It is important to take a fact-based approach to the issue of increasing the presence, on corporate boards, of women directors or diversity candidates. Toward that end, I queried Institutional Shareholder Services Inc. (ISS) -- a leading provider of corporate governance solutions to the global financial community -- and asked them to report on the number of shareholder proposals submitted during the 2011 proxy season relating to board diversity.
Only two shareholders proposals were submitted for a vote during this proxy season: Urban Outfitters (7 directors, all male) and American Financial Group (10 directors, all male). Both proposals were sponsored by Calvert Asset Management Company, Inc. The Connecticut Retirement Plans and Trust Funds joined Calvert in the Urban Outfitter proposal, while the Board of Pensions of the
Evangelical Lutheran Church in joined Calvert on the American Financial Group proposal. America
Both proposals failed to reach any noticeable support from shareholders:
Urban Outfitters - received only 22.6% support
American Financial Group - received only 26.8% support.
Read the proposals and the board responses in the proxy statements:
Calvert also filed proposals, which were ultimately withdrawn, at:
General Cable Corp. (7 directors, all male)
Jefferies Group, Inc. (8 directors, all male)
WABCO Holdings (8 directors, all male)
United Methodist Church Foundation filed a similar proposal, which was ultimately withdrawn, at National Oilwell Varco, Inc. (8 directors, all male).
Sponsors of shareholder proposals may withdraw them after engaging with target companies and gaining concessions, which may include a commitment to adopt the policy or simply to provide additional disclosure.
I would conclude the following from this evidence. The Calvert et al. shareholder proposals had zero weight or impact on nominating/governance committees or board consideration of women or diversity director candidates. The supporting statements for the proposals show a heavy reliance on “beliefs” and “academic research” rather than substantive experience within the corporate boardroom.
Both shareholder proposals and board responses argued their positions were supported by the SEC’s December 2009 ruling, which gave corporations wide discretionary latitude in their considering or not considering “diverse” candidates. Since both sides appeal to the SEC’s ruling, we would conclude that it was a wash.
Reliance on “academic research” arguments by shareholder proponents has had little or no credibility within the business community. That research is specious at best, with results going in all directions, providing little predictive power and merely support for a “belief” system that sustains the studies.
An examination of the proxy counter arguments (Board of Director Responses) provides the strategies that might prove more effective in bringing forward new, appropriate women and diversity director candidates. Boards and nominating committees, and others who would nominate new candidates, today must consider a candidate’s:
· viewpoint, professional experience, individual characteristics, qualities and skills resulting in the inclusion of naturally varying perspectives among the directors.
· whether these capabilities and characteristics will enhance and complement the full Board of Directors as a unit, and
· whether the Board of Directors, as a whole, possesses the appropriate skills and experience to oversee the Company’s business and serve the long-term interests of our shareholders.
Shareholder proposals will not win the day as they might have in the past with race or conflict diamonds as the central issue. Shareholders who bring forth actual new independent director nominations with the specific credentials and capabilities described above have a far better chance to be considered.
It’s time to stop looking at the increase in the number of women and diversity directors as a “social movement.” It’s time to look at the specific credentials and talents which individual candidates could bring into the boardroom, and how well their presence would complement the work of the board as a whole, over the long term.