public Company DEI Reporting in a New Federal Legal Paradigm

In the latest episode of the Mintz On Air: Practical Policies podcast, Member Jen Rubin is joined by Member Anne Bruno to discuss public company DEI reporting in today’s evolving federal legal landscape. This episode is part of a series of conversations designed to help employers navigate workplace changes and understand general legal considerations.

Together, Jen and Anne examine:

1. The current regulatory framework and shifts in DEI disclosure practices
2. Implications for public company reporting post-January 2025 and why to plan now for next year’s proxy season
3. The importance of aligning DEI practices with mission, business strategy, and risk tolerance
4. Whether and how to use DEI metrics in executive compensation decisions
5. What to expect from the upcoming SEC roundtable on compensation disclosure

Listen for insights on how companies can approach DEI reporting thoughtfully and strategically in this new paradigm.

Mintz On Air: Practical Policies – Same Rules, Different Disclosures: Public Company DEI Reporting in a New Federal Legal Paradigm Transcript

Jen Rubin (JR): Welcome to Mintz On Air: Practical Policies podcast. Today's topic: Same Rules, Different Disclosures: Public Company DEI Reporting in a New Federal Legal Paradigm. I'm Jen Rubin, a Member of the Mintz Employment Group, with a San Diego-based, bi-coastal Employment Practice representing management, executives, and corporate boards. Thank you for joining our Mintz On Air podcast. If you've not tuned into our previous podcasts and you would like to access our content, please visit us at the Insights page at mintz.com or on Spotify.

Today I'm joined by my Boston-based colleague, Anne Bruno, an executive compensation lawyer with a specialty in public company disclosure and compensation practices. Anne works with corporate boards, companies, and their investors to navigate a broad range of environmental, social, and governance considerations. She helps clients create, implement, and administer equity and executive compensation arrangements and programs, change-in-control arrangements, and severance and employment agreements. Anne leverages her broad experience in counseling clients on federal securities laws and, for purposes of our podcast today, regularly advises public companies and registrants in preparing required disclosure filings and shareholder materials. Thanks for joining Mintz On Air , Anne.

Anne Bruno (AB): Thanks for having me, Jen. It's a pleasure to be with you here today.

JR: Today, Anne and I will be discussing public company DEI reporting in the new federal paradigm that has shifted the way many companies adopt, report on, and in some cases publicly embrace diversity. Our focus today is to provide some practical advice for those responsible for public company reporting on human capital management and the design of executive compensation packages. So, Anne, before we dive into some practical guidance for making human capital disclosures in this new paradigm, can you give us the lay of the disclosure land, the outset, and some of the recent changes?

Regulatory Landscape and Recent Shifts in DEI Disclosure 

AB: Thanks, Jen. As background, public companies are subject to two different layers of regulatory schemes depending on their trading location, for example, NASDAQ or the New York Stock Exchange, which each have their own rules, as well as all public companies being subject to general SEC reporting rules. With respect to DEI specifically, companies subject to NASDAQ reporting requirements were required beginning in 2022 and until last December to meet certain diversity metrics for their boards or explain why they were not meeting those goals.

That rule was overturned by the Fifth Circuit last December, and in January, NASDAQ decided it would not try to appeal that decision and repealed its board diversity disclosure rule. There are no current diversity metric rules applicable to reporting on diversity for public company boards at this point. In addition, there have been changes at the SEC level as well.

The change in presidential administration in January has resulted in a number of executive orders relating to diversity. And while those orders may not have the same legal force as legislation, they're currently indicative of the administration's focus and undoubtedly impact how companies do business in the private sector. In fact, at least one of the executive orders prohibits promoting diversity and allowing or encouraging federal contractors and subcontractors to engage in workforce balancing based on race, color, sex, sexual orientation, religion, or national origin. In this regard, it's notable that 25% of the American workforce is employed by a federal government contractor. This executive order impacts many workplaces.

Following the issuance of the executive orders, some publicly traded companies have been sensitive to government perception about DEI, especially if they're government contractors. A review of public filings and disclosures shows that these federal companies were more likely in 2025 to remove references to the word “diversity” in their SEC filings and were more conservative in their inclusion of descriptions of their DEI-related practices.

Private sector companies had more range of details in their disclosures in the recent proxy season. So even if the executive orders don't apply to all private sector businesses, there's no question they have had an impact on how those companies disclose and discuss DEI.

