Board Governance

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The 30 Percent Coalition, which coordinates shareholder resolution and other efforts to diversity boards, includes senior business executives, national women’s organizations, institutional investors, corporate governance experts and board members. The proposals ask companies to add more women and minorities or to report on how they manage this process. As more companies act, the list of recipients has expanded, going to smaller firms such as a group of small cap companies in the Midwest last year. Wherever the recipient hails from, though, the pressure to include more women is not receding. Since 2010, proponents have filed more than 200 proposals, withdrawing two-thirds after companies have made their policies more inclusive, at least on paper. Proponents are most likely to file proposals at companies with no women or people of color on the board.

Adopt policy:
Resolutions at 14 companies—CACI International, Cognex, Discovery Communications, FCB Financial Holdings and UnitedHealth Group and at least two more undisclosed companies—ask each to

adopt a policy for improving board diversity…requiring that the initial list of candidates from which new management-supported director nominees are chosen…by the Nominating and Corporate Governance Committee should include (but need not be limited to) qualified women and minority candidates. The Policy should provide that any third-party consultant asked to furnish an Initial List will be requested to include such candidates.

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It is new to all but Cognex, where last year the proposal earned 62.7 percent support. At Discovery Communications, a board diversity reporting proposal in 2017 earned 35.3 percent, up from 17.6 percent in 2016 and 23.1 percent in 2015. CalSTRS and Calvert had withdrawn a similar 2012 proposal after the company added a commitment to racial and gender diversity on its board, but proponents filed again starting in 2015 because, until 2017, the company’s board included no women or minorities.

A similar resolution is before three more—Gulfport Energy, Old Dominion Freight and World Fuel Services—asking that each

adopt a policy that the board will seek to enhance board diversity beyond current levels by taking all reasonable steps, consistent with the board’s fiduciary obligations, to ensure that a wider range of female and minority candidates are included in the pool of candidates from which board nominees are chosen and reporting to shareholders by the 2019 annual meeting about how that policy is being implemented, including efforts to expand the pool of potential candidates and any changes made to the governance and nominating committee’s charter.

A resolution at Praxair asks that it

adopt a diversity policy in which the Board publicly commits to:

  • Ensuring that women and minority candidates are routinely sought as part of each Board search;
  • Expanding director searches to include nominees beyond the executive suite, from non-traditional environments such government, academia, and non-profit organizations; and
  • Reviewing Board composition to ensure that the Board reflects the knowledge, experience, skills, and diversity required for the Board to fulfill its duties.

Similar proposals about board diversity are pending at CME Group, First Hawaiian, Getty Realty and HollyFrontier.

Withdrawals—Proponents so far have withdrawn at three companies—Hub GroupOceaneering International and Thor Industries—after reaching agreements. More are certain.

Reporting on diversity policy:
At least 15 companies have received resolutions asking them to report on their board diversity practices.

With slight variations, proponents have asked Anika Therapeutics, Ansys, Black Knight, Cato, Pilgrim’s Pride (where the resolution earned 14.3 percent last year), LogMeIn, US Foods Holding and Sealed Air to report on how they are “fostering greater diversity on the Board,” by:

  1. Strengthening Nominating and Corporate Governance policies by embedding a commitment to diversity inclusive of gender, race, ethnicity;

  2. Committing to include women and underrepresented minority candidates in every pool from which Board nominees are chosen;

  3. Reporting on progress and challenges experienced.

The resolution at Pilgrim’s Pride is slightly different for the first point—it asks for “consideration of modifications to nominating and corporate governance policies reflecting greater commitment to advancing Board diversity inclusive of gender, race and ethnicity.” At Sealed Air, the second point says “Expanding director searches to include nominees from corporate positions beyond the executive suite and from environments including government, academia, and nonprofit organizations.”

That language is incorporated into a resolution to Bristol-Myers Squibb, as well, asking for additional details:

plans to increase diverse representation on the Board, including an assessment of the effectiveness of such efforts. The report should include a description of what steps, if any, the Board and/or the Nominating Committee has taken or plans to take to:

  1. Include women and other diverse candidates in the pool from which Board nominees are chosen; and

  2. Expand director searches to include nominees from both corporate positions beyond the executive suite and non-traditional environments including government, academia, and non-profit organizations.

