Shareholder proponents remain keenly interested
in making the corporate boardroom more
diverse—for reasons of both equity and
performance. Almost all these resolutions get
withdrawn after companies agree to change their
board nominee procedures (graph right). Last year,
proponents withdrew fully 40 out of the 44
resolutions filed on the subject after agreements.
More of the same will occur in 2020. To date, we
have identified 49 proposals and a few more may
emerge; 27 are not yet public. New this year are
resolutions specifically seeking more diversity for
CEOs. This is in addition to last year’s shift to seek diversity beyond simply gender, race and ethnicity—with attributes such as age, gender identity, gender expression and sexual orientation.

The 30 Percent Coalition continues to coordinate resolutions and work in other ways to diversify boards. The coalition’s members include senior business executives, civil society groups, institutional investors, corporate governance experts and board members themselves. The proposals ask companies to add more diversity to the board room and report on how they manage this process. Since most of the very largest companies have made some commitment to more diversity, companies further down the revenue ranks are coming under scrutiny. Since 2010, proponents have filed about 280 proposals, withdrawing nearly three-quarters after companies have made their policies more inclusive, at least on paper. Proponents are most likely to file proposals at companies with no women or people of color on the board, but increasingly they are not satisfied with a token few and seek expanded representation even where there one or two diverse board members.

USING “ROONEY RULE” TO ADVANCE CEO DIVERSITY

MICHAEL GARLAND
Assistant Comptroller, Corporate Governance and Responsible Investment Office of New York City Comptroller

New York City Comptroller Scott M. Stringer, on behalf of the New York City Retirement Systems, submitted shareholder proposals to approximately 17 S&P 500 companies for the Spring 2020 proxy season calling on their boards of directors to adopt a policy for improving board and top management diversity. The policy would require that the initial list of candidates from which new management-supported director nominees and chief executive officers (CEOs) are recruited (if from outside the company) should include qualified female and racially/ethnically diverse candidates. The policy should provide that any third-party consultant asked to furnish a list will be requested to include such candidates.

There are two types of resolutions. One seeks adoption of a policy that would require consideration of diverse candidates in the selection process, based on the “Rooney Rule” concept that helped to diversify National Football League coaching. These proposals typically ask the company to:

adopt a policy for improving board and top management diversity (the “Policy”) requiring that the initial lists of candidates from which new management supported director nominees and chief executive officers (“CEOs”) recruited from outside the company are chosen by the board or relevant committee ( each, an “Initial List”) should include qualified female and racially/ethnically diverse candidates. The Policy should provide that any third-party consultant asked to furnish an Initial List will be requested to include such candidates.

The other type of resolution asks for reports and all recipients this year are new. The type commonly asks how companies will enhance board diversity beyond current levels, such as:

Strengthening Nominating and Corporate Governance policies by embedding a commitment to diversity inclusive of gender, race, ethnicity;
Commit publicly to include women and people of color in each candidate pool from which director nominees are chosen;
Report on its process to identify qualified women and people of color for the board.

Withdrawals—As of mid-February, proponents had withdrawn six of the policy adoption proposals and one of the reporting resolutions (see table).

SEC action—At PACCAR, the resolution was omitted on the grounds that a policy change made it moot. Liberty Broadband is contending As You Sow has not provided sufficient proof of stock ownership.