Racial & Ethnic Diversity in the Boardroom: Special Report
Unclear and inconsistent disclosure is holding back investor efforts to promote diversity at the companies they own—and they’re tired of it. Whereas other elements like professional background and gender are available or evident, investors are often forced to guess the racial and ethnic composition of the board by looking at director profile photos or surnames. And with no consistent standards in place, making cross-company or even year-to-year comparisons to determine progress is almost impossible.
These practical difficulties have spurred a growth in demand for more company disclosure of racial and ethnic data and related initiatives. Recently, a host of institutional investors have updated their engagement strategies and voting policies to address disclosure of board-level race and ethnicity, along with the broader diversity policies and processes in place. For investors, disclosure of this information signals that the discussion is at least happening at the board level, even if it has yet to bear fruit.
It appears that many companies’ disclosures relating to board diversity in the context of race and ethnicity are lacking relative to these evolving institutional investor expectations: In our review of proxy statements filed during 2020 by companies in the S&P 500, we found that most companies do not disclose any information regarding the race and ethnicity of their board.
As part of our annual engagement program, in Q3 and Q4 2020 we spoke with over 50 companies within the S&P 500 about their processes for disclosing information regarding diversity policies and demographics. We met with a wide spectrum of companies to better understand the challenges for those who have not disclosed this information, and best practices from companies who have — in some cases for many years.
The result is a Glass Lewis special report on Racial & Ethnic Diversity in the Boardroom, setting out a summary of what companies shared with us in those conversations, including reasons why companies do (and do not) disclose racial & ethnic diversity, advice for companies starting the process, considerations for creating a racially diverse board, and a look beyond the boardroom at organizational structure and the use of diversity as a metric for employee compensation.
Racial & Ethnic Diversity in the Boardroom is available now. Glass Lewis customers can access the report on Viewpoint via the Help & Resources menu, or Governance Hub, or contact their Glass Lewis Representative for more information.
Not yet a customer? Click on the button below to download.
