Trillium Successfully Withdraws Four Board Diversity Proposals

In the autumn of 2012, Trillium filed board diversity shareholder proposals at Superior Energy* (NYSE: SPN), Hartford Financial* (NYSE: HIG), Zimmer Holdings (NYSE: ZMH) and Lowe’s Companies (NYSE: LOW).

The proposals asked each company to:

“publicly commit [themselves] to a policy of Board inclusiveness to ensure that women are routinely sought as part of every Board search the company undertakes”

At the time of the filings, each company had either no women or only one woman on its board of directors. Further, none of the four companies disclosed diversity, inclusive of gender or race, as part of its board nominee search process.

Following Trillium’s successful engagement this spring, all four companies agreed to amend their governance documents to include a clear definition of diversity, inclusive of gender and race, and make diversity an intentional part of board nominee search criteria. Subsequently, Trillium withdrew our proposals.

A number of studies now underscore the links between greater board and management diversity and improved governance practices and financial health[1]. This has been particularly noticeable when there are three or more women on a board. Despite the data, only 17% of US corporate board seats are held by women[2] . This represents only a 3% gain in board seats over the past decade — while women now constitute 47% of the US workforce.

The infrequency with which companies look to refresh their board is often cited as a reason women have not moved into boardrooms at a faster pace. Therefore, committing to an annual review of the skills, backgrounds, the diversity inclusive of gender and race, among other attributes was a critical element of our dialogues, as was persuading companies to look beyond traditional talent pools for board candidates.

“None of the four companies we met with questioned the growing body of research demonstrating strong links between board gender diversity and corporate financial health. We are pleased with the steps companies are taking to embed gender diversity criterion in corporate governance documents and broaden board nominee searches beyond traditional circles” said Susan Baker, Vice President Shareholder Advocacy and Corporate Engagement. “If the US is to move up from its 11th place rank among industrial nations on board gender diversity, however, more companies need to act. Board gender diversity should be a top priority of every company’s efforts to deliver long-term value to its shareholders.”

Superior Energy reported to us that board diversity was an unaddressed ‘top priority’ issue. In agreeing to amend its governance principles, Superior expanded the search beyond those qualified in the oil and gas industry to include those who “achieved a high distinction in their chosen field.”

Superior also revised its principles by stating, “The board believes that a diverse membership with varying perspectives and breadth of experience is an important attribute of a well-functioning board that will enhance the quality of the Board’s deliberations and decisions.”

In its 8-K filing Superior reiterates:

“The Principles further make clear that diversity is inclusive of background, experience, gender, race and skills, and that diversity will be an intentional part of the search process by the Board of Directors with respect to director candidates.”

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[1] Barta, Kleiner and Neuman “ Is there a Payoff from Top-Team Diversity?” The McKinsey Quarterly April, 2012; “Gender Diversity and Corporate Performance” Credit Suisse AG, August 2012;V.W. Kramer, A.M. Konrad, and S.Erkut, “Critical Mass on Corporate Boards: Why Three or More Women Enhance Governance,” Wellesley Centers for Women, Paper No.WCW11, 2006

[2]“Getting On Board: Women Join Boards at Higher Rates, Though Progress Comes Slowly” December, 2012 , Ernst & Young, LLP Corporate Governance Group

*Portico and The United Methodist Church Foundation were co-filers to the Superior Energy and Hartford Financial shareholder proposals, respectively.

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