SOCIAL TOPICS (Archive): WORKPLACE

Published, November 1992

       When our client, the Sisters of Notre Dame, came to us last year and asked to vote their own proxies, naturally we asked them why. We reviewed with the Sisters USTrust's policy for voting resolutions that appear on proxies. In so doing, we discovered that the Sisters differed with us on only one issue: nominees for director.

       Voting for directors traditionally has been considered a routine corporate governance issue and one that is rarely, if ever, challenged. This was not the case for the Sisters of Notre Dame, and rightly so. They argued that diversity on a company's board of directors is fundamental to properly representing its broad-based constituency. We felt that many of our other activist clients who apply comprehensive social screens to their investments would agree, and so we adjusted our voting patterns accordingly.

       Last year we began to address the issue of diversity by withholding votes for the Sisters and other like-minded clients from slates of directors when both women and racial minorities were not represented. We sent letters to companies notifying them of the votes we cast on behalf of our clients concerned about diversity. We applauded those companies at which both women and racial minorities were represented, and encouraged the remaining companies to diversify their boards in the future. Among companies that made changes in the composition of their boards in 1992 were Goulds Pumps Inc. and Deluxe Corp. which nominated women as directors to their previously all-white male boards.

       Although companies in our comprehensively screened portfolios have made considerable progress in this area, only 19.8% of them have both women and racial minorities on their boards. Even when this does occur, rarely more than one woman and one racial minority sit on boards of as many as 20 directors. Only 8.5% of all the directors of these companies are women and racial minorities. Figures obtained from the Feminist Majority Foundation and a study by Heidrick & Struggles indicate that this figure approximates the makeup of boards of Fortune 500 companies. Clearly, there is much room left for improvement even among the more progressive companies.

       We have been pleased to note that other social investors and money managers have begun to follow the Sisters of Notre Dame's lead in voting against all-white male slates. Better still, 25 of the companies to which we sent letters explaining our vote this year wrote us back compared to only three responses last year. Most indicated that they were working to diversify their boards.