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More Minnesota Public Companies Increase Transparency Around Diversity Reporting

For years, investors have used environmental, social and governance metrics to gauge how well companies account for long-term risk.

But now investors and shareholders want to know more about a company’s social issues, including the composition of the workforce and the board.

Due to shareholder pressure and public backlash, more and more large public companies have made their mandatory – but non-public – EEO-1 reports available to the US Equal Employment Opportunity Commission. The EEOC has used the reports, filed annually since the Civil Rights Act of 1964, to offer aggregate workplace diversity statistics or as a basis for enforcement action.

Shareholder advocacy group As You Sow, for example, has been pushing companies since 2019 to better disclose diversity in the workplace, frequently submitting shareholder proposals in proxy statements.

“Shareholders want to understand the diverse makeup of companies,” said Andrew Behar, CEO of the group. “We all know this has…a direct material impact on the business,”

In 2020, according to the group, 20% of S&P 100 companies published EEO-1 reports. By the end of 2021 – after companies re-engaged or made greater commitments to diversity in the wake of the murder of George Floyd – 81% of those companies made the reports public.

Minnesota’s 10 largest public companies make all of their EEO-1 reports or versions available on their websites. Some are easier to find than others. A simple Google search will find you some of them, and others such as Target and 3M filings are hidden in workplace diversity reports. Some small state-owned companies have not yet made the documents public.

In the report, the companies document data on race, ethnicity and gender based on job categories. The forms were designed to cross industries and have not changed since their introduction, making comparisons between companies – and even different years for the same company – difficult.

The EEO-1 reports give breakdowns on 10 job categories, including six racial categories and two gender categories. Critics would say that the form does not provide enough options, so some companies have offered additional information.

But you can get an idea of ​​how a company is fulfilling its diversity goals.

UnitedHealth Group, Minnesota’s largest public company, in its EEO-1 Report 2020, said it has 671 senior staff. Of these, 553 are white men, 18 are black men and 15 are black women. The company goes into more detail than that in its 2020 Sustainability Report.

3M in 2020 had 303 senior executives, including 156 white men, eight black men and four black women, according to its EEO-1 report.

Xcel Energy, in its 2020 reportsaid of 38 senior executives, there are 26 white men, one black man and one black woman.

The EEO-1 reports are good starting points, but “the resolutions we’re asking for are really about recruitment, retention, and promotion data disaggregated by gender, race, and ethnicity,” Behar said.

As You Sow is looking for more granular data to convert into an advanced company diversity dashboard that can be a useful tool for investors and a benchmark for businesses. The non-profit organization says reporting can be done at a reasonable cost and exclude proprietary information.

Most shareholder proposals are non-binding, but even if accepted, companies are not required to implement the suggestions. Failure to do so, however, may result in negative reactions from shareholders.

“Most companies aren’t going to ignore a shareholder vote,” said Amy Seidel, a partner at Minneapolis law firm Faegre Drinker, who specializes in advising public companies on SEC reporting requirements and others. corporate governance practices.

Information about board members can be gleaned from photos and biographies in annual proxies, but assessing a board member’s race or nationality can be tricky, not to mention the sexual orientation or gender identity.

In August 2021, the Securities and Exchange Commission approved Board Diversity and Disclosure Rules, as requested by Nasdaq. The new rule requires aggregate reports on the self-identified gender, racial characteristics and sexual orientation of members of a company’s board of directors.

The Nasdaq wrote and adopted the rule for its members, but it doesn’t officially go into effect until later this year. Companies that voluntarily report their board diversity numbers during this year’s proxy season will not have to make additional filings when the rule is finalized.

This does not apply to most of Minnesota’s largest companies, as they trade on the New York Stock Exchange, which has different rules.

Minneapolis-based Jamf Holding Corp. is listed on the Nasdaq, and its most recent proxy shows a good example of the board diversity matrix. Of the company’s 10 directors, seven are men and three are women. Diversity data shows that two directors identify as two or more races or ethnicities, two as African American or Black and one as Asian.

Eden Prairie-based CH Robinson Worldwide is also listed on the Nasdaq and included a board diversity matrix in its latest proxy. This grid shows that its 12 directors include nine men and three women; one identified as ethnically diverse.

Board diversity reporting requirements face some legal challenges, including New Civil Liberties Alliance. The nonprofit civil rights group ensures that administrative agencies do not overstep their role.

“The SEC has no grant-making power from Congress to provide rules regarding board composition,” said NCLA senior litigation counsel Margaret Little. “We’re not focusing on the issue of diversity, our focus is: does the SEC have that power.”