Institutional investors and proxy advisory firms continue developing and refining their policies regarding board diversity. While gender diversity on public company boards has been in focus for some time now, institutional investors and proxy advisory firms are also increasingly focusing on racial and ethnic diversity as part of their evolving approach to board diversity.

This post summarizes published board diversity policies of several institutional investors and proxy advisory firms into a singular resource for ease of reference. Below the initial breakdown is a description of specific policies concerning board diversity shareholder proposals. 

2022 Board Diversity Policy Summary Chart – Proxy Advisory Firms/Institutional Investors (as of May 2, 2022)

ISS (12/31/2021)

Gender Diversity Board Policies Racial/Ethnic Diversity Board Policies Guiding Principles regarding Board Diversity/Additional Notes
Companies in the Russell 3000 or S&P 1500 indices generally vote against or withhold from the chair of the nominating committee (or other directors on a case-by-case basis) at companies where there are no women on the company’s board.  An exception will be made if there was a woman on the board at the preceding annual meeting and the board makes a firm commitment to return to a gender-diverse status within a year. This policy will also apply to companies not in the Russell 3000 and S&P 1500 indices, effective for meetings on or after February 1, 2023. Companies in the Russell 3000 or S&P 1500 indices generally vote against or withhold from the chair of the nominating committee (or other directors on a case-by-case basis) where the board has no apparent racially or ethnically diverse members. An exception will be made if there was racial and/or ethnic diversity on the board at the preceding annual meeting and the board makes a firm commitment to appoint at least one racial and/or ethnically diverse member within a year.

Boards should be of a size appropriate to accommodate diversity, expertise, and independence while ensuring active and collaborative participation by all members. Boards should be sufficiently diverse to ensure consideration of a wide range of perspectives.

See below for board diversity shareholder proposal policies.

Glass Lewis (11/15/2021) | Approach to Diversity Disclosure Ratings (2/2022))

Gender Diversity Board Policies Racial/Ethnic Diversity Board Policies Guiding Principles regarding Board Diversity/Additional Notes

Current Policy:

Will generally recommend against the nominating committee chair of a board with fewer than two gender diverse members or the entire nominating committee of a board with no gender diverse directors, at companies within the Russell 3000 index. For companies outside of the Russell 3000 index and all boards with six or fewer total directors, existing voting policy requiring a minimum of one gender diverse director will remain in place.

Beginning with shareholder meetings held after January 1, 2023:

Will transition from a fixed numerical approach to a percentage-based approach and generally recommend voting against the nominating committee chair of a board that is not at least 30% gender diverse at companies within the Russell 3000 index. For boards with six or fewer total directors, the existing voting policy requiring a minimum of one female director will remain in place.

State Laws on Gender Diversity:

Glass Lewis will recommend in accordance with mandated board composition requirements outlined in applicable state laws when they come into effect. However, Glass Lewis will generally refrain from recommending against directors when applicable state laws do not mandate board composition requirements, are non-binding, or solely impose disclosure or reporting requirements in filings made with each respective state annually.  For example, California Senate Bill 826 (requiring all companies headquartered in California to have at least one woman on their board, and, by the end of 2021, California companies must have at least two women on boards of five members and at least three women on boards with six or more directors) and Assembly Bill 979 (required companies headquartered in California to have one director from an “underrepresented community” on their board by the end of 2021, and, by the end of 2022, California companies must have at least two such individuals on boards of five to eight members, and three such individuals on boards of nine or more members).

State Laws on Underrepresented Community Diversity:

Glass Lewis will generally recommend in line with applicable state laws mandating board composition requirements for underrepresented community diversity or other diversity measures beyond gender when they come into effect.

Stock Exchange Diversity Disclosure Requirements:

Beginning in 2022, companies listed on the Nasdaq stock exchange are required to disclose certain board diversity statistics annually in a standardized format in the proxy statement or on the company’s website. Nasdaq-listed companies must provide this disclosure by the latter of:

  • August 8, 2022, or.
  • The date the company files its proxy statement for its 2022 annual meeting.

