California recently became the first state in the US to enact a law requiring companies based there to include at least some women on their boards of directors. The legislation, signed by Governor Jerry Brown on the last day of September, mandates that all publicly traded companies headquartered California (not just those chartered there) have at least one woman on their boards by the end of 2019. For companies with at least five directors, at least two or three of those seats must be filled by women by 2021, depending on the size of the board. Companies that do not comply will be subject to fines by the state.
California’s mandate has ignited a firestorm of controversy, with business groups like the California Chamber of Commerce saying it violates constitutional principles and effectively requires companies to discriminate against men, while even some advocates of diversity in corporate leadership question whether it will have the kind of impact it is intended to have. The state will likely be sued over the law and may lose, which Brown acknowledged in his letter to the state Senate announcing his signature of the bill. “I don’t minimize the potential flaws that may indeed prove fatal to its ultimate implementation,” he wrote. The constitutional issues at hand concern not only the issue of reverse gender discrimination but also a question of jurisdiction, as the Supreme Court has ruled in the past that a corporation’s internal affairs are governed by the statutes of the state in which it is chartered, not where its headquarters is located.
Nonetheless, even if the law is ultimately defeated in court, it is intended partly as a marker of determination on the part of the California state government to ratchet up pressure on companies there to make more progress on diversity and inclusion, particularly in leadership roles where women and minorities remain heavily underrepresented. Simply bringing visibility to the issue counts as a win for some advocates of gender equality, Vox‘s Emily Stewart reported:
“If nothing else, what this law is doing is increasing the visibility and awareness on the issue itself and the importance, and that is a win in and of itself,” said Serena Fong, the vice president of strategic engagement at Catalyst, a nonprofit focused on promoting women in business.
Investors in Alphabet Inc., the parent company of Google, voted down all proposed resolutions at on Wednesday’s shareholder meeting, including one that would have made the compensation of senior executives partly dependent on the company making progress toward specific diversity and inclusion goals. The proposal was opposed by Alphabet management, Reuters reported on Wednesday, which sank the resolution as insiders have effective voting control of the company. Google co-founders Larry Page and Sergey Brin hold supervoting shares in Alphabet that enable them to defeat any shareholder resolution they don’t approve of. Google insists that its existing commitments to diversity are sufficient:
Eileen Naughton, who leads Google’s HR operations, said the company remains committed to an internal goal to reach “market supply” representation of women and minorities by 2020, which could help bring hiring in line with the diversity of the candidate pool.
Another resolution aimed at getting Google to provide investors more information about its efforts to moderate user-generated content on the platforms it owns, including YouTube, was also voted down on Wednesday.
The proposal related to diversity was put forward by the activist investment fund Zevin Asset Management and supported by a group of Google employees who have expressed concern about how committed the company really is to being an inclusive environment for everyone who works there. One of those employees, engineer Irene Knapp, addressed Wednesday’s shareholder meeting with a statement that stressed the urgency of addressing ongoing problems in Google’s culture:
A group of Google employees has teamed up with activist investors in the tech giant’s parent company, Alphabet, to push a proposal at a June 6 shareholder meeting that would make executive compensation at Google contingent on the company meeting certain diversity goals, Kate Conger reported at Gizmodo last week. Alphabet opposes the resolution and has recommended a vote against it:
Google and Alphabet have maintained that they aren’t experiencing a diversity crisis but are rather dealing with complaints from a few disgruntled employees. A Google spokesperson declined to comment on the shareholder proposals, but the company also argued in its proxy statement that the proposal wouldn’t have any meaningful impact, even if it were approved, because Alphabet CEO Larry Page receives a base salary of only $1 per year and is not compensated based on performance.
But Zevin Asset Management, the investment firm that drafted the proposal, says that it’s intended to apply to all of the company’s executives, not just Page. “Anyone whose compensation is reviewed in the proxy, people like Sundar [Pichai, Google’s CEO], we are thinking about them, too,” said Pat Miguel Tomaino, the director of socially responsible investing at Zevin. “If this proposal gets a high vote and the board moves to implement it, we expect they would implement it for the people for whom it’s relevant.” In focusing its response solely on Page’s compensation, Alphabet is avoiding the bigger issues at stake, Tomaino added.
Although Google maintains that it is a leader in diversity and inclusion among Silicon Valley tech companies, it has faced scrutiny in the past year over its slow progress toward diversity goals and allegations of discriminating against women in pay and promotions. A pay equity audit demanded by another activist investor, Arjuna Capital, failed to satisfy Arjuna’s questions and compel it to withdraw a resolution demanding that the company report on the risks it faces from emerging public policies on gender pay equity.
