Our Take: Expect Diversity to Stay in the Spotlight
Recent events have spurred calls for greater diversity across leadership positions in the corporate world, within government and in the not-for-profit space. We expect these societal shifts will increasingly demand that issuers go beyond compliance with the strict legal requirements. Stakeholders, proxy advisory firms and institutional shareholders have tended to be the drivers of change on governance issues, with changes to the legal framework generally trailing behind. Now, business leaders across sectors are also becoming more active and vocal change agents. Organizations that fail to be forward-thinking risk being unable to adapt to the constantly changing legal and social landscape. The need to be forward-thinking becomes even more important in light of the many other forms of discrimination that are not contemplated in legislation or as apparent to the eye, including for example discrimination based on sexual orientation, gender identity, classism, religion, mental health, disability and ageism.
Although no changes have (yet) been implemented to the existing legal diversity framework for the 2021 proxy season, expectations by shareholders, employees, customers and other stakeholders with respect to diversity disclosure, policies and initiatives of public companies are quickly evolving. Issuers that wish to enhance their diversity should consider the desired outcomes of their entity-specific diversity initiatives and policies, especially within the context of their long-term strategies and objectives. Each issuer’s board should ask itself: Do our programs and policies create a framework that gets us to a level of diversity that will meet our human capital strategy and needs five to 10 years from now? Now more than ever, boards and senior management should be thinking about their overall frameworks, with greater emphasis on gender, race and ethnicity, as well as other diversity criteria. All forms of diversity are – and are expected to remain – in the spotlight in 2020 and beyond.
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Governance Insights 2020
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