Investors are turning up pressure on companies to develop racial and gender diversity on their boards ahead of the annual meeting season, according to influential shareholder advisor.
The Investment Association (IA) will issue “amber-top” warnings – the second highest level of warning – to the 350 largest registered companies if they do not disclose the racial diversity of their boards or have a reliable action plan to deal with the issue.
The advisory group, which represents 250 members with £ 8.5tn under management, hopes to use its members’ voting power to encourage registered companies to accept the Parker Review target of at least one director from a minority background. decision by the end of 2021.
The IA institution’s voting information service (IVIS), a paid service that provides independent information about registered companies, does not make recommendations to investors on how to vote, but uses amber and red tops to highlight areas of concern. marking.
Andrew Ninian, IA director of stewardship and corporate governance, said: “UK boardrooms need to reflect Britain’s diversity today. With three-quarters of FTSE-100 companies not reporting the ethnic shape of their boards in last year’s AGM season, investors are now urging companies to take steps to meet Parker Review targets. ”
The group is also seeking more progress on gender diversity, with a red alert for companies with 30% or fewer female leaders. This is an increase on last year’s 20% threshold for red alert.
On executive pay, the group said companies that received government support or raised capital from shareholders during the pandemic should not receive annual bonuses. Many companies have benefited from the government furlough scheme or the business loan schemes; and 73 companies of the FTSE 600-strong index raised new cash from investors between March and November as Covid-19 pandemics hit.
“Investors don’t usually expect to pay bonuses if a company has taken government support or shareholders – any company that chooses to do so is expected to have a clear philosophy,” Ninian said. The group also warned pay committees not to compensate operators for lower pay last year by changing this year’s pay packages.
The climate crisis will be another major medium. This year, companies in high-risk sectors such as transportation, energy, banks, airlines, travel and tourism, which do not comply with reporting standards set by the global Task Force for Related Financial Publications to Climate (TCFD), for the first time, get an amber alert. Investment managers want to see companies report climate-related risks in a consistent, clear and comparable way. The UK Government plans to make climate-related financial publications mandatory by 2025.