JR: So, a lot going on here. The NASDAQ diversity metric rules are no longer in effect. While the executive orders aren’t laws in and of themselves with respect to non-government contractors, they are certainly indicative of the administration's regulatory and compliance priorities. So, Anne, where does this lead companies subject to public company reporting at this point? Are the requirements any different post-January 20, 2025?

Implications for Public Company Reporting Post-January 2025 

AB: No, the regulatory environment, meaning the SEC regulations concerning reporting of human capital policies and risks, remains the same. But that reporting now needs to take into account some risks that didn't exist prior to January 20. This has resulted in a tremendous amount of uncertainty about the correct approach to reporting on DEI and how DEI impacts human capital risk at public companies.

In fact, even the large shareholder advisory services, ISS and Glass Lewis, differ about whether diversity, at least at the board level, is functionally important from a governance perspective. That split between ISS and Glass Lewis has only resulted in more uncertainty. If those shareholder advisory services can't agree on market standards, it's hard for companies to understand, prepare for, and address the risk that DEI programming poses, either affirmatively or negatively, whether in the board context, the management context, or generally within the organization's workforce. Also, while it's still early to conclude trends from the 2025 proxy season, it appears that the prevalence of DEI metrics as executive performance goals in connection with setting executives' bonus compensation will likely drop from 2024 levels as more companies consider removing or reframing their DEI approach and metrics.

JR: It sounds to me, Anne, like there's a lot of mixed opinion here. We have the issue with ISS and Glass Lewis, and of course, all of these public companies are struggling to find the right balance and the right way to describe diversity programs, or frankly, to drop some in some instances, or to simply use different verbiage to describe their programs. Given that, and given the focus on practicality that we want to provide our listeners, can you provide some practical suggestions for companies that are struggling with finding the right balance here?

Practical Strategies for Navigating DEI Disclosure Challenges 

AB: Yes, I think we can. As a starting point, human capital management disclosures on the company's material policies are required in Form 10-K annual reports. But this disclosure is technically limited to the number of persons employed by the company and any human capital measures or objectives that the company focuses on in managing its business.

What we saw in 2025 disclosures is that some companies have significantly abbreviated their human capital management DEI disclosures or removed them entirely. Others have shifted away from diversity and equity to focus on inclusion or have subsumed their DEI disclosure in a more general human capital management description.

Specifically, some companies have started to move away from language that could easily be flagged as relating to DEI, including by avoiding the use of the phrase, “diversity, equity, and inclusion” changing phrases such as “identify as female” to “are female” or not using the word “diversity” within their filings in contrast to prior years’ disclosures. Also, some companies that in recent years, have described their DEI programs in their human capital disclosures in a subsection titled “Diversity, Equity, and Inclusion” are now using titles less likely to implicate the executive order, such as “Inclusion” or “Building a Diverse and Inclusive Workplace” or “Culture and Inclusivity”.

Another shift seen in filings has been the removal of references or detail related to the specific DEI programs the company implements or actions the company is taking, although the company still references the importance of inclusivity to its company culture. Some companies have opted to remove demographic data from their public filings or websites or have reframed the language to workforce statistics or workforce composition.

Companies are also required to disclose potential risks to the company in their annual reports and company disclosures have focused on increased risk factors relating to reputational risks and the risks of the executive orders generally. Of course, risk factor disclosure is even more complicated because there's a risk of both too much DEI as well as not enough DEI. For some companies, this is resulting in the recharacterization of those risks, such as disclosing the risk of DEI initiatives being perceived as either insufficient or too extreme by different factions of the public. Whereas previously, the disclosure had focused principally on the risk of criticism for not meeting the company's DEI goals.

For companies navigating these developments in order to evaluate these risks and craft their disclosures, they have to balance the potential backlash from stakeholders, for example, customers, employees, and non-US investors, that might come from reframing or backtracking on DEI against the reputational and litigation risk from continuing DEI programs. It's a delicate balance that will look different for companies across industries and with different target customers, status as government contractors, etc. But the takeaway is that DEI is often still there. It's just being characterized differently in some sectors and by some companies.

JR: You know, it really sounds to me like we're playing a semantics game. I recognize we're talking about public disclosure so of course, semantics are important. You need to disclose risk factors in an accurate way, in a way that is going to advise the investing public. You know, here are the things that you need to think about before you invest in our company. There's a reason why companies are asked to provide these disclosures. But of course, listening to you, Anne, it makes me think if too much diversity is not good enough, and yet focusing on diversity could attract the wrong type of government attention and put your organization at risk, it's a darned if you do, darned if you don't type of situation.