Accordingly, for annual meetings held after August 8, 2022, of applicable Nasdaq-listed companies, Glass Lewis will recommend voting against the chair of the governance committee when the required disclosure has not been provided.

Disclosure of Director Diversity and Skills:

For companies in the Russell 1000 index, Glass Lewis’ Proxy Paper reports will reflect how a company’s proxy statement presents the following:

  • The board’s current percentage of racial/ethnic diversity.
  • Whether the board’s definition of diversity explicitly includes gender and/or race/ethnicity.
  • Whether the board has adopted a policy requiring women and minorities to be included in the initial pool of candidates when selecting new director nominees (aka Rooney Rule).
  • Board skills disclosure.

Glass Lewis will not be making voting recommendations solely based on this assessment; however, such ratings will help inform their assessment of a company’s overall governance and may be a contributing factor in their recommendations when additional board-related concerns have been identified.

Beginning in 2022, for companies in the S&P 500 index with particularly poor disclosure (i.e., those failing to provide any disclosure in each of the tracked categories), Glass Lewis may recommend voting against the chair of the nominating and/or governance committee. Beginning in 2023, when companies in the S&P 500 index have not provided any disclosure of individual or aggregate racial/ethnic minority demographic information, Glass Lewis will generally recommend voting against the chair of the governance committee.

Council of Institutional Investors (CII) (3/7/2022))

Gender Diversity Board Policies Racial/Ethnic Diversity Board Policies Guiding Principles regarding Board Diversity/Additional Notes
CII supports a diverse board. CII believes a diverse board has benefits that can enhance corporate financial performance, particularly in today’s global marketplace. Nominating committee charters, or equivalent, ought to reflect that boards should be diverse, including such considerations as background, experience, age, race, gender, ethnicity, and culture.

Black Rock (12/2021) | (Board Diversity Engagement Priorities (3/2021))

Gender Diversity Board Policies Racial/Ethnic Diversity Board Policies Guiding Principles regarding Board Diversity/Additional Notes
Encourages companies to have at least two directors on their board who identify as female. Encourages companies to have at least one director on their board who identifies as a member of an underrepresented group.

BlackRock recognizes that diversity has multiple dimensions. In identifying potential candidates, boards should take into consideration the full breadth of diversity, including personal factors, such as gender, ethnicity, race, and age, as well as professional characteristics, such as a director’s industry, area of expertise, and geographic location.

BlackRock expects boards to disclose their approach, actions, and progress toward achieving diverse representation, including the demographic profile of the incumbent board, including, but not limited to, gender, ethnicity, race, age, and geographic location, in addition to measurable milestones to achieve a boardroom reflective of multi-faceted racial, ethnic, and gender representation.

To the extent that a company has not adequately accounted for diversity in its board composition within a reasonable timeframe, based on BlackRock’s assessment of such company’s corporate disclosures, BlackRock may vote against members of the nominating/governance committee for an apparent lack of commitment to board effectiveness.

BlackRock expects boards to have credible responses to a range of questions that can demonstrate a robust approach to board diversity, including the following:

  • How the board’s composition reflects the diversity of the company’s key stakeholders, the company’s stated strategy, trends impacting the business and succession expectations;
  • The board’s evaluation process, including how it impacts board succession planning and the director appointment or nomination process;
  • The board’s approach to refreshment and the extent to which diversity is a consideration;
  • Steps the nominating committee (or equivalent) is taking to enhance board diversity; for example, having a slate that includes diverse candidates;
  • The director appointment or nomination process and how unconscious biases may be addressed;
  • If search firms or recruitment consultants are used to identify candidates, whether the nominating committee (or equivalent) assessed the consultant’s networks and expertise in finding and placing diverse directors, especially first-time directors; and

How the board integrates the variety of perspectives its members bring to facilitate inclusive leadership.

State Street Global Advisors (3/2021) | (Racial Diversity Guidance (1/2022))

Gender Diversity Board Policies Racial/Ethnic Diversity Board Policies Guiding Principles regarding Board Diversity/Additional Notes

Beginning in 2022, State Street expects boards of companies in all markets and indices to have at least one female board member. If a company fails to meet this expectation, State Street may vote against the chair of the board’s nominating committee or the board leader in the absence of a nominating committee, if necessary.

