July 17, 2020
Companies that have issued statements in support of racial equality should “match their words with concrete actions” such as disclosing their EEO-1 Report data publicly or risk a shareholder proposal, according to New York City Comptroller Scott Stringer on behalf of three NYC retirement systems. Meanwhile, proxy advisory firm ISS is requesting boards voluntarily disclose the ethnicity of directors and senior officers.
Comptroller Stringer sent letters to the CEOs of 67 S&P 500 companies that made recent statements supporting racial equality, asking that they “walk the walk” by disclosing demographics of employees by race, gender and ethnicity. The letters ask companies to commit in writing, by August 30, 2020, that they will make their next EEO-1 submission public or risk a shareholder proposal or opposition to director nominations next proxy season.
Backed up by research: The letters cite research showing that companies in the top quartile for executive team diversity have stronger financial performance. They further note that since EEO-1 disclosures are standardized and disaggregated by race and ethnicity, they lead to a clearer picture of company diversity.
Tracking company disclosures: The NYC Retirement Systems campaign comes at a time when investors and social justice organizations are placing significant pressure on companies to increase transparency around workforce demographics. JUST Capital, a nonprofit research group, that tracks the social impact of large companies, has published a tracker of large companies that have released statements on Black Lives Matter and whether they disclose their racial/ethnic workforce composition.The tracker shows that about 66% of the 300 companies surveyed made such statements, and of those, 53% have disclosed at least some information on racial breakdowns in their workforce.
Investors join the fray: Mainstream investors have also joined the dialogue, with BlackRock CEO Larry Fink committing to doubling representation of Black senior leaders and increase overall representation by 30% by the year 2024. (As of today, only 3% of the investor’s senior leaders are Black and only 5% of the U.S. workforce is Black). As part of this commitment, BlackRock has asked portfolio companies to publish SASB-aligned disclosure on racial/ethnic workforce composition and has warned companies it will ask about human capital management including recruitment, promotional rates, pay gaps for diverse employees, and company efforts to create an inclusive culture.
Separately, the U.S. Equal Employment Opportunity Commission announced it is funding a study with the National Academies of Sciences to assess the quality and usefulness of the EEO-1 Component 2 pay data that was collected for FY 2017 and 2018. The assessment will also inform the EEOC’s approach to possible future pay data collections.