New York City Comptroller: Lack Of Diversity, Bad For Business

NYC comptroller

By Scott M. Stringer

Dear Friend —

The lack of diversity in the corporate world, especially at the top, is no secret.

Just two years ago, only 21% of boardroom members at S&P 500 companies were women, 7% were African American, and Hispanic or Asian American board members each only accounted for 3% of board members.

These disparities aren’t just wrong, they’re bad for business. Often, they’re the result of board elections that are more like coronations of the same old board, again and again.

As a long-term investor in thousands of major U.S. companies, we have a stake in making sure these companies are strong for decades to come. And the fact is, corporate boards with independent and high quality directors from diverse backgrounds are better for the long-term success of our portfolio companies.

That’s why we launched the Boardroom Accountability Project – to shake up corporate culture and strengthen the companies in our portfolio.

In 2014, we made our first push for reforms. We called on companies to establish “Proxy Access,” a powerful tool which gives long-term investors the ability to nominate boardroom directors. In only three years, our push brought Proxy Access from just six, to over 520 U.S. companies – and it’s now the market standard.

On the heels of this success, we took another step forward by launching Boardroom Accountability Project 2.0 – a nationwide call for transparency and refreshment in the boardroom.

We engaged companies to release data on the gender, race, and skill composition of the corporate board, and put this information in a “matrix” table, to give investors a bird’s eye view of the quality, diversity, and independence of board members.

Historically, this information is rarely – if ever – made public. But in less than a year since we launched, we’re already seeing unprecedented results:

  • Over 35 companies are now telling us not only the skills of those making important oversight decisions for the company, but also details about both the gender and race/ethnicity of their directors.
  • Dozens of companies are publicly committing to include women and people of color in the candidate pool for every future board search.
  • And these conversations are changing boardroom culture in a real way. Since this initiative began, 49 of the companies we targeted have elected 59 new, diverse, and high quality candidates.

These issues are too important to ignore. There is simply no excuse for companies to hide information about who is sitting around their boardroom tables and not to embrace the highest board quality and diversity for their companies and their investors.

But these steps forward are encouraging. They show that the corporate world is starting to hear what investors have known all along: being transparent and inclusive is not just the right thing to do – it’s a strategy for financial success.

I’ll keep you posted,

Scott 

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