The requested report should also address:

  • Changes to the Nominating Committee Charter to include a requirement to consider the Board’s diversity inclusive of gender, race, ethnicity, sexual orientation and gender identity in identifying director candidates.
  • The number of women and diverse candidates in the pool within the past 3 years.
  • Any challenges to increasing diversity identified by the Board and any plans to address them.

Withdrawals—Walden withdrew at Anika after it agreed to expand its disclosure in the proxy statement and to revise its corporate governance policy to specifically consider gender, race and ethnic diversity. More withdrawals will occur as the season progresses.

New “matrix” request:
The New York City pension funds have a resolution pending at ExxonMobil, NRG Energy and an undisclosed additional number of companies seeking information about diversity but also other director attributes:

each director’s/nominee’s gender and race/ethnicity, as well as skills, experience and attributes that are most relevant in light of [the company’s] overall business, long-term strategy and risks, presented in a matrix form. The requested matrix shall not include any attributes the Board identifies as minimum qualifications for all Board candidates in compliance with SEC Regulation S-K.

The requested matrix shall be presented to shareholders in [the company’s] annual proxy statement and on its website within six months of the date of the annual meeting, and updated annually.

SEC action—ExxonMobil has challenged the “matrix” resolution at the SEC, arguing it is too vague and concerns ordinary business, but the SEC has yet to respond.

Board executive committee:
A final proposal to Alphabet is new. Trillium Asset Management proposes that the “take steps to make the Board’s Executive Committee diverse in terms of race, ethnicity, and gender,” arguing that adding more diversity to the three-person board executive committee—made up of three white men—will help the company achieve greater diversity in its workforce.

Advocacy Position: Board Diversity: Not a Slogan, It's Your Bottom Line

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Board Oversight

Resolutions about board oversight fall into two functional categories—asking for the nomination of specific types of experts to sit on the board (three this year) or suggesting specific types of committees are needed to properly oversee complicated sustainability issues (seven this year). There were more resolutions on these topics in 2014 and 2015.

specific issues

Climate change:
A new report from the 50/50 Climate Project warns of the growing risk to investors and shareholders of inadequate board-level governance on climate change risk, plus risk from heavy political influence spending that works against climate change transformation.

Expert Insight: Spending Against Change: Little Board Climate Oversight & Expertise, Substantial Influence Spending

This year there are three proposals asking for board oversight about climate change. The resolution to PNM Resources is a resubmission that the Edith P. Homans Family Trust withdrew last year after a company challenge that said it was moot—but the trust expressed desire for further discussions about the issue with the company. This year it has refiled. The resolution says, “To help address the critical social and business impacts of climate change,” the company should “take the necessary steps to establish more effective board oversight of our company’s policies and programs addressing climate change and report to shareholders on steps taken or planned.”

A very similar proposal is before Old Republic, requesting the report by November. Mercy Investments withdrew at Travelers after it agreed to expand public reporting on its board oversight of climate risks. The resolution had asked that it “take steps necessary to establish more effective board oversight of our company’s policies and programs addressing the risks and opportunities posed by climate change and report to shareholders by November 2018.”

SEC action—PNM Resources again has challenged the climate oversight proposal at the SEC, arguing it is moot because it already has board oversight of the issue and has extant current board expertise; it also says PNM is working to align its business with GHG reduction goals.

Human rights:
Chinese human rights activist Jing Zhao, who has filed often at tech companies about problems in China, asks that Apple

establish a Human Rights Committee to review, assess, disclose, and make recommendations to enhance Apple’s policy and practices on human rights. The board of directors is recommended, in its discretion and consistent with applicable laws to: (1) adopt Apple Human Rights Principles, (2) designate the members of the committee, including outside independent human rights experts as advisors, (3) provide the committee with sufficient funds for operating expenses, (4) adopt a charter to specify the functions of the committee, (5) empower the committee to solicit public input and to issue periodic reports to shareholders and the public on the committee’s activities, findings and recommendations, and (6) adopt any other measures.

The company unsuccessfully challenged the proposal at the SEC, which did not agree it can be excluded on ordinary business grounds. Apple contended respect for human rights is integral to its business practices which management and the board already consider, but the SEC said that Apple did not “explain why this particular proposal would not raise a significant issue for the Company.” Investors gave the proposal 5.6 percent support at the mid-February annual meeting.

