Further to its "Proxy Paper Policy Guidelines for 2021," which we reported on here, Glass Lewis's "Approach to Diversity Disclosure Ratings" elaborates on how it will assess each of the four aspects of director diversity and skills disclosure (enumerated in our November 2020 post) in companies' proxy statements, based on the following considerations:
Board’s current percentage of racial/ethnic diversity
- Individual – Racial/ethnic diversity of directors is disclosed on an individual basis.
- Aggregate – Racial/ethnic diversity of directors is disclosed on an aggregate basis but does not identify specific directors – or – racial/ethnic diversity disclosure is provided on an individual basis but it is not clear what measures of diversity are represented.
- Combination – Diversity disclosure is provided on an aggregate basis and it is not clear what measures of diversity are represented.
- None – No data is provided in the proxy statement regarding racial/ethnic backgrounds of directors.
Whether the board’s definition of diversity explicitly includes gender and/or race/ethnicity
- Gender and Race/Ethnicity – Both are expressly included in the definition of diversity that is considered in the director search process.
- Gender – Gender, but not race/ethnicity, is included in the definition of diversity that is considered in the director search process.
- None – Neither gender nor race/ethnicity are expressly included in the definition of diversity that is considered in the director search process.
Whether the board has adopted a policy requiring women and minorities to be included in the initial pool of candidates when selecting new director nominees (aka “Rooney Rule”)
- Yes – The company discloses in its proxy statement that it utilizes a formal Rooney Rule in its director search process, or otherwise, the nominating committee is bound by a committee charter which expressly states a commitment to include diverse candidates in its director search pool.
- Not disclosed – No such disclosure is provided in the proxy statement or relevant committee charter.
Board/director skills disclosure
- Skills Matrix – A single table which identifies each director’s knowledge and proficiency in specified skills.
- Individual – Individual director biographies contain standardized skills disclosure which could be tabulated into a single table.
- Aggregate – Aggregated information that indicates how many directors have a particular skill but does not identify which directors have those skills.
- None – No standardized, tabulatable skills data is provided in the proxy statement.
Glass Lewis's assessment will be included in its Proxy Paper reports for the S&P 500 beginning with the 2021 proxy season. As reported previously, although Glass Lewis won't be making voting recommendations solely on this basis in 2021, its evaluation of the quality of board diversity disclosure will inform its assessment of a company's overall governance and may inform its recommendations on other matters involving board-related concerns.
Access additional information & resources on our Proxy Advisors and Board Diversity pages.
This post first appeared in the weekly Society Alert!