Evidence continues to mount that ethnic, racial, and gender diversity at the highest levels of leadership is enormously important to a well-functioning organization. The gains made by corporations to diversify both their boards and senior executive ranks are noteworthy and investor engagement has played a valuable role in these advances. 

In 2019, women on S&P 500 boards and in the C-suite reached new milestones, comprising 26 percent and 21 percent, respectively. Yet promotional gaps persist, especially in the highest ranks of decision makers. Of top earners in the C-suite, just 11 percent are women and a much smaller percentage are women of color. According to Catalyst, only 5.8 percent of S&P500 CEOs are women (unchanged from a year ago) and just 0.4 percent are women of color.  A 2017 survey of business leaders revealed that women comprised just 10 percent of the short-term CEO candidate pool, pointing to added concerns around future diversity trends. 

Further, the gender and minority pay gaps that persists across industries exist because men still hold a majority of the higher paying jobs when compared to women. Narrowing this pay gap requires management focus on diversity and inclusion from entry level to senior leadership. 

In 2018, sustainable investment firms and mutual funds began urging companies to specifically address diversity in executive leadership ranks. A majority (50.9 percent) of Newell Brands shares supported a request to assess and plan for expanded executive leadership diversity. In mid-2019, the board appointed India-born Ravi Saligram as Newell’s next CEO and newest member of the executive committee. 

Related shareholder proposals asking for comparable data of total workforce composition received equally strong support (56 percent at Travelers and 48 percent at Analog Devices). After nearly four years of engagement and the majority vote, Travelers began releasing its complete EEO-1 report on the racial, gender and ethnic composition of its workforce by specific job categories. While Travelers was willing to engage over the years, it was only after the majority vote that it agreed to disclose meaningful workforce data. 

The business and societal benefits of diversity are no longer in question and are increasingly expected, as growing votes on this issue show. However, in practice much remains to be done. As a result, Trillium and several investor partners are continuing to urge companies, including Tractor Supply, IPG Photonics, Ormat Technologies, SVB Financial Group, and Hanover Insurance Group, to provide assessments of diversity in the C-suite and plans to expand diversity inclusive of race, ethnicity and gender.  

This is not a recommendation to buy or sell any of the securities mentioned. It should not be assumed that investments in such securities have been or will be profitable. The specific securities were selected on an objective basis and do not represent all of the securities purchased, sold or recommended for advisory clients.

Susan Baker
Vice President Shareholder Advocacy, Trillium Asset Management

Brianna Murphy
Vice President Shareholder Advocacy, Trillium Asset Management