Investors letter to companies

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We are contacting you on behalf of the Thirty Percent Coalition’s (the “Coalition”) institutional investor members, with over $3.2 trillion assets under management, regarding the composition of your board of directors. A broad cross section of investors are actively advocating for board diversity including California State Teachers Retirement System, UAW Retiree Medical Benefits Trust, Walden Asset Management, pension funds of New York City and New York State, the Connecticut Retirement Plans, and other city and state pension funds as well as investment managers, religious investors, and mutual funds. We advocate for diversity, inclusive of gender, race and ethnicity, which we believe is critical to an effective board and a measure of sound corporate governance. We are especially focused on gender diversity. Since 2012, the Coalition’s institutional investors have collaboratively engaged with more than 150 companies who have appointed a woman to their boards, in many instances a woman of color, for the first time.

Currently there are no women on <<Company>>’s board of directors. We urge you to take active steps to address this shortcoming. We believe that adding diversity to a company board helps mitigate risk and contributes to long-term performance for shareholders. Diversity on boards of directors, as well as in senior and mid-level management, is not only an indicator of good corporate governance; there is growing evidence that diversity is good for business.

Corporate leaders are increasingly recognizing the strong business case for board diversity. The influential association of chief executives of U.S. companies, the Business Roundtable (BRT), updated its Principles of Corporate Governance in 2016, stating: “Boards should develop a framework for identifying appropriately diverse candidates that allows the Nominating/Corporate Governance Committee to consider women, minorities and others with diverse backgrounds as candidates for each open board seat.” Ball Corporation CEO John Hayes, then Chair of BRT’s Corporate Governance Committee, articulated the rationale: “Similar to our efforts to promote diversity among our management ranks, diverse backgrounds and experiences on corporate boards, including those of directors who represent the broad diversity of American society, strengthen the performance of a board of directors and promote the creation of long-term shareholder value.” Research identifies numerous business benefits from board diversity including a larger candidate pool from which to pick top talent, better understanding of consumer preferences, a stronger mix of leadership skills, and improved risk management.

Investor engagement by prominent institutional investors to promote greater board diversity is increasing dramatically. You may have seen in a March 2017 press announcement that State Street Global Advisors, the world’s third largest asset manager, sent letters to 3,500 companies asking Boards of Directors to increase the number of women directors on their boards.1 State Street Global Advisors also voted against director nominees on the proxy statements of 400 companies in 2017 due to inadequate board diversity. Board diversity is also an engagement priority for BlackRock, the largest asset manager in the U.S., as well as Vanguard, the second largest U.S. mutual fund company. In another initiative, Massachusetts’ state pension fund did not support management in 69 percent of director elections this year because the companies did not meet a board diversity threshold of 30 percent women and people of color.

We ask that the board and its nominating committee take the lead in shaping the composition of the board and identifying diverse individuals who can best serve the interest of the company and its long-term strategy. Furthermore, we regard it as best practice for boards to institutionalize a commitment to diversity in their nominating committee charter. We therefore ask <<Company>> to commit to include women and minority candidates in every pool from which board nominees are chosen, a practice commonly referred to as the “Rooney Rule.” 2

We look forward to working in partnership with you on board quality and diversity. We would like to speak with you to learn more about your position on this important topic and to share our experience. We also have resources in the Coalition’s member base that may assist you in sourcing candidates for your board and would be pleased to discuss.

1 State Street Global Advisors presses companies it invests in to add women to boards.  

2 Rooney Rule will forever associate Dan Rooney with the highest ideals, April 13, 2017.

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