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The other major topic that ISS asked about in this year’s benchmark policy survey was how to handle shareholder proposals on racial equity audits/civil rights audits. As I noted last month on the Proxy Season Blog, ISS backed 77% of resolutions on this topic during the 2022 proxy season – compared to 22% in 2021. Looking ahead to 2023, here’s the feedback that will be guiding ISS’s policy development:

Discussions with clients and proponents and the survey results lead ISS to conclude that investors are roughly evenly split into two camps on this issue. Approximately 42 percent of investor respondents to the survey said most companies would benefit from an independent racial equity or civil rights audit, while a slightly larger 45 percent responded that whether a company would benefit from an independent racial equity or civil rights audit depends on company-specific factors including outcomes and programs.

A majority of non-investor respondents indicated that they believe company specific criteria are the best determinations of which companies would benefit from a racial equity audit.

When asked what factors were relevant to determine whether a company would benefit from an independent racial equity or civil rights audit, “significant diversity-related controversies” were the most popular choice – being selected by a majority of investor and non-investor respondents. This was followed by whether the company disclosed workforce diversity representation statistics, such as EEO-1 type data, and has undertaken initiatives/efforts aimed at enhancing workforce diversity and inclusion, including training, projects, and pay disclosure.

The least popular choice for investor respondents was whether the company offered products or services and/or made charitable donations with a specific focus on helping create opportunity for people and communities of color.

The question asked this year was the same as the one asked in the 2021 Benchmark Policy Survey to assess any changes in sentiment over time, especially given the strong vote support that many of these proposals received at annual meetings in 2022. The responses for investor and non-investor respondents changed only slightly from last year to this one.

– Liz Dunshee