Outcome: Successfully withdrawn after the company agreed to revise its Governance Guidelines to include gender and racial diversity among the qualities it seeks in its board members.
WHEREAS: eBay 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 a strong business case for board diversity. For example, several studies suggest a critical mass of at least three women directors strengthens corporate governance (research from Schwartz-Ziv, Miriam, Does the Gender of Directors Matter? (2013); Kramer,V.W., Konrad A.M. & Erkut, S. (2006) Critical mass on corporate boards: Why three or more women enhance governance.)
An August 2012 Credit-Suisse Report Gender Diversity and Corporate Performance links board diversity to better stock market and financial performance (higher return on equity, lower leverage, higher price/book ratios and improved growth prospects.) The report 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), and more attention to risk.
According to a 2014 PwC survey of institutional investors representing more than $11 trillion in managed assets, “Nine out of 10 investors believe boards should be revisiting their director diversity policies, and 85% believe doing so will require addressing underlying impediments…”
Recognizing the benefits of diversity in corporate leadership and interest from institutional investors, investment firms are responding with new products. In 2014, U.K.-based Barclays launched an exchange-traded note based on an index of companies with female CEOs or directors (the latter with a threshold of 25 percent.) In the U.S., Bank of America, Morgan Stanley, and Pax World Investments have similarly expanded their product offerings.
eBay lags its peers on board diversity. Amazon, Google, Visa, MasterCard and Facebook each have at least two women on their boards. Ninety-two percent of S&P 500 boards include at least one woman; the average is two women directors (2014 ISS Board Practices Study).
Resolved: Shareholders request that the Board of Directors report to shareholders by September 2015, at reasonable expense and omitting proprietary information, on plans to increase diverse representation on the Board as well as an assessment of the effectiveness of these efforts. The report should include a description of how the Nominating and Corporate Governance Committee, consistent with its fiduciary duties, takes every reasonable step to:
1. include women and ethnically diverse candidates in the Board nominee pool; and
2. expand director searches to include nominees from both non-executive corporate positions and non-traditional environments such as academia and non-profit organizations.
Companies combining competitive financial performance with high standards of corporate governance, including board diversity, are better positioned to generate long-term shareholder value. We propose that the report also address:
• changes to the Nominating and Governance Committee Charter to embed a commitment to diversity inclusive of gender, race and ethnicity in Board searches.
• the number of women and minorities in the candidate pool in the most recent three year period.
• a summary of challenges and plans to address them.