Ormat Technologies, Inc. – Racial Justice Audit (2022)
Outcome: Successfully withdrawn following the company’s commitment to expand gender diversity in its director ranks by the June 2022 AGM; commitment to revise its Corporate Governance Guidelines such that its commitment to assemble a diverse slate, including diversity of age, gender, ethnicity and race, for each candidate pool for open board and senior leadership seats is clearly stated, and an agreement to publish a Board diversity matrix in its 2022 proxy statement.
WHEREAS: Ormat Technologies has one woman on its Board of Directors and racial and ethnic diversity is not disclosed.
We believe that diversity among directors, 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, affirms diversity enhances long-term shareholder value and states: “Boards should develop a framework for identifying appropriately diverse candidates, which asks the nominating/corporate governance committee to consider women and/or minority candidates for each open board seat.” (1) Board and management diversity benefits include better understanding of consumer preferences, a stronger mix of leadership skills, and improved risk management.
Numerous institutional investors have adopted proxy voting guidelines reflecting their belief that board and management diversity are indicators of good corporate governance. Asset managers, including the world’s largest—BlackRock, Fidelity Investments, State Street Global Advisors, and Vanguard—increasingly vote against directors and support shareholder proposals on board diversity at companies deemed to be making insufficient progress. State and city pension plans have adopted proxy voting policies with minimum thresholds for board diversity. According to Sustainable Investments Institute, three of the four board diversity resolutions that went to a vote in the proxy season ending June 2021 garnered majority support.
U.S. regulation and legislation to accelerate progress on board diversity is on the rise. In August 2021, the Securities and Exchange Commission approved Nasdaq’s proposed board diversity rule requiring listed companies to meet diversity thresholds or explain their failure to do so, as well as to disclose diversity statistics. California and Washington have passed legislation mandating minimum board diversity thresholds. Federal legislation has been introduced to require disclosure of the gender, racial, and ethnic composition of boards of directors and executive officers (H.R. 1277).
Despite recent progress, women and people of color remain significantly underrepresented on U.S. corporate boards. Women and people of color account for 26.5% and 17.5% of the directorships in the Fortune 500, respectively, (2) relative to 48% and 41% of private industry jobs. (3)
Ormat Technologies’ peer, Innergex, has two women on its ten person board of directors and women represent more than one-quarter of Innergex’s officers.
Resolved: Shareholders request the Board of Directors prepare a report by January 2023, at reasonable expense and omitting proprietary information, on steps Ormat Technologies is taking to enhance board diversity, such as:
- Embedding in governance documents a commitment to diversity inclusive of gender, race, and ethnicity;
- Committing publicly to include women and people of color in each candidate pool for board and senior leadership seats;
- Disclosing in proxy statements the gender, racial, and ethnic composition of the board; and
- Detailing board strategies to reflect the diversity of the company’s workforce, community, and customers.