Boardroom Accountability 2.0

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After launching the successful “Boardroom Accountability Project” in fall of 2014 to give investors a meaningful voice in director elections through “proxy access,” New York City Comptroller Scott M. Stringer and the New York City Pension Funds launched the “Boardroom Accountability Project 2.0” in September 2017. This next phase of the campaign ratchets up pressure on companies to make their boards more diverse, independent and climate-competent, so that they are in a position to deliver better long-term returns for investors. 

As part of the launch, Comptroller Stringer sent letters to the nominating committee chairs of 151 companies requesting a dialogue about their process for adding and replacing board members (i.e., board refreshment and evaluations) and for soliciting shareowner input for potential candidates who are women and people of color. As a predicate to the discussion, the Comptroller requested that each company publicly disclose the skills, race and gender of board members in a board matrix. 

The effort is the logical next step for the Boardroom Accountability Project, in which the NYC Funds negotiated, company by company, to make proxy access — the right for shareowners to nominate directors using the corporate ballot — a market standard. Today, more than 450 companies provide proxy access, including over 65 percent of the S&P 500, up from about six companies when the Project was launched.

Proxy access is a powerful tool and the mere specter of a proxy access candidate is expected to make boards more responsive to shareowner engagement, particularly with respect to board composition and quality, including diversity. Boardroom 2.0 is an ambitious effort to test this theory.

Companies that received the Comptroller’s letter include 139 companies that enacted proxy access after receiving a proposal from the NYC Funds and 12 at which the NYC Funds’ proxy access proposal received majority support in 2017. In most cases, the companies were initially targeted for proxy access because their board lacked adequate diversity or granted excessive CEO pay, or because they are carbon-intensive energy companies that face substantial risks related to climate change.

In addition to the letters, the NYC Funds submitted shareowner proposals to some of the companies requesting a board matrix that, among other attributes defined by the board, includes each director’s gender and race/ethnicity. This specific matrix approach is consistent with the request in a 2015 rulemaking petition to the SEC seeking mandatory matrix disclosure by all U.S. public companies.

A meaningful board matrix provides shareowners with a “big-picture” view of directors’ attributes and how they fit together, enabling shareowners to assess how well-suited individual director nominees are for the company in light of its evolving business strategy and risks and the overall mix of director skills and experiences.

Initial responses have been overwhelmingly positive, leading to meaningful engagements with approximately half of the companies through January 2018, and the withdrawal of some proposals. At a number of companies, including Exxon Mobil and NRG Energy, proposals appear likely to go to a vote.


Mike Garland.jpg

Michael Garland

Assistant Comptroller, Corporate Governance and Responsible Investment Office of New York City Comptroller