- Disclose how measures to increase diversity have been applied and the take up of these measures; and
- Disclose results of gender pay gap assessments across the company, and what actions will be taken as a result.
A focus on Germany
Germany has seen significant legal developments regarding diversity (including beyond gender) in the last few years. During 2019 we carried out a root and branch analysis of DAX 30 companies to understand how why they continue to lag peers on gender diversity at senior levels. We evaluated the policies in place and measures already being implemented to address the gender gap. Our engagement revealed more awareness on the issues than had been apparent from their public disclosure – but practice varies widely. As a follow-up to the project, we communicated our expectation to all companies involved as noted above.
A focus on US & Canada
2019 saw investors raise the bar for US and Canadian company directors, particularly on diversity, with female board appointees reaching a record high of 45% in the US. In July, we saw the last remaining all-male board in the S&P500 at Copart Inc. announce the appointment of a female executive to the board. However, hundreds of smaller Russell 3000 companies continue to lack diversity. In the TSX Composite, the proportion of companies that had all-male boards declined slightly to 2%, although almost half of all Canadian companies outside of this core index lack female board representation
Many investors also ramped up pressure on laggards by targeting the election of individual directors who had responsibility for board policies, most commonly the Chair of the Nomination Committee. In some instances, votes against reached over 25% of total votes cast on those in this role at companies with all-male boards.
We continue to engage and encourage companies to meet the 30% Club’s target. We will use our voting power to drive change at board level where we consider not enough has yet been achieved. We will not support the election of Nomination Committee chairs or other relevant directors onto the board without requisite female representation and where there is unwillingness to fully address the issue.
For 2020, we have expanded the coverage of our voting policy on diversity from the S&P500 to the entire US market. In Canada, we now expect all TSX Composite companies to put in place a policy that aims to increase gender diversity on the board. Our expectation is that there be at least two female directors on the board for a company within this index.
For a second year running, we have written to US and Canadian investee companies to highlight our expectations for improved board diversity across these markets.
2020 Voting Rule Changes
We seek to set sensible, market-appropriate thresholds based on evolving markets practice, investor good practice expectations and actual board diversity data across main markets. As touched on above in relation to the US and Canada, we have further developed our voting stance on companies around the world for 2020. Changes to the US and Canadian polices seek to address the “one and done” phenomenon of appointing one female
director at a wider range of companies. In addition, we have now introduced a baseline diversity voting policy that will apply to all markets1 and companies regardless of size, referred to below as the global minimum standard.
The table below shows the voting policy for 2020 and the 2019 policy as applied.