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Generating a Wider Impact in Corporate America: Improving Diversity, Equity and Inclusion with Shareholder Engagement

03.24.2021 - Lisette Cooper

At Fiduciary Trust International, we view impact investing as a way to achieve both a financial return as well as an environmental, social and governmental (ESG) return. Generally, this impact is implemented via private markets, meaning among companies not typically traded on public exchanges. 

However, there is an opportunity to achieve a positive impact among publicly traded companies through shareholder engagement. This may be the only means available to individual investors to attempt to inspire change at these firms.

Defining the Tool

Shareholder engagement aligns investors’ values with the companies they choose to invest in. By uniting with other similarly minded investors, stockholders can encourage companies to adopt new policies that reduce investment risk and improve social or environmental performance. Investors can engage in their individual shareholder capacity or invest in mutual funds that are dedicated to shareholder engagement. Tools to effect change include engaging in dialogue with senior management of companies and filing shareholder resolutions.

The Beginning of a Movement

We have been working with clients to help guide them in the process of voting proxies in accordance with their values, using separately managed accounts of equities, for nearly two decades. It was a big step forward to begin engaging in shareholder activism. In 2016, shortly after we launched our gender-lens investing strategy, the social landscape shifted dramatically as high-profile revelations and scandals around the sexual abuse of women and girls began to unfold, launching the #MeToo movement.

A network of our female clients, many of whom were already using their shareholder proxies to support gender diversity, equity and inclusion (DEI) efforts, expressed an interest in doing more with their investments. We initiated a series of events across the country—inviting women academics, wealth managers and investors—and uncovered a collective desire to make an impact and take bold action. From these discussions, we discovered shareholder engagement as a powerful pathway to change.

Getting a Company’s Attention

From our series of women’s events, a group of clients and investors coalesced and we established ourselves as a chapter of the Women’s Inclusion Project, a group of investors utilizing gender-lens investment strategies to support women and girls. We learned that owning just $2,000 worth of stock held for a minimum of one year[1] enabled shareholders to file resolutions with a company. Our small but mighty group decided to focus its efforts on getting women on boards, improving gender and racial DEI practices at large corporations, and combating sexual violence against women and girls.


Since filing its first resolution over five years ago, the Women’s Inclusion Project has interacted with about 25 companies. Roughly half represent multiyear engagements, as it takes time to build trust and educate companies on issues that result in new policies. We first try to engage a company's senior management in a dialogue before filing a resolution. Hopefully, they are responsive, and a productive interaction ensues. However, if a company does not respond positively, the next step is to file a resolution with the SEC that leads to a proxy vote at an upcoming company meeting. Shareholder votes are exclusively non-binding on the ballot, meaning a resolution can receive overwhelming support without the company being required to take any action. However, very often a strong response in favor of a particular resolution can signal investor concern to management and encourage the company to take action.

One of the first companies our chapter of the Women’s Inclusion Project engaged with was Pfizer. This was part of an effort to narrow the firm’s gender pay gap. After a series of conversations with senior management, Pfizer agreed to provide us with a pay gap report that showed the difference between the average hourly pay for men and women within the organization. Importantly, the company was only the second in the US to make such a report publicly available. Similarly, we asked CIGNA for a gender pay gap report. After first engaging in a dialogue with us, the company did not agree to provide such a report, so we filed a resolution and received 36% of the ensuing vote. Following this, CIGNA made a public commitment to adopt an equity pay policy but failed to produce a report that revealed the details of their internal findings. For that reason, we filed a second resolution and have continued to press them for further disclosures and increased transparency.

Amplifying the Message 

In 2019, we asked Verizon to provide a report on the potential sexual exploitation of children through their products and services. As the company refrained from engaging in a dialogue, we filed a resolution. We earned 33.9 % of the subsequent vote, which represented over $53 billion in shares. Following this result, management agreed to meet with us. In our opinion, they’ve made substantial progress on the issue, including hiring a former prosecutor as their head of child safety. Without pressure from the shareholders, we believe such action may have been unlikely. Our group withdrew the resolution the next year and has maintained an ongoing dialogue with management to monitor their progress.