Beginning in the 2023 proxy season, State Street will expect companies in the Russell 3000, TSX, FTSE 350, STOXX 600, and ASX 300 indices to have boards comprised of at least 30% women directors.

If a company fails to meet either of the expectations provided above for three consecutive years, State Street may vote against all incumbent members of the nominating committee or those deemed responsible for the nominating process.

State Street will vote against the nominating & governance committee chair at companies in the S&P 500 and FTSE 100 that do not disclose the racial and ethnic composition of their boards.

State Street will vote against the nominating & governance committee chair at companies in the S&P 500 and FTSE 100 that do not have at least one director from an underrepresented community on their boards.

State Street views board quality as a measure of director independence, director succession planning, board diversity, evaluations and refreshment, and company governance practices. State Street votes for the election/re-election of directors on a case-by-case basis after considering various factors, including board quality, general market practice, and availability of information on director skills and expertise.

If a company in the S&P 500 does not disclose, at minimum, the gender, racial and ethnic composition of its board, State Street will vote against the chair of the nominating committee.

NYS Comptroller (2/16/2022)

Gender Diversity Board Policies Racial/Ethnic Diversity Board Policies Guiding Principles regarding Board Diversity/Additional Notes

The NYS Comptroller will withhold support from all incumbent board nominees at companies with no women on the board.

Additionally, the NYS Comptroller will withhold support from incumbent nominating committee nominees at companies where a board does not have more than one woman director.

The NYS Comptroller will vote against the following directors at Russell 1000 index companies:

  • All incumbent board nominees at companies with zero directors identifying as an underrepresented minority on their board.

All incumbent nominating committee nominees at companies with just one director identifying as an underrepresented minority. Nominating committees are responsible for nominating new board directors.

The NYS Comptroller will scrutinize boards that are not sufficiently diverse, including diversity of age, race, gender, ethnicity, sexual orientation and gender identity, geography, and disability. A determination that a board is not sufficiently diverse may result in the NYS Comptroller withholding support from incumbent board nominees.

The NYS Comptroller will also vote against the following directors at Russell 1000 Index companies:

  • All incumbent nominating committee nominees at companies that do not disclose the self-identified individual racial/ethnic diversity of their board members.
  • All incumbent nominating committee nominees at companies that have not listed both gender and racial/ethnic diversity as explicit considerations in their search for directors.

The NYS Comptroller will also encourage its portfolio companies to disclose whether directors identify themselves as LGBTQ+ or a person with a disability.

NYC Comptroller (2/2019)

Gender Diversity Board Policies Racial/Ethnic Diversity Board Policies Guiding Principles regarding Board Diversity/Additional Notes
The NYC Comptroller will generally vote against members of a nominating/governance committee that is negligent in its performance, including but not limited to the following circumstances: . . . The board lacks meaningful gender and racial/ethnic diversity, including but not limited to any board on which more than 80% of the directors are the same gender.

Boards should be composed of directors who, collectively, are best equipped to effectively oversee the company’s strategy for creating and protecting firm value. Accordingly, the NYC Comptroller encourages board diversity. Diverse perspectives, skills, expertise, and backgrounds may enhance the board’s decision-making and ability to exercise prudent oversight on shareowners’ behalf, and better position the board to pursue market opportunities. The NYC Comptroller views diversity broadly and believes diverse boards may encompass considerations such as professional background, expertise, skills, age, race, gender, ethnicity, geography, sexual orientation, and gender identity. Director attributes should be relevant to the company’s business and enhance the board’s capacity to effectively oversee strategy and risk, including operational, regulatory, climate-related and environmental, human capital, macroeconomic, and financial risks. Board nominating policies and practices should define and reflect the board’s view of diversity.

The NYC Comptroller may integrate more explicit racial/ethnic diversity expectations in the future as reliable data becomes available and may
increase the minimum expectation for gender diversity.

