The Advisors' Blog

This proxy season, S&P 500 boards will be facing greater consequences for keeping workforce demographic info private. As Emily noted last week on our “Proxy Season Blog” on TheCorporateCounsel.net, State Street Global Advisors published new guidance on diversity disclosures & practices – as well as on human capital management disclosures & practices. When it comes to workforce diversity, SSGA expects all portfolio companies to publicly disclose:

– Goals: Describe the firm’s timebound and specific diversity goals (related to gender, race, and ethnicity, at minimum), what policies and programs are in place to meet these goals, and how they are measured, managed, and progressing.

– Workforce Metrics: Employee diversity by gender, race, and ethnicity (at minimum), in markets where it is legal to collect and disclose this information. We expect to see this information broken down by industry-relevant employment categories or levels of seniority, for all full-time employees. In the US, companies are expected to at least use the disclosure framework set forth by the United States Equal Employment Opportunity Commission’s EEO-1 Survey. Non-US companies are encouraged to disclose this information in alignment with SASB’s guidance and nationally appropriate frameworks, or guided by their own perspective as to the best way to describe the composition of their workforce.

If a company in the S&P 500 doesn’t disclose its EEO-1 report, the diversity guidance says that SSGA will vote against the chair of the Compensation Committee. Acceptable disclosures include the original EEO-1 report response or the exact content of the report translated into custom graphics. SSGA also encourages companies to consider providing other demographic info – e.g., LGBTQ+ and disabilities. The asset manager also underscored the increasing focus on workforce diversity by saying:

While our existing diversity voting policies are mainly focused on increasing diverse representations on boards, given our belief in the centrality of effective board governance and oversight, we intend to shift our focus to the workforce and executive levels in the coming years. Companies should prepare by ensuring they are recruiting, promoting, and retaining diverse talent at all levels of the organization.

Similar to the letter issued yesterday by BlackRock’s Larry Fink, SSGA also expects companies to disclose how the board oversees human capital-related risks & opportunities, HCM strategy – including pay strategies, specific info about how employee engagement is conducted (and acted upon), and inclusion efforts. If the stewardship team encounters HCM “laggards” who aren’t making progress through engagements, it will consider voting against relevant directors and/or supporting relevant shareholder proposals.

On the point of shareholder proposals, SSGA’s framework for analyzing requests on the topics of DEI reporting, racial & gender pay gaps, and racial equity/civil rights audits also looks at whether a company’s disclosure & oversight framework aligns with what’s in these guidance documents. SSGA will generally vote against proposals where companies are meeting SSGA’s expectations – as evidenced by public disclosure about oversight, strategies, goals, statistics, etc. It will abstain if the company has made a specific commitment on the topic, and it will support proposals at companies that haven’t disclosed a plan to address the applicable issues. Check out the guidance for more details and recommendations on how boards & executives can support DEI.

– Liz Dunshee