At Monsanto, investors gave 6 percent support to a Harrington Investments proposed on a binding bylaw amendment to set up a board human rights committee to

to review the implications of company policies, above and beyond matters of legal compliance, for the human rights of individuals in the US and worldwide, including assessing the impacts of company operations on resources and public welfare in host communities and the relationship of company operations and resources to any government security forces securing company operations in those communities.

This was the first time that a proposal requesting the creation of a board-level human rights committee had appeared on the Monsanto ballot. Monsanto withdrew an initial challenge it lodged at the SEC, noting its pending merger with Bayer. In 2011, Harrington requested that a board sustainability committee be established, but withdrew after a challenge at the SEC that argued the resolution was obviated by the existence of its board Public Policy Committee. Harrington Investments has filed a proposal at Monsanto almost every year since at least 2011, with three proposals seeking a report on the risks of GMOs (2012, 2013 and 2014) and, most recently, two proposals seeking a report on pesticide monitoring (2016 and 2017).

Indigenous rights:
Harrington Investments also has proposed that JPMorgan Chase “establish a Human and Indigenous Peoples’ Rights Committee.” The company has challenged the proposal at the SEC, arguing it can be excluded because it concerns ordinary business since it seeks to micromanage the company by constraining potential business opportunities. It also argues the proposal does not transcend ordinary business since its board already considers human rights issues and indigenous peoples. Both arguments invoke SEC Staff Legal Bulletin 14I.

Risk committee:
Trillum Asset Management would like Facebook to report “discussing the merits of establishing a Risk Oversight Board Committee,” reasoning that such a committee could better identify and manage the company’s “risk reporting and monitoring,” and help management and the board focus on “the ‘big picture.’” The proposal asserts the company may not “understand its impact on society and may be creating numerous financial risks which could present material challenges to the company and its shareholders,” and enumerates a range of issues from depression to Russian election meddling and censorship, as well as the broadcast of heinous events by Facebook users. These problems are evidence of the need for “a strategic approach to risk” by Facebook’s board, the resolution says, to avoid daily-emerging unintended consequences. A specific Risk Committee would better address these challenges, in the proponent’s view.

Advocacy Position: Managing the Unintentional Consequences of Social Media


The Chevron proposal from NYSCRF has gone to a vote every year since 2010, although support has fallen from an early high of nearly 27 percent support in 2010 to last year’s 19.6 percent. It asks that the company nominate at least one new director who:

  • has a high level of expertise and experience in environmental matters relevant to hydrocarbon exploration and production and is widely recognized in the business and environmental communities as an authority in such field, as reasonably determined by the company’s board, and
  • will qualify, subject to exceptions in extraordinary circumstances explicitly specified by the board, as an independent director.

NYSCRF defines a director as not independent if he or she:

  • was, or is affiliated with a company that was an advisor or consultant to the Company;
  • was employed by or had a personal service contract(s) with the Company or its senior management;
  • was affiliated with a company or non-profit entity that received the greater of $2 million or 2 percent of its gross annual revenues from the Company;
  • had a business relationship with the Company worth at least $100,000 annually;
  • has been employed by a public company at which an executive officer of the Company serves as a director;
  • had a relationship of the sorts described herein with any affiliate of the Company; and
  • was a spouse, parent, child, sibling or in-law of any person described above.

Human rights:
The Episcopal Church is using the same approach at Caterpillar and Motorola Solutions, which both have faced controversies about their operations in Israeli and Palestinian territory, but also in other parts of the world. The resolution asked for the nomination of

at least one candidate who: has a high level of human rights expertise and experience in human rights matters relevant to Company production and supply chain, related risks, and is widely recognized in business and human rights communities as such, as reasonably determined by the Board, and will qualify, subject to exceptions in extraordinary circumstances explicitly specified by the Board, as an independent director.

The church withdrew after discussions in 2017 at Caterpillar but refiled and added Motorola to its slate. It reasons that because the companies operate in conflict zones and need to demonstrate they are adhering to best human rights practices, they need experts on their boards “versed in all business aspects of human rights.”