Vanguard (3/1/2022) | (Board Diversity Guidance (12/2020))

Gender Diversity Board Policies Racial/Ethnic Diversity Board Policies Guiding Principles regarding Board Diversity/Additional Notes

Vanguard’s primary interest is to ensure that the individuals who represent the interests of all shareholders are independent, capable, and appropriately experienced. Diversity of thought, background, and experience, and personal characteristics (such as gender, race, and age), meaningfully contribute to a board’s ability to serve as effective, engaged stewards of shareholders’ interests.

Vanguard expects boards to reflect both diversity of personal characteristics (such as gender, race, age, and ethnicity) and diversity of skill, experience, and opinion. Vanguard believes that a variety of unique experiences meaningfully contributes to a board’s ability to serve as effective, engaged stewards of shareholders’ interests.

Vanguard expects companies to conduct a sufficiently broad search for director candidates. This search should go beyond traditional candidate pools and purposely consider candidates who will bring diverse perspectives into the boardroom.

Vanguard may vote against directors at companies where progress on board diversity falls behind market norms and expectations. Vanguard may hold nominating committee chairs or other relevant directors accountable in such cases.

See below for board diversity shareholder proposal policies.

J.P. Morgan (4/1/2022)

Gender Diversity Board Policies Racial/Ethnic Diversity Board Policies Guiding Principles regarding Board Diversity/Additional Notes
J.P. Morgan will generally vote against the chair of the nominating committee when the issuer lacks any gender diversity unless there are mitigating factors. J.P. Morgan will generally vote against the chair of the nominating committee when the issuer lacks any racial/ethnic diversity unless there are mitigating factors.

J.P. Morgan expects its investee companies to be committed to diversity and inclusiveness in their general recruitment policies, as J.P. Morgan believes such diversity contributes to the effectiveness of boards. J.P. Morgan will utilize its voting power to bring about change where boards are lagging in gender and ethnic diversity.

See below for board diversity shareholder proposal policies.

Fidelity (2/2022)

Gender Diversity Board Policies Racial/Ethnic Diversity Board Policies Guiding Principles regarding Board Diversity/Additional Notes
Fidelity will evaluate board composition and generally will oppose the election of certain or all directors if there are no women on the board or if a board of ten or more members has fewer than two women directors. See below for board diversity shareholder proposal policies.

Goldman Sachs Asset Management (3/2022)

Gender Diversity Board Policies Racial/Ethnic Diversity Board Policies Guiding Principles regarding Board Diversity/Additional Notes

Goldman Sachs will vote against or withhold from the full board if the board does not have at least one woman director.

Goldman Sachs will vote against or withhold from the Nominating Committee if the board does not have at least 10% women directors and at least one other diverse board director.

Goldman Sachs will vote against or withhold votes from members of the nominating committee if:

  1. The board does not have at least 10% women directors and at least one other diverse board director.
  2. At companies within the S&P 500, if, in addition to the expectation of at least 10% women directors, the board does not have at least one diverse director from an underrepresented ethnic group.
  3. If the company is not incorporated in the United States, if the board does not have at least 10% women directors or does not meet the requirements of local listing rules or corporate governance codes and national targets.

When evaluating board composition, Goldman Sachs believes a diversity of ethnicity, gender and experience is an important consideration.

See below for board diversity shareholder proposal policies.

California Public Employees’ Retirement System (CalPERS) (3/2022)

Gender Diversity Board Policies Racial/Ethnic Diversity Board Policies Guiding Principles regarding Board Diversity/Additional Notes

On a case-by-case basis, where its engagements are not successful, CalPERS will withhold votes from directors who are nominating/governance committee members, board chairs, or long-tenured directors (greater than 12 years on the board) on boards that lack diversity and do not make firm commitments to improving the board diversity in the near term.

See below for board diversity shareholder proposal policies.

California State Teachers’ Retirement System (CalSTRS) (1/2021) | Corporate Governance Principles (1/2021)

Gender Diversity Board Policies Racial/Ethnic Diversity Board Policies Guiding Principles regarding Board Diversity/Additional Notes

CalSTRS will vote against the entire board of directors of companies that do not have at least one woman on the board.

