Want To Be Classified As "Diverse"?  According To ISS, Be A Member Of The Right Club

Allen Matkins
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Allen Matkins

Earlier this week, I wrote about the classifications used by ISS in determining whether a director is "diverse".  In short, I found ISS' scheme illogical and perverse.  California's board diversity mandate uses different categories, but does not define them.   Cal. Corp. Code § 301.4(e)(1).  California, moreover, focuses solely on how a director's self-identification as a member of an "underrepresented community".   ISS does not.   ISS identifies and sources racial and ethnic characteristics directly from corporate filings, as well as direct feedback in response to ISS’ outreach to U.S. companies.  Thus, the information may, or may not, be based on a director's self-identification. 

I find that matters become more than a little invasive and downright creepy when a company does not disclose the racial and ethnic characteristics of its directors.  When this happens, ISS says that it "carefully" assesses racial and ethnic characteristics "through a variety of publicly available information sources".   According to ISS, these sources include "company investor relations websites, LinkedIn profiles, press releases, leading news sites, as well as through identifying affiliations between individuals and relevant associations and organizations focused on race and/or ethnicity, such as the Latino Corporate Directors Association".  So it seems that ISS can, and will, assign racial and/or ethnic characteristics based on a director's club membership.  

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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