One of the things I want to remind our listeners, if you haven't tuned into our podcast before, Corbin Carter and I had a discussion about this, which we called “DEI Diplomacy”. I want to refer you to that in terms of addressing some of these issues relating to titles and how to talk about these things. We tried to provide some practical guidance there.

Aligning DEI with Mission, Strategy, and Risk Tolerance 

Coming back to the practical topics that you and I are talking about here today, I want to focus on something that seems to me that we're kind of backing into: yes, we have the conflict; yes, we have a situation where you can't quite get it right for everybody, but the issue here to me is it’s the company’s mission, strategy, and risk tolerance. Those are the starting points from which disclosure needs to follow. I realize we need to address the regulatory scheme. We've been talking about how it's changed in some ways and how it hasn't changed in others, but in other words, shouldn't the starting point be whether and why DEI is important to the mission of the business and then policy and disclosure can flow from that conclusion?

AB: I agree, the mission and business goals define what role DEI should have in the corporation. That should be the starting point, going back to first principles before you focus on the disclosure. It may be that different companies will answer that question in different ways without regard to a change in the federal paradigm or a lack of change in the regulatory environment. In other words, the first question is why, if at all, is this beneficial to the company's stakeholders?

That conversation should really start with the board, and even better, it should be a data-informed analysis. What are the objectives? What is the mission and business strategy? And what are the parameters of success? Once you identify those goals, you can then move on to whether DEI furthers or inhibits the mission. Companies that want to continue robust DEI practices and disclosures, but that fail to make a strong case for how DEI policies and programs advance their business strategy and drive sustainable value creation for shareholders and stakeholders, will be exposed to the greatest risk.

Executive Compensation: Evolving Role of DEI Metrics 

JR: It sounds to me like we're saying the rules are the same, but of course the legal paradigm has shifted from the perspective of the administration and some of the executive orders. It also sounds to me like that care needs to be taken in how a company moves forward with compliance. That leads me to another question for you: How, if at all, does this impact executive compensation metrics? Because in the past, many companies, and you mentioned this, for purposes of furthering DEI goals, used diversity as a metric against which executive compensation was measured and, by the way, possibly rewarded. But if you can't measure DEI goals because they're much more difficult to track without specific targets in light of the fact that the administration has shifted these priorities, how do you incorporate these metrics into executive compensation and do you? Why are we talking about this now a year before proxy season?

AB: That's a good question, Jen. Companies are going to want to consider ways to measure DEI progress linked to business performance beyond leadership and workforce representation. Perhaps they might want to focus going forward on employee resource groups, engagement scores, surveys, overall retention and promotion statistics, and meeting hiring needs. This is important because in next year's proxy statements, companies are going to want to be able to disclose the compensation of their executive leadership team in ways that relate to the company's mission and business strategy. This is a future disclosure issue, but it does make sense to think about it now so that it can be thoughtfully implemented.

JR: Right, you don't want to find yourself in a position where you're about to put the proxy out and you're thinking how did we come up with these metrics, have the metrics been met, and have we been thoughtful about it? So, I would argue that thinking about this as far enough in advance is actually extremely beneficial. And frankly, do it in tandem with that, taking a look back at your mission and what aligns with your shareholder goals. It all makes sense to me.

The SEC has announced that it's going to be conducting a roundtable sometime this month, June of 2025, regarding executive compensation disclosures. Can you talk a little bit about what, if anything, you expect to come out of that roundtable?

What to Expect from SEC Roundtable 

AB: Well, the roundtable is going to be focusing on the effectiveness of the existing compensation disclosure rules that the SEC has implemented over time. We'll see if there's some paring back of some of those disclosure rules as well, separately from DEI-related issues, more of a question of disclosure of executive compensation, and whether is it really driving the right disclosure for shareholders to be able to make thoughtful decisions about voting on the issues raised in the company's proxy statement.

JR: Where we really come to, Anne, is we have the same rules other than the NASDAQ diversity metrics being stricken. We have a new administration that has a very targeted focus on eradicating DEI from American workplaces. And yet we still have the same obligations of corporate boards, of course, to ensure that the shareholder mission is being carried out and making changes if necessary, based upon that mission and making changes if necessary to their disclosures. Boards and those managing human capital management disclosures as well as executive compensation have an awful lot to think about in the coming year in terms of how these rules are implemented and how this legal paradigm is adjusted for in the corporate context.

Once again, I'm Jen Rubin. Thank you, Anne Bruno. And to those of you who have tuned into our Practical Policies podcast, visit us at mintz.com for more content and commentary from Mintz, or you can find our podcast on Spotify. Thanks again.

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