Tag: board racial/ethnic diversity
ISS study finds percentage of racial/ethnic minority directors finally hits 20% mark
A study of companies in the Russell 3000 just released by ISS showed that, for the first time, directors who self-identified as racial and ethnic minorities accounted for 20% of all board directorships. The study found that each of the minority groups analyzed experienced growth in the percentage of director seats held, with the greatest growth (90% over the study period) occurring among African-American directors, who now hold 8.3% of all board seats in the study group. According to the Head of ISS Corporate Solutions, these percentages “represent a watershed moment for minority corporate directors broadly and Black directors in particular….The analysis shows the impact of increasing and continual institutional investor engagement with portfolio companies on matters around board diversity coupled with growing stakeholder pressure from various quarters over the past two years.” Still, as she told Reuters, “[w]hile this is a huge sea change in terms of the percentages, it still falls short of the ethnic breakdown of the U.S. population….It’s a watershed moment but probably not something to pat ourselves on the back too much about.”
Have we made much progress on board racial and ethnic diversity?
After the murder of George Floyd in 2020 and the national protests that it triggered, many of the country’s largest corporations expressed solidarity and pledged support for racial justice and racial and ethnic diversity, equity and inclusion. Some institutional investors also beefed up their proxy voting policies, demanding both greater transparency and more racial and ethnic diversity. One place that companies looked to implement their commitments to DEI was at the board level. Now, about two years after that horrific event, how much progress have companies made? Using the end of proxy season in 2020 as a starting point, ISS has some recent data. ISS concludes that, while substantial progress has been made in board racial and ethnic diversity, “many boards still do not reflect the diversity of their customer base or the demographics of the broader society in which they operate.”
What’s ahead for this proxy season?
Alliance Advisors, a proxy solicitation and corporate advisory firm, has just posted its 2021 Proxy Season Preview, a useful introduction into the major themes of this season—well worth a read. First, and most obviously, there is COVID-19 and its direct and indirect impact. The pandemic is having a significant direct impact this year—not just in necessitating recourse to virtual-only annual meetings again this season—but also in focusing the attention of investors and proxy advisors on “how well corporate leaders navigated the crisis and protected business operations, liquidity and the health and welfare of employees.” But the pandemic has also had a somewhat surprising broader indirect impact. While it was widely anticipated that the challenges of COVID-19 would overwhelm any other concerns, the impact appears to be otherwise, as the pandemic has highlighted our increasingly precarious condition, including the effects of climate change, and intensified our social and economic inequality—all issues that are front and center this season. The Preview predicts that environmental and social proposals “are likely to see stronger levels of support in view of last year’s record 21 majority votes… and more assertive investor policies on diversity, climate change and political spending.”
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