Last week, New York City Comptroller Stringer announced the progress of the Boardroom Accountability Project 3.0 (Project 3.0) that is designed to foster diversity in the leadership of the companies in which the New York City Retirement Systems (NYCRS) invests. As an actively-engaged investor with sizeable assets under management (NYCRS reports that it had approximately $211.2 billion as of February 2020), NYC Comptroller Stringer notes that prior project campaigns have helped to facilitate the prevalence of important corporate governance matters, such as proxy access and greater board diversity transparency.
As described more fully in our prior post, Project 3.0’s objective is to increase the accessibility of director and CEO positions for women and persons of color by encouraging companies to adopt a “Rooney Rule” policy, resembling the one employed by the National Football League. In its simplest form, a “Rooney Rule” policy ensures that a vacancy is filled by drawing from a candidate pool with at least one minority candidate.
The launch of Project 3.0 included NYC Comptroller Stringer’s written letters to 56 companies in October 2019 requesting the adoption of a director and CEO diversity search policy targeting women and people of color. Of the 56 companies, NYCRS submitted shareholder proposals with 17 companies (~30%) for the 2020 proxy season. NYC Comptroller Stringer reports that 13 of 17 companies have approved and publicly disclosed policies—a 76.5% withdrawal rate. According to NYC Comptroller Stringer, many of the policies include a provision that requires hiring search firms that will include women and people of color in the initial list or candidate pool. The comptroller explained that shareholder proposals were filed at two companies that only agreed to adopt a director policy, but not a CEO policy. One of these companies will be omitting the proposal from the proxy after receiving a response from the SEC that concurred with the company’s rationale for omission. As a result, the NYCRS’s shareholder proposal is scheduled to go before the shareholders at three companies in connection with their respective annual meetings.
NYCRS’s proxy voting guidelines provide that it will hold accountable members of the nominating committee seeking re-election if the board lacks the level of diversity that the NYCRS deems appropriate.