Outcome: Successfully withdrawn following a commitment from the company to produce a report assessing the current state of diversity on the executive team and beyond.
We believe that diversity, inclusive of gender and race, are critical attributes of a well-functioning executive team and necessary to meaningfully drive diversity throughout an organization.
Currently, Hanover Insurance Group has limited racial or ethnic diversity on its Executive Leadership Team.
The business case for workforce diversity is compelling. McKinsey & Company, found in 2015, and in a larger study in 2017 that highly diverse executive teams had higher returns on equity and earnings performance than those with low diversity. ISS Analytics examined companies where the CEO had a tenure of at least three years, and found companies that combined gender diversity in the boardroom and the C-Suite showed, overall, the best results in terms of risk-adjusted quality of performance. (ISS Analytics /Governance Insights/October, 2018). Without a truly diverse executive team we are concerned Hanover Insurance Group may be leaving money and value on the table.
The number of women and people of color in leadership roles at public companies remains low. Nine percent of top executive roles in the Russell 3000 are held by women.
Many companies across industry sectors are setting goals to address this significant issue. Intel has been tracking diversity data since 2014 and ties diversity goals to incentive compensation. In 2018, two years ahead of schedule, Intel achieved full representation of underrepresented minorities and women in its U.S. workforce. Symantec set a goal to increase the percentage of women in leadership (Director-level and above) to 30 percent by 2020. BP says it wants women in at least 25% of its group leadership roles by 2020. Citigroup, in August 2018, announced plans to reverse “falling diversity” by setting public quantitative goals and holding senior leaders accountable to meet them.
To address the lack of diversity in senior roles we believe the Board must set clear policies to attract, retain and promote women, including reporting on gender pay equity, formalizing sponsorship programs, and establishing gender-neutral family support programs.
Further, we believe that linking diversity performance metrics to senior executive compensation packages can sharpen management’s ability to manage human capital management risks, increase accountability and successfully reach inclusion and diversity goals.
RESOLVED: Shareholders request that the Board of Directors prepare a report (at a reasonable cost, in a reasonable time, and omitting confidential information) providing its assessment of the current state of its management team diversity and if and how it plans to make the company’s management team more diverse in terms of race, ethnicity, and gender.
Supporting Statement: A report adequate for investors to assess Hanover Insurance Group’s strategy and performance could include disclosures such as use of “Rooney Rule” practices when interviewing for open positions, and hiring and promotion rates of women and people of color across employment.