An increasing number of companies are providing long-term investors with proxy access rights, whereby shareholders can nominate candidates to a company’s board. The right to proxy access ensures strong board oversight and board members that are more responsive to shareholder concerns.
Since 2014, the New York City Comptroller and the City’s pension funds have spearheaded the Boardroom Accountability Project to give shareholders a meaningful voice in director elections through proxy access. The project provides shareholders with information on the profile of directors including skills, expertise, and qualifications. In general, proxy access is available to a group of shareholders who collectively hold at least three percent of outstanding shares for at least three years to nominate 20-25 percent of directors to the board.
Board Diversity and Skillsets
Shareholders recognize that a diverse board with representation from women and other racial and/or ethnic groups can lead to smarter decision-making and better financial performance. A diverse board serves as a measure of the board’s inclusiveness and signals the company’s commitment to maintaining an open and inclusive workplace from the top down.
In September 2017, New York City and the city’s funds launched the next phase of the project, Boardroom Accountability Project 2.0, to increase pressure on companies and to engage with them on their “refreshment” process to improve the quality of their boards by focusing on diversity of gender, race and climate expertise. Companies are encouraged to disclose this information in a matrix format. Enhanced transparency on board composition is helpful for investors to identify whether the board has representation that aligns a company’s performance with shareholders’ interests. In August 2018, the New York City Pension Funds identified best practices among 18 companies’ board matrices that were disclosed in their 2018 proxy statements.