ISS has begun to send this form of letter to companies asking for their boards and named executive officers to voluntarily self-disclose their race/ethnicity.
ISS uses board race/ethnicity to power some specialty and custom voting policies as well as some of its data feeds. If companies don’t have sufficient racial/ethnic diversity in the boardroom to satisfy investors, certain directors (usually Nom/Gov Committee members) or potentially the entire board may receive adverse vote recommendations. Several of ISS’s specialty policies look for 30% of the board to be diverse, either by race/ethnicity or gender, with at least one racially/ethnically diverse director and one woman director. To collect data, ISS looks for direct (from the company itself) or indirect (from other sources) disclosures of race/ethnicity.
ISS is requesting companies disclose race/ethnicity data to it directly to mitigate the risks of inaccuracies from having to rely on indirect sources. According to ISS's letter, if directors / NEOs choose to self-disclose via the data request, each can select up to three classifications from the eight listed and/or the "Other" response choice. The race/ethnicity selections are based on the 1977 OMB Standards for the Classification of Race and Ethnicity.
ISS has recently released a number of ESG-oriented indices, so may offer a diversity index in the future.
See this Financial Times article. This post first appeared in the weekly Society Alert!