Arjuna Capital: Wells Fargo Fights Board Diversity Proposal at Upcoming Annual Meeting

Wells Fargo, Alphabet (Google), and now Tesla face investor votes asking their boards to increase gender and racial diversity in line with customer and employee demographics.

BOSTON--(BUSINESS WIRE)--At Tuesday’s annual meeting, Wells Fargo investors will have an opportunity to vote for a shareholder proposal, filed by investment manager Arjuna Capital, requesting the Company improve its racial and gender board representation so that it is better aligned with its employee and customer demographics. Shareholders will have a similar opportunity at Alphabet’s (Google’s) annual meeting on June 1^st, following an unsuccessful attempt to block the proposal through an appeal to the Securities and Exchange Commission (SEC). This week, Arjuna Capital also filed the board diversity proposal at Tesla for its annual meeting in the fall.

Wells Fargo’s board diversity is disproportionate with its employees’ demographics. The Company’s board is comprised of 36 percent women and 29 percent racial and ethnic minorities. Meanwhile, it’s employee base is 56 percent women and 45 percent racial/ethnic minorities.

Historically, boards in the United States have been comprised predominantly of white men. Yet, Institutional Shareholder Services (ISS) finds that 61 percent of investors believe boards should “aim to reflect company’s customer base and the broader societies in which they operate by including directors drawn from racial and ethnic minority groups.” Further, a growing body of research indicates that diverse boards can outperform homogenous ones. Boston Consulting Group finds that companies with greater board diversity have 19 percent higher revenue than non-diverse competitors. Other research indicates greater board diversity correlates with lower stock volatility and improved performance.

State regulations and market listing standards (Nasdaq) are increasingly pressing companies to have two or three gender- and/or racially diverse board members. Likewise, shareholder proposals requesting board diversity have seen increasing investor support at annual meetings. Yet, in a country with 51 percent women and 42 percent racial or ethnic minorities, current board diversity efforts appear largely insufficient. This proposal is unique in that it requests Wells Fargo to set quantitative goals to achieve alignment between its employee and/or customer base demographics and board demographics.

“Achieving board diversity should not be an exercise in tokenism,” said Natasha Lamb, managing partner at Arjuna Capital. “Gender- and racially diverse boards bring value to bear, as companies can more-astutely respond to the needs of their stakeholders. Boards that reflect the diversity of their employees and customers are seeking a long-term performance advantage.”

Arjuna Capital is the lead filer of the three board diversity proposals this proxy season, with Sisters of St. Francis co-filing the Alphabet proposal. Since 2016, Arjuna has worked to improve racial and gender equity within the financial, technology, and retail sectors.