According to its new whitepaper: "Ethnic Diversity - Financially material, socially imperative," Legal & General Investment Management plans to significantly step up its engagement and proxy voting to prompt and promote advancement throughout its portfolio companies on ethnic diversity and social justice issues. A new letter engagement campaign targeting FTSE 100 and S&P 500 companies that lack board ethnic diversity reportedly will indicate the importance of "capturing and reporting" relevant data and LGIM's intent - beginning in 2022 - to vote against Nominating Committee chairs or Board chairs at companies that don't meet its expectations.
More generally, LGIM will be looking for companies to develop and/or improve and disclose their ethnic diversity policies and practices. These emerging best practices are suggested to help companies move the needle on diversity within their organizations:
- Disclosure of ethnic representation at the board, executive, and management (as defined by the company) levels, and throughout the full workforce
- Disclosure of the ethnic pay gap
- Aspirational goals for ethnic diversity and pay equality, and strategies for reaching them with regular updates towards these goals
- Participation in the ‘race at work’ charter or other relevant industry initiatives
- Disclosure of an anti-discrimination policy, including specificity on the process for investigating and sanctioning discriminatory or harassing behavior
- Inclusive hiring policies, such as the ‘Rooney rule’, requiring a minimum number of ethnic-minority candidates to be interviewed for every job opening
- Disclosure of EEO1 workforce data (US companies)
- A focus on inclusive culture to harness the value of a diverse workforce
In addition to proxy voting, the paper notes that companies that don't meet LGIM's minimum expectations may suffer investment consequences.
See this Bloomberg article: "L&G to Vote Against Company Boards That Lack Racial Diversity"; LGIM's "Debunking myths about corporate diversity" (addressing gender diversity); our recent report: "LGIM Walks its Talk" and additional resources on our Institutional Investors page. This post first appeared in the weekly Society Alert!