SSGA presses firms to disclose racial and ethnic board composition
Systemic risks linked with climate change and racial and ethnic diversity on company boards are State Street Global Advisors’ stewardship priorities of 2021, said the US asset manager’s president and CEO Cyrus Taraporevala in an open letter to boards of investee companies.
Taraporevala acknowledged that 2020 has “cast a stark light on systemic vulnerabilities and reinforced the connections we see across sustainability, inclusion, and corporate resiliency.” SSGA’s CEO said investors cannot ignore the social issues that have “taken center stage” throughout last year, referring to the Black Lives Matter movement among others.
As a consequence, SSGA has expanded its focus to consider financial risks related to racial and ethnic diversity after the US manager first updated its diversity engagements in August 2020 to include discussions of race and ethnicity. At that time, the firm pointed out the lack of publicly available racial and ethnic diversity data as challenge number one for investors. It has therefore decided to amend its proxy voting practices in order to oblige racial and ethnic diversity disclosure at more US and British companies.
The manager’s CEO said that in 2021, SSGA will vote against the chair of the nominating & governance committee at companies in the S&P 500 and FTSE 100 that do not disclose the racial and ethnic composition of their boards. Then in 2022, SSGA’s pressure will take one step higher as the US manager will vote against the chair of the compensation committee at companies in the S&P 500 that do not disclose their Employer Information Report EEO-1 responses. Adding to this, also as from 2022, SSGA will vote against the chair of the nominating & governance committee at companies in the S&P 500 and FTSE 100 that do not have at least one director from an underrepresented community on their boards.
“Of course, disclosure is just a starting point. Building on the more than 70 engagements we have held with companies on racial and ethnic diversity since August, our investee companies should be prepared for thorough engagements on these and related subjects in the coming year, and we will analyse shareholder proposals accordingly,” said Taraporevala.
SSGA itself will disclose the racial and ethnic composition of its board and its EEO-1 data starting this year. It has also drawn ten actions to remove racial inequity within the firm. That includes tripling SSGA’s Black and Latin leadership and “increasing its spend with minority businesses over the next three years.”