Outcome: Successfully withdrawn following the company’s commitment to amend its corporate governance documents to include a policy to actively seek out highly qualified women and individuals from minority groups for consideration as nominees to the Board.
WHEREAS: Union Pacific has one woman on its Board of Directors.
We believe that diversity, inclusive of gender and race, is a critical attribute of a well-functioning board and a measure of sound corporate governance.
Research confirms the strong business case for diversity on corporate boards. For example, several studies suggest a critical mass of at least three women directors strengthens corporate governance.
The August 2012 Credit-Suisse Research Report Gender Diversity and Corporate Performance links board diversity to better stock market and financial performance (higher return on equity, lower leverage and higher price/book ratios). It suggests several explanations for this better performance including a stronger mix of leadership skills, improved understanding of consumer preferences (women control more than two-thirds of U.S. consumer spending), a larger candidate pool from which to pick top talent, and more attention to risk. In 2014, Credit-Suisse updated its research and observed similar results.
An October 2014 PwC survey of institutional investors representing more than $11 trillion in assets observed that “Nine out of 10 investors believe boards should be revisiting their director diversity policies, and 85% believe doing so will require addressing underlying impediments…” This is consistent with growing investor engagement with companies on board diversity, as evidenced by state and city pension fundssuch as CalSTRs and pension funds of Connecticut, New York City and New York State.
Business leaders are also increasingly vocal about the benefits of greater gender balance in the workplace and on boards of directors. Leaders including Warren Buffet, Larry Fink and Sheryl Sandberg are all calling for aggressive steps to improve Board diversity.
Investment firms are responding to growing interest from investors by developing investment strategies with a diversity lens. In 2014, U.K.-based Barclays launched an exchange-traded note based on an index of companies with female CEOs or directors. In the U.S., Bank of America, Morgan Stanley, and Pax World Investments offer similar investment vehicles.
Union Pacific lags other companies with respect to representation of women on its Board. Norfolk Southern and CSX Corp each have two women on their boards. Three women serve on the board of Canadian Pacific. Sixty-one percent of S&P 500 companies had either two or three women on their boards in 2014 (2015 Institutional Shareholder Services).
Resolved: Shareholders request that the Board of Directors prepare a report by September 2016, at reasonable expense and omitting proprietary information, on steps Union Pacific is taking to foster greater diversity on the Board over time including but not limited to:
1. Strengthened Nominating and Corporate Governance policies which embed a commitment to diversity inclusive of gender, race, ethnicity, in Board searches;
2. The inclusion of women and minority candidates in every pool from which Board nominees are chosen and our company’s plans to advance Board diversity ;
3. An annual assessment of challenges experienced and progress achieved.