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Wall Street is taking seriously the call to increase corporate diversity. In the end.
For the first time, every company listed on the S&P 500 has at least one racially or ethnically diverse director. About 11% of S&P boards were non-diverse in 2020.
And now, the most important attribute being prioritized in corporate director searches is racial and ethnic diversity according to PwC 2021 Annual Survey of Corporate Directors. The numbers back it up. Half (51%) of all current directors support linking executive compensation to diversity and inclusion goals, an increase of 13 points from last year, according to PwC 2021 Annual Survey of Corporate Directors.
Good thing those numbers are finally rising, because today also marks an important deadline for everybody listed on Nasdaq companies: Must complete a board diversity matrix that includes the total number of board members in the company and how those board members self-identify with respect to gender, race, ethnicity, and LGBTQ+ status . Results will be made public through proxy statements at the annual meeting or on company websites.
As of August 2023, publicly traded companies must have at least two diverse members on the board or explain why they are not meeting this diversity goal.
“Because what we measure indicates what we value, the stock market is sending a great message about its priorities,” wrote S. Mitra Kalita, founder and CEO of URL Media and a former CNN executive in a blog post. recent op-ed on the importance of diversity on boards.
“Disclosing this information to investors empowers shareholders to support companies that embody their ideals and attract investment from those that don’t,” said Rep. Carolyn Maloney, a New York Democrat who chairs the Committee on Oversight and Reform. of the House of Representatives, in a statement praising the move. “Beyond common and moral sense, more diversity also makes financial sense. Studies have repeatedly found that companies with more diverse leadership are better positioned to succeed.”
The 2020 killing of George Floyd by Minneapolis police that ignited Black Lives Matter protests across the country also increased demands for corporate action around diversity and inclusion, said Fassil Michael, head of thought leadership at ISS. Governance Solutions.
Those demands are being taken seriously, the numbers show. But the numbers don’t show everything.
Although 19% of the total US population identifies as Hispanic or Latino, directors from that group make up only 5% of board seats in the S&P 500, for example.
“Many boards still don’t reflect the diversity of their client base or the demographics of the broader society in which they operate,” Michael wrote. “While there is reason to celebrate the progress that has been made in recent years, many companies are expected to address board diversity issues, along with C-suite diversity, workforce equity and pay. fair, for the foreseeable future, as the long term The long-term trajectory of many corporate diversity and inclusion initiatives has yet to be seen.”
It’s not just boards. New McKinsey Research found that about 75% of all black and Hispanic employees have frontline jobs, such as waiting tables, stocking store shelves or folding clothes, compared to 58% of white workers. And while three in four of those workers want to be promoted, only one in four will be. Black workers make up 17% of hourly jobs at top companies, but only 9% of jobs in low-level supervisory roles, one moved up the ladder.
Additionally, hourly frontline employees are nearly 20% less likely than corporate employees to believe diversity and inclusion policies make a difference, according to McKinsey.
Large corporations have enthusiastically embraced ESG incentives recently, Alison Taylor wroteprofessor at the NYU Stern School of Business and executive director of its Ethical Systems program; and Brian Harward, principal research scientist for the program.
But much of what they are doing “appears to be a self-serving strategy to generate positive public relations,” they wrote in a joint statement. The current state of diversity efforts by corporations is “disappointing but understandable… Investors are pushing them to do what amounts to a box-ticking, virtue-signaling exercise, and it shows.”
(MCD), for instance. The company announced last year that it would tie 15% of executive compensation to annual increases in the participation of women and minorities in senior leadership.
Sounds great. But at the same time, McDonald’s was accused of mistreatment and “branding” its black franchise owners, pushing them into less favorable locations that required expensive and unrealistic renovations, and instituting stricter ratings and inspections of their stores.
“What encouraged that behavior?” ask Taylor and Harward. “Was there any relationship between the lack of diversity in senior leadership and this litigation? More broadly, why should executives receive bonuses for meeting intrinsic goals that should be central to any company’s values and mission?
The company has denied any wrongdoing and resolved claims that it had treated black franchisees less favorably.
Enjoy the good times while you can because they don’t last forever.
Last year was a lucrative one for wearers of black fleece vests who work in Midtown Manhattan but call it Wall Street. The streets gleamed in the 2021 version of gold… mergers, acquisitions and IPOs.
The economy was back, honey. Covid finally found its match thanks to the hard work of Pfizer, Moderna, and Johnson & Johnson. Those Wall Street warriors were hard at work and their salary reflected it. Average bonuses reached a record $257,500, up 20% from the previous year. That’s on top of very generous base salaries.
Then came 2022.
Covid rates are still at record levels and lockdowns are disrupting supply chains. Inflation, interest rates and the lack of IPOs have hit the financial world hard. M&A activity is down 25% and IPOs have halved since last year. Investment banking revenue at JPMorgan Chase fell 61% and Morgan Stanley 55% last quarter.
Now, year-end bonuses are expected to decline significantly. Those who work in finance can expect to see a nearly 50% drop in their compensation, reports my CNN business colleague Allison Morrow. Read more here.
We all know that inflation, at record highs, has hit our portfolio. This earnings season has shown us that corporations have taken notice, too.
There has been a 26% rise in mentions of “inflation” so far this quarter from publicly traded companies’ earnings reports, according to new data from Cision.
That carried over to Twitter, where “inflation” was mentioned 19,518 times versus 827 times in the same period in 2021. Interestingly, “corporate greed” was also a heavily used phrase among Twitter users discussing reports of inflation. earnings, with 9577 mentions. compared to just 8 in 2021.
Companies increased their mentions of “interest rates” and “recession” in earnings reports this quarter by 9% and 4%, respectively.
But the Russian invasion of Ukraine, seen as a major headwind last quarter, saw a 77% drop in mentions as a negative factor this quarter, while conversations about the pandemic fell by 17%.
Tyson Foods and Palantir Technologies report earnings before US markets open.
Also today: New York Fed 3yr inflation expectations are out.
Coming tomorrow: Sysco, Coinbase, and Hyatt report earnings.