New Investor Initiative Calls for Russell 3000 Board Diversity Disclosure
November 14, 2020
Illinois State Treasurer Michael Frerichs has announced a new initiative asking that all Russell 3000 companies begin disclosing the race/ethnicity and gender of each director on their boards by 2021. The initiative includes 22 investor organizations representing over $3 trillion in assets under management, including the New York City Comptroller, Boston Trust Walden, JUST Capital and other well-known diversity advocates. Building on the work of The Thirty Percent Coalition, an organization devoted to board diversity in the United States, the Illinois Treasury initiative has sent letters to all Russell 3000 boards (typically care of the corporate secretary) to request this disclosure.
The letters note that, as ISS recently adopted in its 2021 voting policies, members of the initiative “have or are examining policies to vote against nominating committees with no reported racial/ethnic diversity in their proxy statements and expanding more direct shareholder engagement.” However, there is a strong preference to make these determinations based on voluntary self-reporting from companies rather than guessing at diversity on the basis of names or pictures in the proxy, hence the request for disclosure from companies.
The Illinois initiative is the latest in a wave of such requests, not to mention House-passed legislation that would have required companies to disclose race, ethnicity, gender and veteran status for each director and executive officer in the proxy statement. Similar legislation is very likely to be proposed in the new year, but may well be moot if investors and investor organizations continue to push companies to make disclosures voluntarily or risk a negative response.