Borg Warner – Diversity in Executive Leadership (2019)

Outcome: Successfully withdrawn following the company’s commitment to publish quantitative metrics in its next sustainability report concerning efforts to develop and retain a diverse workforce including its executive leadership ranks, and develop a process to report on pay equity.

We believe that diversity, inclusive of gender and race, are critical attributes of a well-functioning executive team and necessary to meaningfully drive diversity throughout an organization.
Currently, Borg Warner’s Strategy Board has one woman and an undeterminable number of people of color in leadership roles.
The business case for workforce diversity is compelling. McKinsey & Company, for example, found in 2015, and in a larger study in 2017 that highly diverse executive teams had higher returns on equity and earnings performance than those with low diversity. ISS Analytics examined companies where CEOs had a tenure of at least three years, and found those that combined gender diversity in the boardroom and the C-Suite showed, overall, the best results in terms of risk-adjusted quality of performance. (ISS Analytics /Governance Insights/October, 2018)
The number of women and people of color in leadership roles at public companies remains remarkably low. Only nine percent of top executive roles in the Russell 3000 are held by women.
Many companies across industry sectors are setting goals and targets to address this significant issue. Intel has been tracking diversity data since 2014 and ties diversity goals to incentive compensation. In 2018, two years ahead of schedule, Intel achieved full representation of underrepresented minorities and women in its U.S. workforce. Symantec set a goal to increase the percentage of women in leadership (Director-level and above) to 30 percent by 2020. BP says it wants women in at least 25% of its group leadership roles by 2020. Citigroup, in August 2018, announced plans to reverse “falling diversity” by setting public quantitative goals and holding senior leaders accountable for meeting them.
Borg Warner has made progress expanding board diversity. It is time, in our view, to extend the same focus and accountability to building diversity in its leadership ranks.
To address the lack of diversity in senior roles we believe the Board and senior leadership must set clear policies to attract, retain and promote women, including establishing and reporting on gender pay equity, formalizing mentor and sponsorship programs, and establishing gender-neutral family support programs.
Further, we believe that linking diversity performance metrics to senior executive compensation packages can sharpen management’s ability to manage human capital management risks, increase accountability and successfully reach inclusion and diversity goals.
RESOLVED: Shareholders request that the Board of Directors prepare a report (at a reasonable cost, in a reasonable time, and omitting confidential information) providing an assessment of the diversity of its Strategy Board and plans to expand diversity inclusive of gender, race, and ethnicity in its Strategy Board ranks.
Supporting Statement: A report adequate for investors to assess strategy and performance could include disclosures, such as directives to search firms concerning the composition of the candidate slate, and a review of appropriate time-bound benchmarks for judging current and future progress.

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