Shareholder proponents have responded to the Black Lives Matter movement sparked by the May 25 murder of George Floyd in Minnepolis by doubling down on shareholder resolutions asking for disclosure of diversity in the workplace and in executive positions. They are seeking more robust efforts to hire a diverse workforce, and they want more information on how companies are managing their worforce programs and rooting out racism. The number of propsals doubled to 69, more than have ever been filed before. While not many have been withdrawn so far, the final tally of resolutions to be voted on is likely to shrink significantly because of the pressure companies face to prove their commitments have teeth. All but two of the companies facing these proposals are doing so for the first time.
Proponents include most prominently the New York City Comptroller’s office, joined by Trillium Asset Management, the Unitarian Universalists, the AFL- CIO, As You Sow and the Nathan Cummings Foundation.
(Proposals about greater pay equity considering gender, race and ethnicity are covered in the Decent Work section directly above, p. 38. The Sustainable Governance section (p. 61), describes 28 other proposals seeking greater board diversity—focused on women and people of color; both are deeply underrepresented on corporate boards despite some progress. Sustainable Governance also notes proposals seeking executive pay links to diversity, p. 62.)
Discrimination and Diversity
EEO-1 data reporting: The NYC Comptroller is spearheading, with help from a smattering of additional filers, a major new push to get companies to make public the annual EEO-1 forms they file with the federal Equal Employment Opportunity Commission. The forms classify employees by race, gender and ethnicity in 10 standard job categories and provide data that can be used to assess and compare corporate diversity performance. Many companies provide information about their commitments to diversity and programs for employees, but so far comparable data that would allow impartial assessments of outcomes has not been a routine part of corporate disclosures.
Just 12 proposals are pending, with three more planned for fall meetings. The pithy proposal asks that each company “disclose on its website the annual Consolidated EEO-1 Report. The company shall disclose its EEO-1 Report no later than 60 days after the date of its submission to the EEOC.”
NEW YORK CITY LAUNCHES CAMPAIGN FOR COMPANY DIVERSITY DISCLOSURE
MICHAEL GARLAND
Assistant Comptroller, Corporate Governance and Responsible Investment Office of New York City Comptroller
High-profile killings of Black men and women in 2020 highlighted the grave consequences of systemic racism in our society, sparked nationwide protests for racial justice, and prompted many companies, including at least 67 S&P 100 companies, to publicize their commitments to racial equity and diversity. We believe demonstrable commitments to hire, equitably compensate, retain, and promote Black employees, other employees of color, and women can contribute not only to a more just society, but also to improved company performance.
Withdrawals and SEC action—After two decades of requests, Home Depot at last agreed to annualy publish its EE0-1 report starting this year, prompting a withdrawal. Proposals at the company had routinely earned more than 20 percent and the vote jumped to 48.3 percent in 2018—prompting more workforce data disclosure but not including all job categories. Last year the vote was 36 percent. Other agreements are noted in the table. JPMorgan Chase lodged a challenge at the SEC, saying its proposal was moot, but the NYC funds withdrew before any SEC response after the firm agreed to more disclosure about diverse hiring and to work on improvements; the parties will jointly review progress in summer 2021 to discuss future disclosures. Moody’s has told the SEC the resolution concerns ordinary business by dint of micromanagement, but previous similar arguments have failed. Walmart says the proposal has already been implemented and the SEC has yet to respond.
Diverse hiring pools: Using an idea employed until now by both the National Football League and corporate board diversity initiatives, the AFL-CIO has opened a new front with regard to hiring employees. It is asking three companies— Activision Blizzard, Amazon.com and Electronic Arts to:
adopt a policy for improving workforce diversity by requiring that the initial pool of candidates from which new employees are hired by the Company shall include, but need not be limited to, qualified women and minority candidates (a "Diverse Candidate Search Policy").
The NYC funds withdrew the same proposal at Wells Fargo after it lodged an SEC challenge asserting its current policies make it moot. The company pointed to a new policy announced in March 2020 that applied diverse search criteria for all who earn more than $100,000. The NYC funds withdrew the proposal before any SEC response.
Executive diversity: Trillium Asset Management is in the third year of its campaign to focus corporate attention on upper echelon diversity. In 2019, its proposal earned just under 57 percent at Newell Brands. In 2020 it reached agreement with four companies (as did Proxy Impact with Dell), leaving just one on the ballot, which earned 44.9 percent at IPG Photonics. Trillium withdrew a resubmission there after the company argued it is now moot.
The proposal remains pending at Autodesk, Paycom Software and SBA Communications, asking each to report on an “assessment of the current state of its leadership team diversity and if and how it plans to make the company’s leadership team more diverse in terms of race, ethnicity, and gender.”
CEOs: The NYC funds began asking companies last year to include women and racially/ethnically diverse candidates in all external CEO recruitment searches. The proposal is pending this year at American Airlines, Dell Technologies, Kroger and TJX and also specifies “that any third-party consultant will be instructed to include such candidates” on initial search lists.
Analysis of diversity programs: As You Sow, Nia Impact Capital and the Nathan Cummings Foundation have more than doubled the number of companies in the campaign started last year for annually assessing and reporting on diversity programs. These resolutions go beyond EEO-1 to ask for disclosure of recruitment, promotion and retention cut by gender, race and ethnicity. Pending at 16 companies (see table), the proposal says reports should include:
the process that the Board follows for assessing the effectiveness of its diversity and inclusion programs,
the Board’s assessment of program effectiveness, as reflected in any goals, metrics, and trends related to its promotion, recruitment and retention of protected classes of employees.
SEC action—As You Sow has seen a number of procedural omissions this year, with four of its diversity program proposals omitted so far given procedural deficiencies, at Danaher, Johnson & Johnson, Eli Lilly and Pfizer; two more are likely to be omitted at NextEra Energy and TJX. As You Sow withdrew after this challenge at Texas Instruments, too, although the company says it plans to expand its diversity disclosures in 2021.
INVESTORS DEMAND PROOF OF EFFECTIVE DIVERSITY AND INCLUSION PROGRAMS
MEREDITH BENTON
Principal, Whistle Stop Capital
KRISTIN HULL
Founder and CEO, Nia Impact Capital
Racism: NorthStar Asset Management has a new resolution pending at two companies—Intel and PayPal. It asks for a report “on whether written policies or unwritten norms at the Company reinforce racism in company culture.” It suggests in the supporting statement that the report could assess whether Company policies or unwritten norms:
Yield inequitable outcomes for employees based on race and ethnicity in patterns of hiring and retention, promotion and upward mobility, disciplinary action, or employee usage of benefits;
Establish a cultural hierarchy through perceived pressure to use “whitened” names rather than birth names, to adopt “white-centric” physical appearance standards in hair style, body art or modifications, and facial hair styles, or to avoid traditional attire and religious head coverings.
The proposal quotes the definition of structural racism used by the National Museum of African American History and Culture: “the overarching system of racial bias across institutions and society. These systems give privileges to white people resulting in disadvantages to people of color,’ thereby imposing a cultural hierarchy among racial groups.” It notes a 2020 Citigroup study that found $16 trillion in U.S. GDP losses over the last two decades, including “$2.7 trillion lost due to pay disparities,” and says ending discrimination “could boost U.S. GDP by $5 trillion in the next five years.” It further describes elements of racism and outlines its harms, noting changes at one company that “will allow natural black hairstyles and facial hair because the company wants all ‘employees to feel comfortable, genuine and authentic.’”
SEC action—Home Depot is arguing the proposal is about ordinary business, while PayPal says it is moot given the company’s diversity and inclusion policies and practices. The SEC has yet to respond.
