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Board Leadership | Investors

Proxy season:

A springboard for diversity discussion Investors are continuing their push for board diversity in the 2019 proxy season that was set into motion two years ago. Drawing on the energy from events, such as BlackRock’s letter to CEOs, demanding meaningful change in board composition, more investors are becoming vocal and more definitive about what constitutes boardroom diversity.

Th is year, the New York City Pension Fund will continue its push for disclosure via a matrix that will disclose directors’ gender, race and skills. Th is is part of its ongoing Boardroom Accountability Project 2.0 that focusses on electing more diverse directors to public company boards. While disclosure doesn’t always translate into the election of more diverse directors, it does shine a light on what qualities and skills companies are prioritising in the boardroom.

Investors push for board diversity, but power to change remains with companies Lisa Blais & Ashley Summerfield

Lisa leads the US Board Practice and Ashley leads the Global Board Consulting Practice at Egon Zehnder In addition to investors, proxy advisors are taking a stronger stance on diversity in 2019. Glass Lewis has implemented a policy where it will recommend voting against nominating committee chairs if a board lacks female directors. Institutional Shareholder Services (ISS) has plans for a similar policy that will take effect in 2020. For 2019, ISS has added a board diversity subcategory, which includes questions about women on the board and named executive officers as well. In 2020, for companies in the Russell 3000 or S&P 1500 indices, ISS will ‘vote against or withhold from the chair of the nominating committee (or other directors on a case-by-case basis) at companies when there are no women on the company’s board’, according to its 2019 policies. ISS did note that there were a few mitigating factors it would consider next

year, including a fi rm commitment in the proxy statement to appoint at least one female to the board in the near term. Eyes will also be on California companies to see if those companies lacking female directors have begun to change, given the mandate that companies headquartered in that state must have at least one female director by the end of 2019. Some boards will be required to add up to three women by the end of 2021, based on their board size. A recent article published by Bloomberg noted that the California law will open up about 692 board seats to women. If 49 other states followed suit, about 3,732 seats would open up to women. But for all the talk about board diversity, are the demands from investors and additional disclosure requests from proxy advisors actually making change in board composition?

DIVERSITY AT TOP OF MIND Investors are increasingly focussed on establishing a diverse boardroom 26 Ethical Boardroom | Spring 2019

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Ethical Boardroom Spring 2019