Racial and Gender Pay Scorecard
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FOURTH EDITION RACIALAND GENDERPAY SCORECARD MARCH 2021 RACIAL AND GENDER PAY SCORECARD NAVIGATING CORPORATE RACIAL AND GENDER PAY DISCLOSURES LEAD AUTHOR NATASHA LAMB, MANAGING PARTNER, ARJUNA CAPITAL Natasha is a portfolio manager and managing partner at Arjuna Capital, an investment firm focused on sustainable and impact investing. Natasha works with individuals, families, and institutions to create diversified investment portfolios with a positive social and financial impact, while engaging major corporations to improve their performance through shareholder activism. Natasha and Arjuna Capital have been recognized for using shareholder proposals to promote racial and gender pay equity in the tech, banking, and retail sectors. Named by Bloomberg Businessweek as one of the “Bloomberg 50” most influential people who defined global business in 2017 and by InStyle Magazine on their inaugural 50 Badass Women list in 2018, Natasha and Arjuna’s work has been profiled in The New York Times, The Wall Street Journal, Forbes, Fast Company, Economist, NPR and CNN. For more information, visit www.Arjuna-Capital.com. CO-AUTHOR MICHAEL PASSOFF, CEO, PROXY IMPACT Michael is the founder and CEO of Proxy Impact, a shareholder advocacy and proxy voting service for sustainable and impact investors. Proxy Impact’s Women’s Inclusion Project uses shareholder engagement to close the gender and racial pay gap and to promote diversity on corporate boards and within senior management. Michael previously served as the Senior Program Director at As You Sow, and has participated in more than 400 shareholder dialogues and resolutions. He also founded and co-author’s the Proxy Preview, the leading publication on environmental and social shareholder resolutions. His shareholder advocacy work led him to be named as one of the “100 Most Influential People in Business Ethics” by Ethisphere Magazine. For more information, visit www.proxyimpact.com. 2 2 TABLE OF CONTENTS EXECUTIVE SUMMARY .................................... 4 INTRODUCTION ............................................. 5 BACKGROUND ............................................... 5 ADJUSTED VS UNADJUSTED PAY GAPS ......... 6 REGULATION ............................................ 7 THE BUSINESS CASE ................................. 9 INVESTOR ACTION .................................... 10 FINDINGS ..................................................... 12 RACIAL & GENDER PAY SCORECARD ............ 12 BY CATEGORY .......................................... 13 BY INDUSTRY ........................................... 15 RECOMMENDATIONS ...................................... 18 CONCLUSION ................................................ 19 APPENDIX ..................................................... 20 GRADING METHODOLOGY ......................... 20 SHAREHOLDER RESOLUTIONS ..................... 21 CORPORATE DISCLOSURES ......................... 25 ACKNOWLEDGEMENTS .............................. 26 3 EXECUTIVE SUMMARY The world’s largest corporations are under intense pressure to close their racial and gender ARJUNA CAPITAL / PROXY IMPACT pay gaps in response to investor pressure, the Black Lives Matter and #MeToo movements, RACIAL AND GENDER PAY SCORECARD and increasing public policy and regulation. The global Coronavirus pandemic has only exacerbated racial and gender pay gaps and underlined the need for action. This Equal FINANCIALS GRADE Mastercard Pay Day, we have compiled our fourth quantitative accounting of current pay disclosures, A Starbucks performance, and commitments among corporate leaders and laggards in four industries: A Pfizer A finance, technology/communications, consumer, and healthcare. The Racial & Gender Citigroup A Pay Scorecard offers a template through which to view corporate best practice, ranking Bank of New York Mellon A companies on quantitative disclosures (not qualitative assurances), commitments to report Adobe B numbers annually, global coverage, and goals to close racial and gender pay gaps. The Nike B companies in the ranking have all been engaged by investors through the shareholder Progressive Insurance B proposal process and asked to improve their public pay equity disclosures. American Express B Reinsurance Group The Scorecard looks at 51 major U.S. companies, only five of which–Mastercard, Starbucks, B JPMorgan Chase B Pfizer, Citigroup, and Bank of New York Mellon–receive an “A” grade. A failing grade of “F” Apple B is awarded to over half—26—of the total group of companies, including Goldman Sachs, Cincinnati Financial B Colgate, AT&T, McDonalds, Walmart, and Biogen. Eleven companies (in order of rank) Bank of America B —Adobe, Nike, Progressive Insurance, American Express, Reinsurance Group, JPMorgan