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Issue Brief: Diversity
Introduction
Calvert views diversity as both a social and strategic imperative. Calvert believes that in an increasingly complex global marketplace, the ability to draw on a wide range of viewpoints, backgrounds, skills, and experience is critical to a company's success. Corporate diversity helps companies increase the likelihood of making the right strategic and operational decisions, contributes to a more positive public image and reputation, and catalyzes efforts to recruit, retain, and promote the best people, including women and minorities.
In Calvert's view, companies that value diversity at every level of the organization - from the factory floor to the board room - tend to perform better than those that do not. Calvert believes well-developed workplace policies, comprehensive programs, and strong leadership commitment enhance a company's long-term value, by building its reputation as a fair employer and reducing the costly risks associated with discrimination, harassment, and litigation.
Calvert's Approach
Diversity for Calvert includes nondiscrimination and equal opportunity concerning pay, promotion, training, and tenure without regard to race, gender, age, religion, national origin, ethnicity, sexual orientation, gender identity and expression, HIV/AIDS status, and mental and physical ability. Our company evaluations focus on quality of policies and programs, compliance with national laws and regulations, and proactive management initiatives. Public disclosure of workplace demographic data, independent diversity audits, and board-level commitment are helpful in distinguishing true diversity leaders.
While Calvert's work in this area is far-reaching, recent years have seen an increased focus on executive and board diversity, and the rights of gay, lesbian, bisexual, and transgender (GLBT) employees.
Executive and Board Diversity: Calvert recognizes that many of the same benefits that accrue to companies with inclusive boards also apply to companies with diverse senior management, and that senior management is often the pipeline to future board members. In fact, internal research by Calvert indicates that companies in the Calvert Social Index with above-average representation of women in the boardroom and the executive suite may also have above-average financial performance. We seek companies that disclose EEO-1 data; support affinity groups, mentoring programs, and diversity councils; offer family-friendly benefits; and include women and minorities in management and executive positions.
GLBT Rights: Employment discrimination based on sexual orientation is widespread. No matter how qualified, individuals can be denied job opportunities, fired, or otherwise discriminated against because of their actual, or even perceived, sexual orientation. Such discrimination denies individuals opportunity and equality in the workplace. Calvert believes that companies with inclusive policies and programs have a competitive edge, as they send a message that all employees are valued and respected for their abilities and contributions, and that merit and hard work - not bias and stereotype - are what count in job opportunities and the workplace environment. We look for companies that support inclusive EEO policies, affinity groups, and training, and that offer domestic partner benefits and community-related support. We often engage companies on these issues, encouraging them to be wholly inclusive in their policies and programs.
Criteria in Practice
Johnson & Johnson (JNJ), one of the world's largest health care product makers, has an excellent diversity record. The company has an inclusive EEO policy, shows clear evidence of diversity programs, and discloses partial EEO-1 data. Forty-eight percent of the company's total workforce is female; of those, 33 percent are executives and 46 percent are managers and professionals. In 2006, the company's 14-member board of directors included one African-American man and four women, one of whom was Asian. Johnson & Johnson's EEO and harassment policy includes sexual orientation as a protected class, and the company operates employee affinity groups and mentoring programs. In 2005 and 2006, the company scored a perfect 100 on the Human Rights Campaign Foundation's Corporate Equality Index, which assesses corporate support for diversity in sexual orientation, gender identity, and gender expression.
Know What You Own®
Calvert's Know What You Own® screening tool for diversity-related workplace practices issues includes securities drawn from a universe of the largest 1000 US companies. Companies that fail Calvert's diversity criteria do so because they:
- Have a pattern of discriminatory labor practices, or
- Are subject to serious action by the Equal Employment Opportunity Commission or other US regulatory agencies.
Advocacy
Calvert is building on the success of recent resolutions and campaigns by promoting diversity policies and employment programs and setting the bar higher for pushing for female and minority representation in corporate boardrooms and executive suites. We will continue to advance the Calvert Women's Principles, launched in 2004, as the leading global framework guiding business on ways to invest in and empower women-from the poorest communities to the most powerful companies-in partnership with the United Nations Development Fund for Women (UNIFEM) and NGOs.
In 2002, Calvert initiated a large-scale advocacy initiative to promote board diversity with as many companies as possible . In addition to issuing model charter language, we contacted the 154 companies in the Calvert Social Index Fund that had no board diversity, and filed 35 shareholder proposals asking companies without board diversity to recruit diverse members or amend their nominating charter to ensure that diverse candidates are routinely sought. Since that time, more than half of the companies that remain in the Index have added diversity to their boards, their charters, or both. Of the 35 companies with which we filed shareholder resolutions, 26 (74%) either changed their charter language or added a woman or minority to the board, and 22 (63%) included diversity in their charters.
Danaher Corp. (DHR), a tool manufacturing company, serves as a more in-depth illustration of the sometimes lengthy path to change. In December 2002, we initiated a dialogue with the company on the issue of board diversity. We filed shareholder resolutions with the company in 2003, 2004, and 2005, asking Danaher to take reasonable steps to ensure women and minority candidates be sought as part of every director search. Though our 2003 resolution received support from over 28% of voting shareholders, management resisted our request. We continued our dialogue with the company over the next several years, further educating them on the issue and its importance. Finally, in December 2005, the company appointed its first woman director, and we were able to withdraw our resolution.
Calvert's advocacy efforts have also promoted protection of the rights of gay, lesbian, bisexual, and transgender workers. In 2002, Calvert officially endorsed ENDA, the Employee Nondiscrimination Act, a proposed federal law that would criminalize workplace discrimination based on sexual orientation. In 2005, Calvert filed shareholder resolutions with several companies with published diversity policies that did not explicitly prohibit GLBT discrimination. We asked the companies to amend their written equal employment policies to explicitly prohibit discrimination based on sexual orientation and to substantially implement those policies. A persistent four-year dialogue with Alltel (AT), which included consecutive resolutions garnering increasing support (9.7%, 11.7%, and 27.5% respectively) helped lead the company to finally amend its EEO policy. Also in 2005, we had a successful dialogue with Coventry Health Care (CVH), which led the company to amend its Code of Business Conduct and Ethics to explicitly prohibit discrimination based on sexual orientation. Calvert will continue to engage companies on this issue and encourage them to be wholly inclusive in their policies, programs, and performance.
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