The vast majority of IBM shareholders have given their support to a proposal – also favored by the board – seeking a report on the company’s diversity, equity and inclusion (DEI) efforts.
Several other companies this proxy season have received similar shareholder proposals asking them to conduct racial equity audits. Investors are looking at corporate responses to the growing pressure for progress on DEI following last summer’s Black Lives Matter protests.
Specifically, the proposal approved by 94 percent of votes cast at IBM’s recent annual meeting requests that the company each year publish a report including ‘the board’s process for addressing the effectiveness of its [DEI] programs and the board’s assessment of program effectiveness, as reflected in any goals, metrics and trends related to its promotion, recruitment and retention of protected classes of employees.’
Writing in the company’s 2021 proxy statement, the board urges shareholders to vote for the proposal: ‘At IBM, we have long held that in order to solve the hardest problems in business and society, we require a highly skilled, truly diverse workforce and an inclusive culture that enables people from all backgrounds to thrive.
‘IBM’s board of directors discussed this proposal and determined that it aligns with IBM’s goals of a diverse and inclusive workforce, which are regularly reviewed by the board.’ It states that the board last December adopted a policy under which it will produce a report as requested.
NOT ALWAYS SUPPORT
Not all companies have welcomed similar resolutions. For example, the CtW Investment Group filed a proposal urging Bank of America’s board to ‘oversee a racial equity audit analyzing [Bank of America’s] adverse impacts on non-white stakeholders and communities of color. Input from civil rights organizations, employees and customers should be considered in determining the specific matters to be analyzed. A report on the audit… should be publicly disclosed on [Bank of America’s] website.’
The board urged shareholders to vote against the proposal, writing in its proxy statement: ‘We believe our actions and focus in making progress on the issue of racial equality, and reporting on our progress regularly, render the proposal’s requested audit unnecessary.’ It asserts that Bank of America is ‘committed to making certain that our policies, practices, products and programs align to advance the company’s purpose of making our customers’ financial lives better.’
Among other things, it states that ‘our board and ESG committee are actively engaged in the oversight of our ESG programs and strengthening our ESG practices to support responsible growth’ and that ‘[i]ntegral to sustainable responsible growth is sharing our success with the communities in which we operate, which we do through ESG leadership, including taking action to drive progress on racial and economic inequality in the [US].’
The proposal was backed by 26 percent of votes cast at the AGM, a level of support that governance professionals often describe as significant, particularly for a first vote on a proposal. A Bank of America representative welcomed the level of support received by the company.
Elsewhere, Johnson & Johnson received a proposal from Trillium Asset Management requesting that the company ‘conduct and publish a third-party audit… to review its corporate policies, practices, products and services, above and beyond legal and regulatory matters; to assess the racial impact of the company’s policies, practices, products and services; and to provide recommendations for improving the company’s racial impact.’ The proposal received the support of 34 percent of votes cast at the company’s AGM.
Johnson & Johnson unsuccessfully requested no-action relief from the SEC for excluding the proposal, arguing in part that the company ‘has substantially implemented the proposal.’ For example, it writes that it already publishes information on ‘its assessment of the ways that it has been working, and is continuing to work, to promote diversity, equity and inclusion both within and outside the company, including promoting racial and social justice.’
It also provides details of its ‘You belong: diversity, equity & inclusion impact review’ that explains how Johnson & Johnson approaches such matters and how that is reflected in company policies, practices and initiatives. Among other things, it states that the impact review looks at ways the company ‘has approached products and services in order to promote racial equity.’
Johnson & Johnson has not responded to requests for comment.