Shareholder Activists Advocating For Gender Equality Focus On Tackling Sexual Harassment

A shareholder resolution published on June 16 urged Microsoft to release an annual transparency report, detailing its sexual harassment policies and investigations into alleged incidents across the company, following misconduct allegations against its founder Bill Gates. Shareholder activism, which has gained some big successes against oil companies recently, is also increasingly used by investors to drive gender equality.

The Microsoft shareholder resolution was introduced by impact investment firm, Arjuna Capital, which has a track record in engaging with companies including Citigroup in gender pay equity shareholder resolutions. 2021 has also seen a growth in shareholder activism in relation to pay transparency and reporting of diversity and inclusion data.

There have been at least six shareholder proposals during this proxy season, according to Parallelle Finance, a research firm that monitors, analyses and advocates for gender lens investing. For example, both Nike and Walmart agreed to publish Employment Information Report (EEO-1) data, which provides a demographic breakdown of the workforce by race and gender, in response to shareholder proposals. IBM Corp’s shareholders approved a resolution, with a 94% vote, calling for an annual report assessing diversity, equity and inclusion efforts including the Board’s process for assessing effectiveness, following the proposal filed by Nia Impact Capital, a women-led investment firm. It appears that shareholder activism is increasingly a successful strategy by investors to enhance companies’ performance and disclosures on environmental, social and governance (ESG) criteria, including in diversity and inclusion.

The significance of the latest Microsoft shareholder resolution, however, goes beyond the issue of gender pay equity, which has been the main focus of activist investors driving for diversity and inclusion. The resolution is calling for disclosures to tackle sexual harassment, which is a relatively new focus in shareholder activism. According to Angela Atherton at Parallelle Finance, many of the gender lens funds they track already engage with corporate leadership on gender equality. “In fact, we find that Microsoft is a top holding in 14 of 29 gender lens equity funds as of the end of Q1 2021,” says Atherton, who leads Operations and Strategy at Parallelle Finance. This is despite Microsoft being given a ‘C’ rating out of a scale from ‘A’ to ‘F’ by Arjuna Capital’s 2021 Racial and Gender Pay Scorecard, in their efforts in disclosing and acting on racial and gender pay gaps, trialling behind three other technology companies, Adobe, Apple and Intel, which were given a ‘B’ rating. The latest resolution may prompt gender lens investors think more holistically about gender equality, to go beyond gender pay equity.

The resolution may also prompt many more companies to consider sexual harassment disclosures more seriously. Corporate governance experts have argued, especially in the wake of the #MeToo movement, that sexual harassment is an area of conduct risk and should be a boardroom priority for corporates, and is also a serious investment risk for investors. Yet, a 2017 survey of 400 private and public company directors revealed that the vast majority of boards (77%) had not discussed accusations of sexually inappropriate behaviour and/or sexism in the workplace. Even though this survey was undertaken before the #MeToo movement, the findings suggest that most boardrooms may not be prepared for such discussions.

It is time for companies to be ready to tackle sexual harassment seriously—the pressure will not only be coming from activist investors like Arjuna Capital, but also from their own employees and the general public.