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Activist Shareholder Uses Proxy Process to Target Gender Wage Gap

April 8, 2016

Natasha Lamb, the director of equity research and shareholder engagement at Arjuna Capital, the activist arm of Boston investment firm Baldwin Brothers Inc. and a shareholder in many of the U.S.’s biggest tech outfits, recently filed shareholder resolutions ahead of proxy season at several major technology companies, compelling each to consider a vote on equal pay transparency.  Lamb’s ultimate target is the nation’s persistent gender wage gap.  Today in the U.S., women are still paid an average of only 79 cents to every dollar earned by men.

“Our clients are interested in investing in such a way that they’re having a positive impact on the world with their money,” Lamb said. “We pick issues that we think are good for society, good for the environment, and will be good for the companies that manage them well.” Pay gap is an issue that specifically matters for investors because research has repeatedly shown that more diversity is tied to better performance; in addition, some investors want companies to get ahead of greater scrutiny that may be coming at the regulatory level. “It’s about protecting their brand and attracting women to their companies,” Lamb stated. “The technology industry lives and dies on innovation, and gender-diverse teams are shown to be a key factor.”


Within 24 hours of Arjuna’s submissions, both technology companies announced that they intended to close the gender pay gap among their employees. Among the companies that Arjuna targeted this year, only one of them attempted to fight the proposal. That company sought permission from the Securities and Exchange Commission (“SEC”) to leave Arjuna’s proposal off its annual ballot, referencing “inherently vague or indefinite” language. “The legal argument they made was ridiculous,” Lamb said. “They said they didn’t think their shareholders would understand what the gender pay gap is.” The SEC determined  that the technology company should put the issue to a shareholder vote. Six days later, the technology company released its internal gender pay data and Lamb withdrew Arjuna’s proposal. The technology company noted that they pay their female employees 99.9% of what their male employees make (note that, according to a review that the technology company released last summer, women make up just 39% of its workforce and just 24% in management jobs).

The other technology company, which employs more than 18,000 people in 30 countries, called pay equity a core area of focus and promised to provide its gender pay equity policies and goals by October 2016 through “an all-inclusive report that looks at not only base pay and cash bonuses, but also the equity component,” said Lamb, who added that Arjuna will also be withdrawing its shareholder resolution seeking that technology company’s pay gap study. “We are now seeing real movement to address gender equity in tech and [the technology company] is among the companies leading the way,” Lamb said. She added, “What we know is that a ‘trust me, women are paid fairly’ approach is not enough, and a defensive approach to gender pay equity will not solve the problem … Fostering gender diverse teams leads to more innovative better performing companies. Companies can and should commit to closing the gender pay gap, as [the previous technology company] has done today. But it won’t happen without bold leadership.”

In addition to its filings at the two technology companies this proxy season, Arjuna, just one of a few investment firms pushing companies to close the gender pay gap, has also filed shareholder proposals at five other major technology companies. In February, another major technology company reported it had reached 100% gender pay parity, while yet another major technology company indicated that its female employees were making 99.6 cents to every dollar made by their male counterparts, excluding bonuses and stock.

Technology is not the only area where shareholders are making equal pay an issue. Boston-based Trillium Asset Management LLC is sponsoring a similar resolution requesting a report on gender pay at a major banking and financial services corporation’s April 26th annual meeting. The banking and financial services corporation opposes the resolution. Its proxy documents call a report on gender pay “costly and time-consuming,” which “in light of our many efforts in this area, would not offer shareholders meaningful additional information.”

Some of the companies targeted said they had been working on analyzing gender pay data long before Arjuna filed its proposals, and that Arjuna’s action was not what made them decide to go public with their statistics. Many technology companies have been increasingly transparent about their diversity data, willing to share often uncomfortable statistics about the low numbers of women in their technology and leadership ranks. Most of these companies have sophisticated HR departments that have for a long time had the capability to carefully analyze pay data. And, at a time when the issue has become a highly charged matter of public concern, these companies are seeing more demands for pay transparency from employees.

In the meantime, withdrawing a shareholder proposal should not essentially be considered a sign of defeat. Shareholders hardly ever get more than a few votes in favor of such proposals, and even if they did, the votes are advisory so the companies are not actually bound to follow through on the results. “The goal is not necessarily to have a high vote,” Lamb stated, “[t]he goal is to get the companies to act.”

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