First Solar – Board Diversity (2021)

Outcome: 91%

WHEREAS: Racial and ethnic diversity is undeterminable on First Solar’s Board of Directors.

We believe diversity, inclusive of race, ethnicity, and gender, is a critical attribute of a well-functioning board and a measure of sound corporate governance.

Corporate leaders recognize the strong business case for board diversity. The Guiding Principles of Corporate Governance of the Business Roundtable, an influential association of chief executives, state: “Boards should develop a framework for identifying appropriately diverse candidates that allows the nominating/corporate governance committee to consider women, minorities and others with diverse backgrounds as candidates for each open board seat.” Benefits associated with board and management diversity include a larger candidate pool from which to pick top talent, better understanding of consumer preferences, a stronger mix of leadership skills, and improved risk management. 

Numerous institutional investors have updated their proxy voting guidelines to reflect their belief that diversity on boards, as well as in senior and mid-level management, is an indicator of good corporate governance. BlackRock, the world’s largest asset manager, published in 2020 investment stewardship guidelines that state, “If there is no progress on enhancing diversity at the board level within a reasonable time frame, we may hold nominating and/or governance committees accountable for an apparent lack of commitment to board effectiveness. Deliberate action needs to be taken by boards with a lack of diversity.” State and city pension plans across the country have adopted proxy voting policies with minimum thresholds for board diversity.  

Legislation mandating board diversity inclusive of gender and race has arrived in the U.S. California legislation enacted in 2020 requires  boards with nine directors or more include three members from racial or sexual minority groups by 2022. Potential regulatory action seeking disclosure of racial, ethnic, and gender diversity is also under consideration at the federal level. 

People of color remain significantly underrepresented on U.S. corporate boards. According to ISS Analytics, more than 82 percent of all directors in S&P 500 companies are Caucasian. Among board members of Russell 3000 companies whose race was identified, non-white directors represent 12.5 percent. Continued progress on board diversity requires serious attention to the board search process and refreshment. 

RESOLVED: Shareholders request that the Board of Directors prepare a report by September 2021, at reasonable expense and omitting proprietary information, on steps First Solar is taking to enhance board diversity beyond current levels, such as:

1. Committing publicly to include people of color in each candidate pool for board and senior leadership seats; 
2. Disclosing the gender, racial, and ethnic composition of the board, and 
3. Disclosing strategies related to gender, racial, and ethnic board diversity, including if and how the board plans to reflect the diversity of the company’s workforce, community, and customers. 

We believe this report will foster Board accountability on this issue.

1. https://s3.amazonaws.com/brt.org/Principles-of-Corporate-Governance-2016.pdf
2. https://www.blackrock.com/corporate/literature/publication/blk-commentary-engaging-on-diversity.pdf
3. https://www.congress.gov/bill/116th-congress/house-bill/1018/text
4. https://www.nytimes.com/2020/09/15/business/economy/corporate-boards-black-hispanic-directors.html