Investors Want Diversity Details Companies Are Slow to Report

  • Only 12.8% of S&P 500 boards release breakdown, Equilar says
  • Shareholder proposals demanding disclosure are gaining votes

Investors increasingly want the biggest U.S. companies to reveal the racial and gender diversity of their boards of directors, information that most don’t disclose.

This year, nine companies in the Standard & Poor’s 500 -- the most ever -- faced official demands from shareholders that they adopt new diversity plans, according to ISS Corporate Solutions, a corporate-governance consultancy. Such initiatives have a long way to go, with only 12.8 percent of companies currently giving specific details about directors named in their annual filings, according to a report released Tuesday by researcher Equilar Inc.

“It’s going to take, essentially, peer pressure,” said Matthew Goforth, a research and content specialist at Equilar who led the report. “Companies are going to have to start feeling like outliers if they don’t talk about the diversity of their board.”

The move away from all-male, mostly white boards is getting more scrutiny after the U.S. Securities and Exchange Commission said it may require companies to offer more specific details on their corporate governance. Women now represent about 21 percent of all directors, up from 16.6 percent in 2012, Equilar said in the report, which looks at more than 30 data trends.

SEC Chair Mary Jo White, when announcing the regulator’s plan in June, said that just 15 percent of directors in the top 200 S&P 500 companies belong to a minority group. The percentage of those companies with at least one minority director fell to 86 percent in 2015 from 90 percent in 2005, she said. With almost three quarters of the new director positions going to men, the nonpartisan U.S. Government Accounting Office says it may take more than 40 years for women to reach parity, she added.

Among industries, consumer-goods companies are most forthcoming with board-diversity information, with almost 20 percent reporting, Equilar said, based on a manual review of the proxy statements of S&P 500 companies. Basic materials firms were the lowest, at 2 percent reporting publicly; technology companies were the second lowest, at 5.7 percent, Equilar found.

This year, FleetCor Technologies Inc., which provides specialty payment cards, became the first S&P 500 company where a diversity ballot proposal passed with a final majority, said Peter Kimball, ISS associate director.

The nine proposals in this proxy season were almost twice the five submitted in 2015, Kimball said. The company has tracked 55 such proposals since 2000, he said.

“Gender diversity on boards has come to the fore in the last two years,” Kimball said. “The proliferation of proposals in 2016 reflects the position this issue has taken and signals continued expansion of these proposals for 2017 and beyond.”

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