Investors Pressure Corporate America With Record Diversity Push

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Shareholders are making their biggest push yet into getting corporate America to look more like America.

A record 30 resolutions focusing on diversity, equity and inclusion will be on the ballots at upcoming annual company meetings, according to data compiled by Bloomberg Intelligence. Racial audits have emerged as a new proposal filed with Wall Street banks and other companies, including Amazon.com Inc.

“Hands down, diversity was thrust to the fore,” said Heidi Welsh of the Sustainable Investments Institute, a Boonsboro, Maryland-based research firm. “When you see more companies move on it, the bad actors will be left standing out.”

Corporate executives are facing increased demands from investors, customers and employees to ensure their workforces -- particularly in senior management -- reflect the overall diversity of the U.S. population. The push comes in wake of the biggest civil rights protests in decades and as qualified minorities have often lost out on career opportunities and promotions to White men. The global pandemic has added to the inequities with women and people of color experiencing the worst job losses since last March.

Social issues, which include topics such as pharmaceutical prices, worker pay and scrutiny of supply chains, have garnered a total of 92 resolutions for this year’s proxy-voting season, according to the Bloomberg Intelligence. That compares with 43 for governance proposals and 30 for the environment as of April 15.

For BI dashboard on proxy proposals, see BI PROXY

Corporate influence -- through lobbying and political contributions -- made up the biggest social topic with 34 resolutions. One such proposal was filed by investor Rhia Ventures with JPMorgan Chase & Co.

Rhia Ventures wants JPMorgan to publish an annual report detailing its political expenditures because the bank’s politically-focused expenditures appear to be misaligned with its stated values and interests. The investor said JPMorgan has funded a group that’s led efforts to prevent the enforcement of clean energy laws and donated to political candidates opposing LGBTQ equality.

JPMorgan said its lobbying and political activities are described in detail on its website, and recommended shareholders vote against the proposal.

Given how companies are taking greater stances on social topics from race relations to climate change, investors want to ensure that companies aren’t making contradictory moves in their lobbying, said Rob Du Boff, an ESG analyst at Bloomberg Intelligence.

“Shareholders are seeing the need for companies to explain themselves as they increasingly take a public stand on issues,” he said, adding that a tipping point was in 2019 when the Business Roundtable announced that it would broaden the beneficiaries of its members’ work to customers, employees, suppliers and communities.

BlackRock and Vanguard

Beyond missing out on higher profits, companies with homogeneous leadership and workforces risk paying a big price. BlackRock Inc., the world’s largest asset manager, and Vanguard Group Inc. said they will vote against directors this year who fail to act on diversifying their boards and workforces. And starting in 2022, leading proxy-advisory firm Institutional Shareholder Services said it will recommend voting against directors of all Russell 3000 or S&P 1500 companies whose boards aren’t diverse enough.

BlackRock Chief Executive Officer Larry Fink conceded that his firm wasn’t moving as quickly as he wanted on diversity, saying that he judges his firm harshly on the topic. As such, the world’s largest money manager agreed to perform an independent racial audit to see if, and how, its business model may be contributing to systemic racism.

Meanwhile, the world’s largest retailer, Amazon, is asking shareholders to vote against such a move. So are Goldman Sachs Group Inc., JPMorgan Chase & Co. and State Street Corp. New York State Common Retirement Fund and other investors filed proposals calling for companies to undergo independent racial audits, much like what Airbnb Inc. and Facebook Inc. have done in recent years.

Many resolutions overlap in ESG. Requests for greater board diversity can be seen as both a social and governance issue, while pushing for climate lobbying disclosure can be categorized as an environmental and social topic.

©2021 Bloomberg L.P.

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