Wells Fargo B Chase, Apple, Cincinnati Financial, Bank of America, Wells Fargo, and Intel—garnered a Intel B “B” grade for their efforts to disclose and act on their racial and gender pay gaps. Facebook C Google C The Scorecard is divided into three main sections. eBay C Texas Instruments Background: The Scorecard provides background on shareholder engagement, regulatory C pressure, and the business case for pay equity, all of which have helped to fundamentally Microsoft C change the landscape for women and minorities over the last few years. It also describes Amazon C the difference between company-reported adjusted pay gaps and the unadjusted median Costco D Cigna pay gap disclosures mandated by the United Kingdom, and now requested by U.S. D HP Inc. investors. The report seeks to educate companies, investors, and the public to improve D Lincoln National F understanding of the racial and gender pay equity landscape. Wyndham Hotels & Resorts F Citizens Financial Group Findings: The Scorecard has compiled quantitative data on 51 companies regarding their F pay equity disclosures. It breaks down this data in a simple and transparent rubric so readers Key Corp F can more fully understand company performance and commitments. The Scorecard grades Biogen Inc. F Marriot companies across five categories: F McDonald’s F 1. Racial Pay Gap Walmart F 2. Gender Pay Gap IDEXX Laboratories F 3. UK Pay Gap Verizon Communications F 4. Coverage TJX Companies F 5. Commitment Expedia F AT&T Inc. F The Scorecard also looks at company performance within industry sectors. We see Oracle F leadership from companies like Mastercard, Starbucks, Pfizer, Citigroup, and Bank of New Qualcomm F York Mellon. While others like Goldman Sachs, Verizon, McDonald’s, and Walmart remain Analog Devices F guarded in their disclosures and lag peers. Colgate F Intuitive Surgical F Recommendations: The Scorecard identifies key criteria and commitments critical for Goldman Sachs F racial and gender pay disclosure. Companies must first analyze their current pay structures Marsh & McLennan F and determine if there is a racial and/or gender pay gap. The Scorecard provides Metlife F recommendations for best practice disclosure and goals. Transparent pay disclosures are Arthur J. Gallagher F essential to address racial and gender pay inequity across corporate America. Investors DaVita Inc. F have effectively used shareholder dialogues and proposals to move this process forward. Quest Diagnostics F The continued growth of the racial and gender pay gap shareholder campaign, combined Hartford Financial Services F with an annual scorecard identifying industry leaders and laggards, will help improve Discover Financial Services F corporate disclosure and practices, advancing the goal of pay equity. 4 INTRODUCTION Racial and gender pay gaps at some of the world’s largest The Scorecard is based on a quantitative accounting of current corporations are an area of increased concern and focus. Pay racial and gender pay disclosures and commitments among discrepancies have raised reputational, regulatory, financial corporations engaged by shareholders within four industry and legal risks for companies. Consequently, an increasing sectors: finance, technology/communications, consumer, number of shareholders have asked companies to report on and healthcare.1 And while this is not a complete list of all their analyses, policies, and goals to reduce any racial/gender corporations that have disclosed or have been asked to pay gaps. Over the last seven years, at least 11 different disclose their racial and gender pay gaps, it is a template investor groups have filed 132 shareholder proposals at more through which to view corporate best practice. Importantly, this than 69 companies, and many more have been engaged Scorecard ranks companies based on quantitative disclosures through shareholder dialogues. (not qualitative assurances), commitments to report annually, coverage, and goals. The Racial & Gender Pay Scorecard (Scorecard) analyzes and ranks the performance and disclosure practices of these companies, identifies industry leaders and laggards, and provides recommendations to aid companies in disclosing their pay equity policies and practices. BACKGROUND Pay inequity persists across race and gender and no industries Citigroup estimates closing minority and gender wage gaps 20 or geographies are immune. In the United States, Black years ago could have generated 12 trillion dollars in additional workers’ hourly median earnings have fallen 3.6 percent since income and contributed 0.15 percent to United States GDP 2000, representing 75.6 percent of white wages.2 In 2019, per year—representing a significant lost opportunity.8 Looking women working full time earned 82% the wages of their male forward, McKinsey projects closing