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NYC Comptroller Launches Boardroom Accountability 2.0: Targets Board Composition & Refreshment

By Randi Morrison posted 09-10-2017 02:28 PM

  
In connection with its launch of Boardroom Accountability Project 2.0 on Friday, the New York City Comptroller Scott Stringer and NYC Pension Funds sent letters to the Nom/Gov Committee chairs of 151 companies (80% of which are in the S&P 500) - 139 that enacted proxy access in response to a shareholder proposal from the Funds (form of letter here), and 12 at which the investor's proposal received majority shareholder support in 2017, but have yet to adopt proxy access (form of letter here) - calling for expansive disclosure on and involvement in the board's composition and refreshment processes.

The release notes:
As part of the campaign’s launch, Comptroller Stringer and the NYC Pension Funds are calling on the boards of 151 U.S. companies to disclose the race and gender of their directors, along with board members’ skills, in a standardized “matrix” format – and to enter into a dialogue regarding their board’s “refreshment” process. At present, directors’ race and gender is rarely — if ever — released publicly. If disclosed, it would increase transparency and accountability across the market — and push more boards to be diverse and independent.
The proposed board matrix (sample here) - which includes a non-binary gender option and voluntary disclosure of sexual orientation - is designed to be updated and disclosed annually:
This information — which would be released every year as a “board matrix” — would give a birds-eye view of the board as a whole, while spelling out the skills each director brings to the table, and highlighting their gender and race. This type of standardized disclosure would boost accountability and allow shareowners like the New York City Pension Funds, to identify boards that are ill-suited to protect their investments due to a lack of diversity or relevant expertise. The requested disclosures will also allow shareowners to engage companies to recommend qualified, diverse, and independent candidates.
Both forms of letter identify these topics as among those that may be raised in the NYC Comptroller's/Funds' requested engagement with the board's Nom/Gov Committee:

1. We would like to discuss the matrix that your board currently uses to help us better understand the range of skills and experiences the board considers most critical and how your current directors and potential board candidates best serve the Company’s long-term business strategy, your executive succession planning process and your risk oversight responsibilities.
2. We would like to understand how you evaluate individual directors on an ongoing basis, to assess whether and how they continue to contribute to the above board responsibilities as such responsibilities and individuals continue to change. In cases where a particular director no longer is able to contribute in this way, what processes do you have for discussing with this director stepping down from your board?
3. We would like to discuss how we can establish a process for any director search firms that you may retain, pursuant to which such firm(s) would reach out to us and other significant shareowners for suggestions for the names of both potential board candidates and other organizations that specialize in sourcing potential board candidates who are women and people of color.
4. We would also like to discuss how we can establish a more structured process, pursuant to which we and other significant shareowners may provide to your Committee the names of potential board candidates, on an ongoing basis.

Wachtell Lipton suggests that recipients of the letter "may find it convenient to reply by email calling attention to the information in the company’s 2017 proxy statement and to be included in 2018 and offering a telephone or in person meeting with the appropriate individual(s) from the company, if further information is desired."

        See also this memo from Weil, this post from Stinson Leonard Street, this Reuters article, and numerous additional resources on our Proxy Access, Institutional Investors, Board Diversity, Board Composition, Board Refreshment, and Board Practices topical pages.

        Stay tuned for more information in the weekly Society Alert.
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