Nike shareholders have given indications of significant support for a number of social measures – although none secured a majority.
Four social-based shareholder proposals were up for a vote at Nike’s AGM last week. The board had urged shareholders to vote against each of them.
Of the four proposals, a request that Nike publish annual reports assessing the company’s diversity and inclusion efforts garnered the highest level of support with the backing of 35.6 percent of votes cast – a figure generally regarded as significant by governance professionals, particularly for a first-time proposal.
The measure, brought by As You Sow, requested that the reporting include at a minimum:
- The board process for assessing the effectiveness of its diversity, equity and inclusion (DE&I) programs
- The board’s assessment of program effectiveness as shown in any goals, metrics and trends related to the promotion, recruitment and retention of protected classes of employees.
In a supporting statement for its proposal included in the proxy statement, As You Sow wrote that investors are looking for ‘quantitative, comparable data to understand the effectiveness of [DE&I] programs within and between companies.’ It pointed to studies showing that, for example, companies with the greatest racial and ethnic diversity are 35 percent more likely to have financial returns above industry medians.
As You Sow has separately stated that other major US companies have ‘agreed to meaningful increases’ in their diversity reporting.
The board in the company’s proxy statement urged shareholders to vote against the measure by arguing in part that:
- ‘We are committed to advancing [DE&I] at Nike, including enhancing the representation of diverse individuals at all levels of the company’
- ‘We continue to increase resources devoted to building a more diverse and inclusive workforce by scaling up our efforts to recruit, develop and retain diverse talent’
- ‘Our current initiatives and public disclosures… already address the essential objective of the proposal and provide our shareholders with detailed information about Nike’s commitment to increasing [DE&I] at all levels of the company.’
Meredith Benton, workplace equity program manager at As You Sow and founder of consultancy Whistle Stop Capital, says in a statement to Corporate Secretary following the AGM: ‘Over a third of Nike's investors have said that its current and promised disclosures of diversity data are insufficient.
‘For a global market leader focused on justice themes in its marketing, this high vote should be enough to spur it to action. Although it has spoken extensively to its programs and goals, it has not publicly shared its reasons for refusing to publish the requested diversity and inclusion data sets.’
A request for comment from Nike on the results of voting on shareholder proposals at this year’s AGM was not returned.
DE&I ON THE AGENDA
DE&I issues have been on the agenda for many investors and companies over the past year, in part as a result of the Black Lives Matter protests and the inequitable impact of the Covid-19 pandemic. The Sustainable Investments Institute reported earlier in 2021 that 28 shareholder proposals dealing with racial justice had been filed as of April 27, compared with a total of none across at least the previous nine years.
For example, the CtW Investment Group, working alongside the Service Employees International Union (SEIU), has been instrumental in the emergence of requests that companies conduct racial equity audits, ideally using a third party. The group and the SEIU between them filed racial equity audit proposals at eight major financial institutions this proxy season.
At Nike’s AGM, 27.7 percent of votes cast supported a proposal (not filed by CtW Investment Group) asking the company to publish a report examining the actual and potential human rights impacts of its cotton-sourcing practices throughout the supply chain.
The board opposed the measure, arguing that Nike is committed to the responsible and sustainable sourcing of the materials used in its products. ‘Our current initiatives… already address the underlying rationale for the proposal and provide our shareholders with more relevant information about Nike’s commitment to human rights and responsible sourcing than the requested measure,’ it added.
Another social proposal requesting that Nike report on ‘median pay gaps across race and gender, including associated policy, reputational, competitive and operational risks, and risks related to recruiting and retaining diverse talent’ received less support at 17.6 percent of votes cast.
The board opposed the measure, arguing that it is ‘committed to the principle of equal pay for equal work and to enhancing the representation of diverse individuals at all levels of the company.’ It added that ‘our current initiatives and public disclosures, including the pay equity data published in our annual impact report, already address the underlying rationale for the proposal and provide our shareholders with more relevant information about Nike’s commitment to pay equity and increasing [DE&I] at all levels of the company than the requested measure.’
Finally, a shareholder proposal requesting that Nike report around its political contributions was backed by 30.5 percent of votes cast. That figure was lower than the 34.4 percent support the measure received at last year’s AGM, despite generally increased attention being given to corporate political spending in the wake of the January 6, 2021 insurrectionist attack on the US Capitol.
‘Especially since the [January 6 attack] … transparency and accountability for political speech and actions are paramount,’ proponents Newground Social Investment had written in support of the proposal. ‘Nike recognized this when it announced that its [political action committee] will not support any member of Congress who voted to decertify the Electoral College results.’
Nike’s board again urged shareholders to vote against the proposal, arguing that it had approved updates to the company’s policy on corporate political contributions, industry associations, public policy statements and lobbying that will become effective and be posted on the company’s website in January 2022.
Bruce Herbert, founder and CEO of Newground, tells Corporate Secretary in a statement: ‘Though we always hope for a high result, this vote is in line with outcomes at Nike in recent years.’
He adds: ‘Any expected increase in support as a result of the January 6 insurrection was likely dampened by Nike’s statement that it had plans to enact a policy next January that would address several of the serious issues raised by the proposal. Unfortunately, the company’s statement offered promises but few details. While we hope the promised changes will meaningfully redress the many gaps and lapses raised by the proposal, given Nike’s obstructionist track record we will reserve judgement.
‘What is clear from this vote – especially in light of the January 6 insurrection – is that several key institutional investors chose to rely on promises rather than evaluate facts.’
According to Corporate Secretary sister publication IR Magazine, this proxy season has seen the highest number of proposals related to political lobbying and spending that have received majority support. Peter Kimball, former head of advisory services at ISS Corporate Solutions, told IR Magazine in July that the number of proposals related to political lobbying or spending that receive majority support has been growing rapidly since 2019.
‘That’s not necessarily an indication that everyone voted differently after January 6,’ Kimball said. ‘It’s probably as much of an indication that shareholder scrutiny around corporate political spending has increased over a longer period of time. We’re seeing a continuation of a bigger trend in terms of greater scrutiny of political lobbying and spending.’