This blog is the second installment of RALIANCE’s “Pursuing Progress” series, focused on stakeholder groups pushing for companies to take steps toward progress and culture change. Up this week: shareholders.
When it comes to corporate performance, shareholders aren’t only looking at a company’s bottom line. Increasingly, they’re also assessing how well corporations are performing in their efforts to increase workplace diversity.
Shareholders are in a strong position to increase the C-suite’s attention on diversity issues – they have the power to elect or oust corporate board directors, as well as vote on shareholder proposals requesting that companies act to build equitable cultures. Investors have good reason to be so engaged on issues of diversity: In addition to being a social good, diversity on corporate leadership teams is correlated with above-average profitability.
Here are three aspects of today’s investor landscape that corporate leaders need to know:
1. Institutional investors, who own large shares of public companies, are looking for corporations to meet more ambitious targets on diversity. For example, BlackRock announced late last year that it wanted companies to ensure that at least 30% of their board directors are diverse, including racial or ethnic minorities, LGBTQ+ people, people with disabilities and veterans. State Street, meanwhile, recently announced that it will expect all of the companies in which it invests to have at least one woman on their boards.
2. Shareholders have also pushed corporations to take steps toward building cultures that are more inclusive of all. For example, Microsoft’s investors voted to approve a proposal asking the company to publish a report on its workplace sexual harassment policies and their effectiveness. The proposal is notable for receiving nearly 78% of the shareholder vote, a rare win for a proposal initiated by activist investors, a type of investor known for pushing corporate leaders to make changes.
3. Corporations are already responding to new diversity standards. According to the Wall Street Journal, the largest U.S. companies significantly increased the number of new Black and Latino board directors, though 80% of board directors at the largest companies remain white. A number of tech companies, including Google, also announced last year that they would band together to strengthen workplace diversity in Silicon Valley.
Shareholders will likely remain highly attentive to issues of workforce diversity in the years ahead – proactively meeting their expectations is the best way for corporate leaders to maintain investor support for their business strategy and vision.
RALIANCE provides consulting, assessment, and employee development services to help build more equitable workplace cultures and create environments free from sexual harassment, misconduct and abuse. We stand ready to support your organization’s goals – contact us today at [email protected] to get started.