This year during proxy season (also known as “spring”), NLPC submitted or sponsored several shareholder proposals that requested compensation committees for companies’ boards of directors to eliminate diversity, equity and inclusion goals as part of top executives’ pay incentives. Most resisted our recommendations, standing by their policies to keep DEI as one of their drivers to boost leadership’s income, but PepsiCo and Mastercard were two that did eliminate the incentives from their formulas as the result of our proposals.
Now, however, research about the just-completed season of corporate annual meetings shows a significant majority of top corporations have removed DEI from their compensation criteria anyway. From Ernst & Young:
DEI is disappearing as a compensation committee responsibility. In recent years, it became commonplace to see diversity, equity and inclusion (DEI) listed among human capital matters overseen by compensation committees. That changed this year. We’ve observed a 76% drop in S&P 500 companies that mention DEI-related terms in descriptions of their compensation committee’s responsibilities. Of those, most have removed the term altogether, though 17% changed it to “inclusion,” indicating a reorientation.
The mere swapping of different terms to replace “DEI” (which also includes “belonging” and “workplace cultured”), without truly eliminating the policies from company-wide practice, is something NLPC has pointed out repeatedly this year. The acronym is now officially toxic, but the policies are far from dead.
Nonetheless, it’s a real change that so many board compensation committees no longer want to pad executives’ pay with these unmeasurable and discretionary “metrics.” It shows that our recommendations ultimately nudged companies in the right direction.
NLPC’s shareholder proposals are archived on our resolutions page, which can be found here. Besides Pepsi and Mastercard, we had proposals to address DEI In executive pay submitted for American Express, Coca-Cola, General Motors, Goldman Sachs, JPMorgan Chase, McDonald’s and Merck. The initiatives that made it onto proxy statements (a few didn’t) received low support at the companies’ annual meetings, but this trend highlighted by Ernst & Young illustrates that success is not measured only in shareholder vote outcomes.
