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.

None of the companies that received these shareholder proposals had any disclosed board/CEO diversity search policies in place, nor did they appear to have people of color among their directors and CEOs, based on public disclosures. 

The proposed rule resembles the Rooney Rule in the National Football League (NFL), which requires teams to interview minority candidates for head coaching and senior football operations openings and was recently expanded to include general manager jobs and equivalent front office positions. It does not dictate who should be hired, but instead widens the talent pool and requires a diverse set of candidates for consideration. While corporate boards may face differing circumstances, and notwithstanding some recent criticism regarding the NFL’s enforcement of the Rooney Rule, it is difficult to ignore the positive impact of the Rooney Rule on diversity.  In the 12 years before the Rooney Rule was implemented, the NFL had four minority head coaches and one minority general manager. Twelve years after, the NFL had 16 minority head coaches and eight minority general managers. 

The policy described in this proposal would apply only to those CEO searches that consider candidates from outside the company. We do not intend for the policy to be a substitute for robust internal succession planning, and we encourage companies to maintain and disclose a process for fostering a diverse talent pipeline for executive management. 

The aspect of the policy governing CEO searches is the most novel facet of the request, has prompted the most pushback and required the most intensive negotiation, and represents a minimum requirement for withdrawal of the proposal.  Based on the negotiated settlement/withdrawal rate through mid-February 2020, the Comptroller’s Office expects approximately five of the proposals to go to a vote during the 2020 proxy season. 

Michael Garland
Assistant Comptroller, Corporate Governance and Responsible Investment Office of New York City Comptroller Scott Stringer