The New York State Common Retirement Fund (the Fund) voted against board directors at companies that failed to meet the Fund’s expectations for board diversity and filed shareholder proposals calling on companies to address investors’ concerns about diversity, equity and inclusion during the 2021 proxy season, New York State Comptroller Thomas P. DiNapoli announced today. The Fund’s ongoing efforts to hold publicly traded corporations and their top executives accountable received strong support.
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, research shows 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.
“Companies have a responsibility to root out racial inequality within their organizations. While many corporations pledged to confront inequity head on, too many have failed to live up to their commitment,” DiNapoli said. “The existing inequities that remain at the highest levels of corporate America pose a significant risk to companies’ bottom lines, a concern for all shareholders. Our state pension fund continues to engage with portfolio companies to advance solutions to address our concerns. The strong support fellow investors have given to our efforts puts the burden on companies to take concrete and measurable steps to improve diversity and promote full inclusion throughout their entire workforce.”
The Fund filed shareholder proposals on a range of diversity, equity and inclusion issues and voted against Board directors at companies which are not taking necessary actions. These actions follow an announcement earlier this year by DiNapoli launching a multi-faceted initiative to hold publicly traded corporations and their top executives accountable for their policies and practices.
Disclosure of federally filed Equal Employment Opportunity (EEO-1) data helps investors assess their portfolio companies’ commitments to greater racial inclusion, not just in a given year, but over time by comparing how the proportion of Black women, for example, has changed in a given job category from one year to another.
DiNapoli reached agreements with Hilton Worldwide, Qorvo Inc. and Lowe’s Companies, Inc. (co-filing with the Comptroller of the City of New York) to disclose their EEO-1 reports detailing the race, ethnicity and gender of their workforce, including senior management.
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.
In 2021, DiNapoli’s shareholder proposals at First Community Bankshares Inc. and National Healthcare Corp. called on 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 agreed to the proposal and committed to adding a woman to its board in 2022. The proposal at First Community Bankshares received support from 71% of investors.
Racial Equity Audit
DiNapoli’s shareholder proposal at Amazon.com Inc. requesting an independent review of the company’s policies and practices on civil rights, equity, diversity and inclusion, and how they affect the company’s business was supported by 44.18% of the company’s shareholders – considered a strong outcome for a first-time proposal.
As a result of the significant support from shareholders, DiNapoli has asked Amazon’s new CEO, Andy Jassy, to take steps to implement the proposal. DiNapoli will continue to press the company to take an independent look at how it is addressing racial justice and equity, as other major corporations have done.
Linking Executive Compensation to Diversity & Inclusion
DiNapoli secured an agreement with McDonald’s Corp. to disclose workforce diversity data and tie executive compensation to improving diversity representation for women and underrepresented groups, and creating a culture of inclusion among employees.
Diversity Voting Guidelines
In February, DiNapoli announced the Fund would expand its voting position against boards at companies that lacked a director identifying as an underrepresented minority. The Fund’s Proxy Voting Guidelines state that the Fund will scrutinize boards that are not sufficiently diverse on factors including age, race, gender, ethnicity, sexual orientation, gender identity, geography and disability.
As a result, the Fund voted against board director nominees due to specific diversity concerns, including:
- 1,176 directors at 280 companies that do not disclose the racial/ethnic diversity of directors on an individual basis;
- 132 directors at 36 companies that do not disclose that the board expressly considers both gender and race/ethnicity diversity in director search processes;
- 345 directors at 97 companies with only one board director who identifies as an underrepresented minority;
- 123 directors at 18 companies with no board director who identifies as an underrepresented minority;
- 90 directors at 13 companies that failed to respond to DiNapoli’s diversity letter;
- 443 board director nominees at 97 companies that had no women on their boards; and
- 1,056 board director nominees at 455 companies for having only one woman on their board.
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 estimated assets of $268.3 billion as of June 30, 2021. 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.