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, IPG Photonics management team has no woman and an undeterminable number of people of color.
The business case for workforce diversity is compelling. McKinsey & Company, found in 2015, and in a larger 2017 study 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)
Yet, the number of women and people of color in leadership roles remains low. Nine percent of top executive roles in the Russell 3000 are held by women. Among S&P500 companies women comprise 44.7 percent of all employees yet just 26.5 percent of executives, senior officials and managers. Women of color face a wider gap.
Companies across industries 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 thirty percent by 2020. Citigroup, in 2018, announced plans to reverse “falling diversity” by setting public quantitative goals and holding senior leaders accountable for meeting them.
IPG Photonics has strengthened diversity on its board of directors. It is time to extend focus and accountability to building diversity in its leadership ranks.
To address the lack of diversity in senior roles we believe the Board must set clear policies to attract, retain and promote women and people of color, including reporting on gender pay equity, establishing sponsorship programs, and 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 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 IPG Photonic’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.