A year later I was the lead filer on a resolution involving Facebook, which received heightened attention from the media. Our group sought disclosures from the social media giant about the risk of increased sexual exploitation of children as their platform develops and offers additional privacy tools including end-to-end encryption. The company was the largest source of online child sexual abuse materials in the US in 2020 and several years prior. The concern is that the additional privacy tools would restrict the ability to detect and report the vast majority of child sexual abuse materials on their platform.

There needs to be a balance between privacy and safety that will keep users coming back to the platform as a trusted digital community. Leaning too far towards privacy without safety may present a significant risk, not only for those online but also shareholders. The company’s reluctance to reckon with transparency and safety may be subject to regulatory action and inevitable deep costs associated with that action.

Facebook initially declined requests for a conversation, so we knew we needed to amplify our messaging to gain their attention. On May 20, 2020, we held a press conference during which my daughter shared a personal experience involving the company’s social media platform. Following the sharing of her story, our resolution received a strong initial response, representing 43% of the non-management-controlled shares worth over $163 billion). Our campaign received a great deal of global press, including over 60 international publications on four continents, as well as Barron’s, The Wall Street Journal, and The Boston Globe in the US. After we filed a second resolution in December 2020, Facebook agreed to have a discussion with us. We look forward to a positive engagement with the firm in the days ahead and working together to further progress towards safety for children from predators. We think this work will have ramifications for other issues regarding safety from hate speech and other forms of violence on the platform.

Keeping the Momentum Going

The evidence that a diverse workforce has a powerful impact on performance has continued to accumulate. For instance, in 2018, McKinsey & Company published a report that showed companies with the highest levels of gender and racial diversity were more likely to outperform their peers. [2] Not only have our efforts focused on improving gender and racial DEI because we believe it is the right thing to do, but this approach may also provide benefits to long-term shareholders of a company due to the company’s direct impact on supply chains, local policies, and communities. 

As investors and activists, our goal for participating in shareholder engagement is to encourage companies to improve their ongoing activities and reduce risks that may potentially affect investment returns. There is an array of issues to focus on. Below are the initial steps for getting involved in this movement.
 
Step 1. Qualify within the current ownership thresholds: 

  • Own $2,000 of the company’s securities for at least three years;
  • Own $15,000 of the company’s securities for at least two years; or
  • Own $25,000 of the company’s securities for at least one year.

Step 2. File a short Statement of Concern as proof of ownership with the necessary documentation and request that a resolution be considered. 

Step 3. Engage in a dialogue with the company or vote on the relevant issue at the annual shareholder meeting. 

We recommend working with your financial advisor to help navigate this process. There are also valuable tools online that may be helpful as you embark upon this journey. The Guide to Filing Shareholder Resolutions, published by the Interfaith Center on Corporate Responsibility, offers an overview of the process. And websites such as As You Sow or CERES provide additional ideas for engagement. Working together, there is a world of change to be accomplished.





[1] In 2020, the SEC amended its shareholder proposal rule to state that a shareholder may submit an initial proposal after having held $2,000 of company stock for at least three years. 

[2] Source: McKinsey & Company, Delivering through Diversity; Hunt, Vivian and Sara Prince, Sundiatu Dixon, Fyle, Lareina Yee; January 2018?



The information provided is intended solely to provide general information. The information and opinions stated may change without notice. The information and opinions do not represent a complete analysis of every material fact regarding any market, industry, sector or security. Statements of fact have been obtained from sources deemed reliable, but no representation is made as to their completeness or accuracy. The opinions expressed are not intended as individual investment, tax or estate planning advice or as a recommendation of any particular security, strategy, or investment product. Please consult your personal advisor to determine whether this information may be appropriate for you. This information is provided solely for insight into our general management philosophy and process. Historical performance does not guarantee future results and results may differ over future time periods.

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