Proxy Music: Which DEI Tunes Will Investors and Advisory Firms be Crooning this Season?

Last year’s proxy season featured a record 943 proposals at Russell 3000 companies. 231 of those proposals dealt with “S” issues, with 10 percent of them passing, according to a review by Harvard Law School. What diversity, equity and inclusion-related songs will institutional investors and proxy advisors be singing this year? To answer that question, here is a brief summary of ISS, Glass Lewis and BlackRock’s most recent workforce and board diversity guidance for public companies, and related insights from the DiversIQ database.   

EEO-1 and Workforce Data

Continuing shareholder engagement has led a record number of companies to answer the EEO-1 call. Several investors and advocates have seen their pressure lead to change, including As You Sow (as noted below), and the New York City Comptroller’s Office, which has convinced 78 large companies to disclose their EEO-1 Report in the past two years.  

  • Our data reveals 352 S&P 500 companies have disclosed their most recent EEO-1 data, and ten more have publicly committed to doing so in 2023. In the Russell 1000, 407 have reported EEO-1 data, and nine are committed to disclose it this year.
  • BlackRock wants companies to disclose the steps they’re taking to advance diversity, equity, and inclusion, job categories and workforce demographics, and EEO-1 data. According to its proxy voting guidelines, if a company’s disclosures or practices fall short, of if the board or management are ineffective on these issues, Blackrock may vote against members of appropriate committees, or lend its support to other relevant shareholder proposals. 
  • ISS will generally vote for requests to disclose diversity policies, workforce data, and EEO-1 data, unless the company sufficiently discloses its policies and data, and the company has no recent equal opportunity violations or litigation. On a related note, ISS’ latest proxy voting guidelines notes that it will generally vote against proposals that seek diversity data for a company’s suppliers and service providers, as those requests may pose a significant burden on companies. 
  • Glass Lewis has no specific policy on HCM-related issues. That said, it will generally recommend voting against the governance committee chair of any Russell 1000 company that fails to provide explicit disclosure concerning the board’s role in overseeing environmental and social issues. 
  • Several advocates that have historically pushed for EEO-1 data, including As You Sow, are now specifically pushing for hiring, promotion and turnover rates by gender, race, and ethnicity. As You Sow filed 20 such proposals last year, and 24 so far in 2023. 

Board diversity 

Following the SEC and Nasdaq’s lead on board diversity, and advocacy from groups such as 50/50 Women on Boards, proxy advisory firms and institutional investors continue to evolve their policies. 

  • According to our data, there are currently thirty S&P 500 companies with boards that have less than 30% overall diversity, the minimum standard espoused by BlackRock and Glass Lewis. These companies include Snap-on, Caesars Entertainment, Southwest Airlines, Charter Communications and Dish Network. 
  • In line with its public commentary, BlackRock encourages S&P 500 companies to lead on the aspirational goal of having at least 30% diversity on their boards (ideally with at least two women, and one member of an underrepresented group). In line with this goal, Blackrock looks for companies to disclose their approach to board diversity, and when a company hasn’t sufficiently done that, it may vote against members of the nominating or governance committee. 
  • ISS’ policy of requiring at least one female director, which had applied to S&P 1500 or Russell 3000 companies, is expanding to all companies with meetings on or after Feb. 1, 2023. If there are no women on a company’s board, ISS will recommend voting against the nominating or governance committee chair, or other directors on a case-by-case basis. In addition, ISS will generally vote for requests for reports on board diversification efforts, while taking a case-by-case approach on proposals to increase the gender and racial diversity of a company’s board. 
  • Glass Lewis will recommend a vote against the nominating committee chair of a Russell 3000 company with less than 30% gender diversity, and a vote against all members of the nominating committee if there are no gender diverse directors. Similarly, Glass Lewis will generally recommend a vote against the nominating committee chair at Russell 1000 companies with fewer than one director from an underrepresented group.

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