Several large enterprises in the UK have been taking heat from investors over the sizes of the bonuses they are paying out to their top-level executives. At Unilever, Sky News reported on Saturday, investors are expected to raise objections at its annual shareholder meeting next month over the millions of pounds in bonuses it paid out this year to its CEO and CFO:
Sky News has learnt that the advisory service run by the Investment Association (IA), the fund managers’ body, has issued a “red-top” warning in relation to Unilever’s remuneration report. … City sources said on Friday that the IA “red-top” related to the decision by Unilever’s remuneration committee to award annual bonuses worth €2.3m to Paul Polman, its chief executive, and €1.1m to Graeme Pitkethly, the chief financial officer.
The bonuses were the maximum possible under the company’s existing remuneration policy, which is being overhauled this year. The IVIS service is understood to have been angered by that decision because Unilever’s underlying sales growth for last year fell short of the target figure by a small margin.
Unilever is not the only company where investors are balking at big payouts to executives. The Financial Times’ Attracta Mooney casts this as a broader trend, pointing also to the investment company Melrose, which specializes in acquisitions and turnarounds of underperforming companies, which has been subject to criticism this week after announcing that four of its executives would earn total pay packages of over £42 million for 2017. The construction company Persimmon is also taking heat for its plans to pay CEO Jeff Fairburn a bonus of £110 million as part of a bonus scheme described as among the country’s most generous (or, by critics, as “obscene”).
Google announced last week that it had conducted an internal gender pay equity audit and found no statistically significant differences in pay between its male and female employees. The report, however, only covered 89 percent of the company’s global workforce of over 70,000 people, with Google saying it had excluded employees in groups on which it could not perform a rigorous statistical analysis:
Our analyses covered every job group with at least 30 Googlers total and at least five Googlers per demographic group for which we have data (e.g., at least five men and at least five women). These n-count minimums ensure statistical rigor (e.g., higher statistical power, narrower confidence intervals) and allowed us to include 89 percent of Googlers (n=63,153) from entry through executive levels. We did not find statistically significant pay differences for 62,925 Googlers, but did for 228 Googlers across six job groups. We therefore increased compensation for those 228 Googlers, totalling ~$270k USD, before finalizing compensation planning and paying any Googlers.
Like other recent pay equity audits at tech and finance companies, Google’s came in response to a shareholder proposal put forth by the activist fund Arjuna Capital. Yet because 11 percent of the Google community, including executives at the senior vice president level and above, were not accounted for in the study, the investment firm tells Bloomberg that it is unsatisfied with the report and will not withdraw its resolution as it has at other companies that completed gender pay audits:
Trillium Asset Management, an activist investment fund focused on social and environmental responsibility, has filed a shareholder proposal at Verizon that would tie executive compensation at the telecommunications giant to its performance against cybersecurity and data privacy goals:
Verizon shareholders request the appropriate board committee(s) publish a report (at reasonable expense, within a reasonable time, and omitting confidential or propriety information) assessing the feasibility of integrating cyber security and data privacy metrics into the performance measures of senior executives under the company’s compensation incentive plans. …
Currently, Verizon links senior executive compensation to diversity metrics and carbon intensity metrics. Cyber security and data privacy are vitally important issues for Verizon and should be integrated as appropriate into senior executive compensation as we believe it would incentivize leadership to reduce needless risk, enhance financial performance, and increase accountability.
The proposal points to several data breaches in the company’s recent history, including one that affected 1.5 million customers in 2016 and another affecting 6 million last year. It also expresses concern about the growing number of users whose data the company is now responsible for safeguarding following its acquisition of Yahoo and AOL, which will expand Verizon’s digital advertising reach to 2 billion people.
American Express has joined the ranks of major US financial firms pledging to identify and close gender-based pay disparities within their workforce in response to pressure from the activist investor Arjuna Capital. On Wednesday, the credit card company told employees that its most recent pay analysis, conducting with a third-party consultant, “found no evidence of bias in our compensation processes and indicated we were effectively at parity,” Bloomberg reports. The company also told Arjuna that it would report any findings on pay disparities to its shareholders by the end of 2018:
“Women are still 20 percent more likely to leave a career in finance than any other industry — that’s bad for business and it’s bad for investors,” said Arjuna Capital managing partner Natasha Lamb, who filed a shareholder proposal seeking the pay disclosure at American Express and eight other companies this year. Calling equal pay “a critical first step” to retaining top talent, Arjuna withdrew its proposal in response to AmEx’s pledge.
In her withdrawal letter, Lamb said AmEx’s review will include base, bonus and equity compensation, and the company will adjust pay to get to 100 percent equality. It will also disclose its methodology, according to Lamb.
Bloomberg has compiled data showing that women make up 50 percent of American Express’s workforce but just 30 percent of its management.