LogMein, Inc. – Board Diversity (2018)
Outcome: Withdrawn when the company committed to strengthening its corporate governance documents, including adoption of the ‘Rooney Rule’ language whereby at least one candidate representing a diversity of gender, race ethnicity, age and/or sexual orientation is included in each new pool of Board candidates.
WHEREAS: LogMeIn has no women on its Board of Directors, and the racial and ethnic diversity of the Board is unclear because the company does not disclose the racial and ethnic profile of its board nominees.
We believe that diversity, inclusive of gender and race, is a critical attribute of a well-functioning board and a measure of sound corporate governance.
Corporate leaders increasingly recognize the strong business case for board diversity. The association of chief executives of U.S. companies, the Business Roundtable (BRT), updated its Principles of Corporate Governance in 2016, stating: “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.” Ball Corporation CEO John Hayes, then Chair of BRT’s Corporate Governance Committee, articulated the rationale: “‘Similar to our efforts to promote diversity among our management ranks, diverse backgrounds and experiences on corporate boards, including those of directors who represent the broad diversity of American society, strengthen the performance of a board of directors and promote the creation of long-term shareholder value.” Research identifies business benefits associated with board diversity including 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.
Investor engagement by institutional investors to promote greater board diversity is increasing. State Street Global Advisors, the world’s third largest asset manager, voted against director nominees on the proxy statements of 400 companies in 2017 due to inadequate board diversity. Board diversity is an engagement priority for BlackRock, the largest asset manager, as well as Vanguard, the largest mutual fund company. Massachusetts’ state pension fund did not support management in 69 percent of director elections this year because the companies did not meet a board diversity threshold of 30 percent women and people of color. Numerous state and city pension funds such as California, Connecticut, New York City, New York State, and Rhode Island also actively encourage greater board diversity.
Women and people of color remain significantly underrepresented on U.S. corporate boards, approximately 18 percent and 10 percent of all S&P 1500 directorships, respectively (2017 ISS Board Practices Study).
While LogMeIn’s Corporate Governance Guidelines state “[t]he value of diversity on the Board should be considered” the company lags peers on board diversity. Citrix, Cisco, and Microsoft each have one or more women on their Boards of Directors.
Resolved: Shareholders request that the Board of Directors prepare a report by September 2018, at reasonable expense and omitting proprietary information, on steps LogMeIn is taking to foster greater diversity on the Board, including but not limited to:
1. Strengthening Nominating and Corporate Governance policies by embedding a commitment to diversity inclusive of gender, race, ethnicity;
2. Committing to include women and underrepresented minority candidates in every pool from which Board nominees are chosen;
3. Reporting on progress achieved and challenges experienced.