New York State Comptroller Thomas P. DiNapoli, trustee of the New York State Common Retirement Fund (Fund), today announced various initiatives to address diversity, equity, and inclusion (DEI) issues at portfolio companies, including filing shareholder proposals at Tesla Inc., Wells Fargo and Co., Chipotle Mexican Grill Inc., and United Health Group Inc. DiNapoli’s actions come as corporate DEI initiatives are under attack, and reports that some companies are scaling back DEI efforts.
“Investors looking at diversity, equity, and inclusion are concerned with how their portfolio companies treat individuals and tackle some of their most complex challenges,” DiNapoli said. “The Fund urges the development of robust DEI strategies because it’s good business. Fostering an inclusive and diverse workforce can enhance innovation, creativity, and problem-solving capabilities, and ultimately lead to improved shareholder value. Including people with different experiences and backgrounds, races, ethnicities, genders, ages, sexual orientations, and physical abilities, and empowering them for success should not be controversial.”
Diversity, equity, and inclusion are fundamental values of companies with sound, sustainable and profitable long-term strategies. Companies increasingly recognize that fostering a diverse workforce, promoting equity, and ensuring inclusion are critical drivers of business success. Failure to establish robust DEI policies and practices can result in reputational damage, the loss of talent, and stunted innovation.
Certain investors now view DEI as indicative of a company’s adaptability to societal shifts and its potential to weather emerging social challenges and the associated business risks they pose. Moreover, companies with diverse teams are typically better equipped to understand a broad range of perspectives, which can lead to more informed decision-making and a competitive edge in an evolving global marketplace.
To that end, DiNapoli is filing shareholder resolutions and engaging companies on a host of DEI issues, including discrimination and harassment, workforce diversity, LGBTQ+ inclusion, health care outcomes and board diversity.
Discrimination and Harassment Disclosure
Corporations should address the corrosive effect that discrimination and sexual harassment have on workplace rights, morale and company performance. The proposals DiNapoli filed with Tesla, Wells Fargo, and Chipotle – companies that have been impacted by allegations of discrimination or harassment – ask them to publicly report on their efforts to prevent harassment and discrimination, including the number of pending complaints, the number and dollar amounts of recent settlements, and the number of enforceable contracts that contain concealment clauses that restrict discussion of harassment or discrimination. The same proposal filed with Wells Fargo last year garnered 52% support among shareholders, but the company has failed to act on it.
Workforce Diversity, Equity & Inclusion Reporting
Proposals filed with Meritage Homes Corp. and NVR Inc. ask the companies to report the outcomes of their efforts to foster diversity, equity, and inclusion in their workforces. The proposals ask for a public accounting of the companies’ employee recruitment, retention, and promotion rates, and pay by gender, race, ethnicity, sexual orientation, age, disability, and veteran status. The proposal at Meritage was withdrawn after an agreement with the company was reached.
LGBTQ+ Inclusion
The Fund filed proposals with Lennar Corp. and International Paper Co. to ask the companies’ boards of directors to report on their LGBTQ+ equity and inclusion efforts in its workforce management strategy, citing the rising number of LGBTQ+ individuals entering the workforce and the benefits they provide to businesses.
Disparities in Health Care Outcomes
A proposal filed at United Health Group Inc. asks the board to oversee a third-party audit analyzing the racial and ethnic disparities in United Health’s business, and the effect of those disparities on the company’s business. The proposal asks for data on the extent of racial and ethnic disparities in health outcomes of the company’s membership. The Fund also filed a proposal at HCA Healthcare, Inc. requesting a public report detailing strategies and programs for improving maternal health outcomes.
Letters to Companies on Board Diversity;
In February, DiNapoli wrote to U-Haul Holding Co., Jabil Inc., Worthington Enterprises Inc., MicroStrategy Inc., and Rollins Inc., asking them to disclose the gender, racial, and ethnic composition of their directors to provide investors with information about their commitment to including diverse viewpoints and perspectives in the board room. These companies currently lack the disclosure that has become a best practice among publicly traded companies.
Board Diversity Votes
In January 2024, DiNapoli approved updates to the Fund’s proxy voting guidelines that refine and clarify considerations the Fund will examine when reviewing various issues, including board diversity and DEI. The Fund believes in the importance of board diversity as an essential measure of sound governance and a critical attribute of a well-functioning board of directors. Research shows that the ability to draw on a wide range of viewpoints, backgrounds, skills, and experience is increasingly critical to corporations’ long-term success in the global marketplace.
The Fund will continue to scrutinize boards that do not appear sufficiently diverse, including boards that lack diversity of gender, race, and ethnicity. If a board is not sufficiently diverse and/or insufficient efforts have been taken to address a lack of diversity, the Fund may withhold support from incumbent nominating committee nominees or all incumbent board nominees.
In 2023, the Fund voted against 1,028 directors at 290 companies for a lack of board diversity.
The New York State Common Retirement Fund is one of the largest public pension funds in the United States. The Fund holds and invests the assets of the New York State and Local Retirement System on behalf of more than one million state and local government employees and retirees and their beneficiaries. It has consistently been ranked as one of the best managed and best funded plans in the nation.