Directors tiring of diversity
and ESG focus, survey finds
Oct 15, 2019
Almost two thirds
say investors devote too much attention to board gender diversity
Diversity and ESG issues have been prominent on investor and board
agendas in recent years, but a new survey suggests some directors are
becoming fatigued by the attention placed on these issues.
According to the PwC survey, 63 percent of directors polled say
investors devote too much attention to board gender diversity, up from
35 percent last year. Fifty-eight percent have the same view of
racial/ethnic diversity, an increase from 33 percent in 2018.
proportion of directors who say board gender diversity is very
important had been growing steadily, from 27 percent in 2013 to 46
percent in 2018, but has notably declined to 38 percent this year.
Similarly, those saying racial/ethnic diversity is very important rose
from 23 percent in 2013 to 34 percent last year then dropped to 26
percent in 2019.
These changes are happening as US companies, particularly in the S&P
500, gradually increase levels of diversity, particularly in terms of
female representation. The survey also finds that more directors than
ever believe board diversity has benefits: 94 percent say it brings
unique perspectives, 87 percent say it enhances board performance, 84
percent say it improves relationships with investors and 76 percent
say it enhances the performance of the company.
apparent discrepancy may be attributed to the fatigue of being
continually told by investors and others about the need to boost
diversity, the report’s authors suggest. ‘Boards have been hearing
about it, hearing about it and hearing about it and they’re moving
on,’ Paula Loop, leader of PwC’s Governance Insights Center, tells
Despite this, the survey shows continued support for companies taking
action to improve diversity. More than half (52 percent) of directors
polled say they strongly back board policies of always interviewing a
diverse slate of candidates and 49 percent strongly approve of search
firm policies of always supplying diverse slates of candidates. But
almost a third (28 percent) strongly – and a further 39 percent
somewhat – support the notion that boards will naturally become more
diverse over time.
Three quarters of respondents say their board is looking to increase
its diversity and are more likely to say this is due to a desire for
diversity of thought (51 percent) than to be politically correct (13
percent). But the attributes they say are important in generating that
diverse thinking are changing.
Large majorities continue to say gender and racial/ethnicity are
important, but just 39 percent say diversity of socioeconomic
background is important for diversity of thought, down from 67 percent
in 2017. Fifty-four percent say an international background is
important, down from 77 percent two years ago. There are also
decreases in assigning importance to age and board tenure.
the past two years a growing number of companies have started
including board matrices in their proxy statements, Loop notes. But
they are also starting to recognize the complexity of assembling a
board that features people with variety along gender, ethnic, age and
background lines, and increasingly have cyber-security experience, she
ESG AND ENGAGEMENT
ESG has become a key item on investors’ agendas, and
industry professionals expect that to continue into the 2020 proxy
season. But a growing number of directors are baulking against this
pressure. According to the PwC survey, 56 percent of directors say
investors’ focus on environmental/sustainability issues is excessive,
up from 29 percent in 2018. Forty-seven percent say the focus on CSR
is excessive, an increase from 29 percent last year.
According to Loop, directors are beginning to feel their corporate
agendas are being ‘hijacked’ by shareholders seeking ESG-based
actions. But she says there is also widespread confusion among
directors as to what ESG
means, so boards may already be discussing ESG issues
without realizing it. ‘Companies aren’t telling their stories very
well,’ Loop adds.
positive note, the survey finds that directors are taking an
increasingly positive view of shareholder engagement. Although IR and
governance teams have in the past sometimes struggled to get directors
involved in discussions with investors, 51 percent of respondents say
a member of the board other than the CEO took part in shareholder
engagement over the past year.
Almost all (94 percent) of respondents say the correct investor
representatives were present at the engagement meeting, up from 73
percent in 2016. There are also marked increases in the proportion of
directors saying investors were well prepared for the engagement (91
percent, up from 63 percent) and that engagement had or was likely to
have a positive effect on proxy voting (87 percent, up from 59
reflects increasingly mature engagement programs, Loop explains.
Importantly, there is a greater ability to prepare an agenda for
meetings ahead of time, which leads to more productive discussions. ‘I
think directors have learned a lot about this process [in part
because] investors have pressed them to up their game,’ Loop adds.
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