New York State Comptroller Thomas P. DiNapoli today announced that the New York State Common Retirement Fund (Fund) has launched a multi-faceted initiative to hold publicly-traded corporations and their top executives accountable for their diversity, equity and inclusion policies and practices.
DiNapoli said the Fund will file shareholder proposals seeking increased board diversity and disclosure of workforce diversity, and will expand its votes against board members at companies whose boards do not include underrepresented racial minorities, companies that fail to disclose their workforce’s racial or ethnic diversity, and companies that refuse to embed diversity in their search for new board directors.
“Companies must root out racial inequality, just as they would root any other systemic problem that puts their long-term success at risk. Corporate America must join in the national reckoning over racial injustice and confront institutionalized racism,” DiNapoli said. “Companies succeed when their workforces reflect the diversity of America and when they develop a corporate culture that embraces equity and inclusion. Many companies are taking meaningful steps towards achieving diversity, equity and inclusion, but it’s clear more is needed.”
Following the murder of George Floyd in 2020, and the public outcry over the killings of other Black men and women, many publicly traded corporations spoke out against racial injustice and made commitments to address racial inequities. DiNapoli noted that companies face increased risks when their corporate policies, practices, products, or services are, or are perceived to be, discriminatory, racist, or adding to racial inequities. By contrast, companies that foster diversity are more likely to outperform their less diverse peers, and companies that develop a culture of inclusion, equity and belonging are better positioned to drive long-term value for shareholders.
In 2020, the Fund updated its Proxy Voting Guidelines to formalize the Fund’s opposition to boards that are not sufficiently diverse, including diverse attributes based on age, race, gender, ethnicity, sexual orientation and gender identity, geography, and disability. Last year, the Fund withheld support from 227 incumbent directors at 55 companies that did not include underrepresented racial minorities.
In 2021, the Fund is expanding its efforts to cover all S&P 500 companies and, combined with expected increases in the disclosure of boards’ racial and ethnic diversity, anticipates an expansion of its voting against directors at companies that lack racially diverse boards. Today, DiNapoli announced that the Fund is taking a multi-pronged approach which includes:
In addition to expanding its voting policies, the Fund has filed shareholder proposals seeking greater corporate responsibility for diversity, equity and inclusion of underrepresented racial minorities.
Corporations are required to file Equal Employment Opportunity reports detailing the race, ethnicity and gender of their workforce, including senior management, with the U.S. Equal Employment Opportunity Commission. DiNapoli has asked a number of companies, including Hilton Worldwide, Qorvo Inc. and Lowe’s Companies, Inc. (co-filing with the Comptroller of the City of New York) to voluntarily disclose their federally-filed EEO-1 reports. In response to DiNapoli’s shareholder proposal, Hilton has agreed to disclose its EEO-1 report. The proposal has been withdrawn from Hilton as a result.
Disclosure of EEO-1 data would help investors assess their portfolio companies’ commitments to greater racial inclusion not just in a given year, but over time, by comparing how representation of Black women, for example, has changed in a given job category from one year to another.
DiNapoli has urged companies in the Fund’s portfolio to diversify their board directors for many years. Diversity of background and experience has been shown to be a factor in improving companies’ performance. The Fund’s latest board diversity shareholder proposals at First Community Bankshares, Inc. and National Healthcare Corp. ask the companies to take actions, such as adopting formal language asserting a commitment to inclusivity of diversity by sex, race, ethnicity, age, gender identity, gender expression and sexual orientation. National Healthcare has since agreed to the proposal and committed to adding a woman to its board in 2022. As a result, the proposal filed there has been withdrawn.
Since 2010, the Fund has filed 37 shareholder proposals calling on public companies in its portfolio to increase board diversity. Through those proposals, the Fund has secured 19 agreements with companies to promote diversity on boards, and engagement successes have added 29 diverse members to boards of directors.
Racial Equity Audit
DiNapoli has previously called on Amazon.com Inc. to conduct a racial equity audit to assess the company’s policies and practices on civil rights, equity, diversity and inclusion, and how they affect the company’s business. Since filing the proposal, Amazon has sought to block its inclusion on the agenda for shareholder consideration at its annual meeting in the spring. A ruling on Amazon’s request is pending from the Securities and Exchange Commission.
Diversity Voting Guidelines
The Fund’s Proxy Voting Guidelines state that the Fund will scrutinize boards that are not sufficiently diverse, including diversity of age, race, gender, ethnicity, sexual orientation and gender identity, geography, and disability. As a result, the Fund will expand its voting position at S&P 500 companies and will vote against:
- All incumbent directors at companies with zero directors identifying as an underrepresented minority on their board (as defined by federal Equal Employment Opportunity Commission, this includes one or more of the following: Black or African American, Hispanic or Latino, Asian, Native American or Alaska Native, Native Hawaiian or Pacific Islander, or Two or More Races or Ethnicities).
- All incumbent nominating committee directors at companies with just one director identifying as an underrepresented minority. Nominating committees are responsible for nominating new board directors.
- Board chairs and incumbent audit committee members at S&P 500 companies that do not disclose the individual racial/ethnic diversity of their board directors.
- All incumbent nominating committee members at companies that have not made both gender and racial/ethnic diversity explicit considerations in their search for directors.
- All incumbent directors at companies that failed to adequately respond to DiNapoli’s August 2020 letter requesting information on diversity, equity and inclusion practices.
The Fund will also encourage its portfolio companies to disclose whether directors identify themselves as LGBTQ+ or a person with a disability, with the goal of further expanding the Fund’s voting policy during the coming years.
Since 2018, the Fund has voted against all incumbent board directors standing for re-election at companies that have no women on their boards. In situations where a company has just one woman on its board, the Fund has withheld support from all incumbent members of the board's nominating committee. In 2020, the Fund withheld support for 879 incumbent directors at 193 public companies with no women on their boards. The Fund also withheld support for 1,574 incumbent nominating committee members at 673 public companies with only one woman on their boards.
About the New York State Common Retirement Fund
The New York State Common Retirement Fund is the third largest public pension fund in the United States with an estimated value of $247.7 billion as of Dec. 31, 2020. The Fund holds and invests the assets of the New York State and Local Retirement System on behalf of more than one million state and local government employees and retirees and their beneficiaries. The Fund has consistently been ranked as one of the best managed and best funded plans in the nation. The Fund's fiscal year ends March 31.
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