In 2020, after George Floyd’s murder, we monitored many of the CEO statements and company pledges to support the Black Lives Matter movement and to increase their diversity, equity, and inclusion efforts. Now, in 2022, employees and investors want to see real progress on these pledges.
Particularly in this time of the Great Resignation (the current wave of people quitting jobs), investors want to see signs that companies are building and nurturing a positive and inclusive workplace culture. They especially want action from companies with policies and practices that hinder development of an inclusive and equitable work environment.
This year, investors have filed resolutions asking that boards of directors prepare a public report assessing the potential risks associated with a company’s use of concealment clauses. Concealment clauses are any employment or post-employment contract that a company requires its employees or contractors to sign that restricts them from speaking about their experience of harassment, discrimination, or other unlawful acts in the workplace.
Non-Disclosure Agreements (NDAs) make sense when we need to protect intellectual property or competitively sensitive information. They do not, however, make sense for cases of harassment or discrimination because they hide circumstances and trends and mask issues from other employees and from investors. Historically, concealment clauses have hurt women, people of color, and other marginalized groups. They conflict with efforts to increase and retain diverse company talent.
The resolutions filed are explicit in asking for board oversight as it is the responsibility of the board to both understand and manage situations where conflicts may exist between current practices and what actually benefits the company and its investors. Investors want to be sure that boards are aware of how often concealment clauses are being signed – and why. Boards of directors should make sure managers are not masking poor employee management practices via NDAs or mandatory arbitration.
Concealment clauses include mandatory arbitration. While the U.S. #MeToo movement saw a big win when Congress recently banned using forced arbitration for sexual harassment claims, racial discrimination cases were not included. Given the current climate, companies risk brand reputation and the ability to recruit top talent if they do not keep discrimination out of the workplace. Resolutions from investors can help move them toward best practices.
We believe companies are best served when they proactively allow employees to speak about harassment or discrimination and allow employees to file suit if discrimination occurs. If a company blocks legal recourse, investors want the board, at a minimum, to understand how often concealment clauses are used and the potential risks they can create.
The early indication is that other investors agree with us; on March 4th, Apple announced that our resolution received majority support from votes cast.
Investors stand to make real change by moving boards to assess the effects of these clauses and requirements on their diversity and inclusion efforts.