CalSTRS will vote against the directors on a board’s nominating committee if the company does not have least 30% women board members.

CalSTRS will vote against the nominating and governance committee members of companies in the Russell 1000 Index that do not disclose the skills and diversity characteristics of their board members. CalSTRS believes the board should be composed of diverse individuals with the skills, education, experiences, expertise and personal qualities appropriate to the company’s current and long-term business needs. This diversity is critical for the board to oversee management, business strategy and risk mitigation properly. The board should establish a format to disclose the various skills, experience and backgrounds of board members and how those attributes enhance the company’s long-term strategy. Board diversity should be considered by the board or the nominating committee. The director nomination process and policy should consider a diverse mix of skills; background; experience; age; gender; sexual orientation and identification; and cultural, racial and ethnic compositions that are most appropriate to the company’s long-term business needs. The board should disclose the policies or procedures used to ensure board diversity. Diversity goals should include cultural diversity in addition to gender and/or racial and ethnic diversity. CalSTRS will hold members of the board’s nominating and governance committee and, if necessary, the entire board accountable if, after engagement about the lack of board diversity, sufficient progress has not been made.

2021 Board Diversity Shareholder Proposal Policies – Proxy Advisory Firms/ Institutional Investors (as of February 21, 2022)

Proxy Advisor Firm/Institutional Investor Board Diversity Shareholder Proposal Policies
ISS (12/13/2021) Generally vote for requests for reports on a company’s efforts to diversify the board unless the following criteria are met:

  • The gender and racial minority representation of the company’s board is reasonably inclusive in relation to companies of similar size and business.
  • The board already reports on its nominating procedures and gender and racial minority initiatives on the board and within the company.

Vote case-by-case on proposals asking a company to increase the gender and racial minority representation on its board, taking into account each of the following:

  • The degree of existing gender and racial minority diversity on the company’s board and among its executive officers.
  • The level of gender and racial minority representation that exists at the company’s industry peers.
  • The company’s established process for addressing gender and racial minority board representation.
  • Whether the proposal includes an overly prescriptive request to amend nominating committee charter language.
  • The independence of the company’s nominating committee.
  • Whether the company uses an outside search firm to identify potential director nominees.

Whether the company has had recent controversies, fines, or litigation regarding equal employment practices.

Vanguard (3/1/2022)

(Board Diversity Guidance (12/2020))

Vanguard will generally vote for a shareholder proposal if:

  • The proposal seeks disclosure related to directors’ diversity of personal characteristics (including gender, race, ethnicity, and national origin) or skills and qualifications, and this information is not already disclosed.
  • The proposal asks companies to adopt policies designed to ensure appropriate diversity on boards, and appropriate policies do not already exist.
  • The proposal is not overly prescriptive about what skills should be included or how this information must be presented.

Vanguard will assess case-by-case but will likely support shareholder proposals that request the adoption of targets or goals related to board diversity (without prescribing what such targets should be unless otherwise specified by applicable laws and regulatory requirements).

J.P. Morgan (4/1/2022) J.P. Morgan generally will vote case-by-case on shareholder proposals that seek to force the board to add specific expertise or change the board’s composition.
Fidelity (2/2022) Fidelity may support proposals on issues in other areas, including but not limited to equal employment, board diversity and workforce diversity.
Goldman Sachs Asset Management (3/2022) Goldman Sachs will generally vote FOR proposals requesting reports on a company’s efforts to diversify the board unless the following criteria are met:

  • The gender and racial minority representation of the company’s board is reasonably inclusive with similar size and business companies.

The board already reports on its nominating procedures and gender and racial minority initiatives on the board.

CalPERS (3/2022) CalPERS generally supports diversity proposals requesting the company to provide additional information and disclosure at the board, management and employee levels, and where its diversity lags those of its peers or the population.
NYS Comptroller (2/25/2021) The NYS Comptroller will submit and support proposals that request reporting on steps a company is taking to enhance board diversity.

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