NYC Comptroller’s Boardroom Accountability 3.0 Results

Michael Garland is Assistant Comptroller for Corporate Governance and Responsible Investment, Jennifer Conovitz is Special Counsel of Pensions, and Yumi Narita is Executive Director of Corporate Governance in the Office of New York City Comptroller Scott M. Stringer. Related research from the Program on Corporate Governance includes Politics and Gender in the Executive Suite by Alma Cohen, Moshe Hazan, and David Weiss (discussed on the Forum here).

This spring, New York City Comptroller Scott Stringer and the New York City Retirement Systems (NYCRS) announced the successful initial results of Boardroom Accountability Project 3.0. Building on the “Rooney Rule” pioneered by the National Football League (NFL), Boardroom 3.0 calls on major companies to adopt search policies requiring the consideration of women and racially/ethnically diverse candidates for board directors and chief executive officers (CEOs). The initiative marks the first time that a large institutional investor has called for such structural reform for CEO searches.

The Comptroller’s Office successfully negotiated Board and CEO diversity search policies with 14 companies, including 13 in response to shareholder proposals submitted to 17 companies for the spring 2020 proxy season, and a fourteenth more recently in response to a subsequent filing for a fall 2020 annual shareholder meeting. While many companies already have similar policies governing director searches, the Comptroller’s Office believes that these are the first public companies to extend the policy to external CEO searches. [1]

The policies do not dictate who should be hired, but instead require a diverse set of candidates for consideration in the talent pool. Many of the policies include explicit provisions that the Board will instruct any search firms they retain to include such individuals in their initial list or pool of candidates. In addition, while the CEO diversity search policy is not intended to be a substitute for robust internal succession planning, the NYCRS encouraged portfolio companies to maintain and disclose processes for fostering a diverse talent pipeline for executive management.

Boardroom Accountability 3.0

Launched in October 2019, Boardroom Accountability Project 3.0 is the next phase of the NYCRS’ Boardroom Accountability Project. At its inception in 2014, the Project sought to make boards more diverse, independent and climate competent by enacting proxy access bylaws to make it easier for long-term investors to nominate directors. After engagement with scores of companies, today more than 600 companies and over 70% of the S&P 500 have adopted “proxy access” bylaws as a market standard.

In 2017, Boardroom Accountability 2.0 sought greater board transparency and pioneered the “Board Matrix” format to facilitate disclosure by U.S. companies of the race and gender as well as the skills and experience of their board members. In response to NYCRS engagement, companies began to disclose board matrices and the number of Fortune 100 companies that now explicitly disclose their board members’ race has risen significantly. [2] As part of phase two, companies also committed to including, or seeking to include, women and people of color in their candidate pool for board searches.

Boardroom Accountability 3.0 now seeks to move beyond the aspirational policy language used by many companies in order to obtain their firm commitment to a diverse search process for board seats as well as to ensure that women and people of color are considered for CEO.

As part of the initiative, the New York City Comptroller’s Office first sent letters requesting a CEO/board diversity search policy to 56 large companies (predominantly S&P 500) that had not disclosed a diversity search policy addressing gender and racial diversity. Focus companies received the letters regardless of the current diversity of their board or CEO based on the premise that a robust diversity search policy can institutionalize a board’s commitment to achieving and maintaining racial and gender diversity over the long term, including beyond the terms of the incumbent directors. The Comptroller and NYCRS subsequently submitted shareholder proposals for the spring 2020 proxy season reiterating the request to 17 of the companies, in most instances focusing on those with little or no apparent racial diversity on their board.

Significantly, all of the companies that eventually adopted and publicly disclosed CEO/board diversity search policies did so in response to a shareholder proposal, as opposed to the letter, which underscores the effectiveness of shareholder proposals as a tool to prompt meaningful engagement. The companies include: Activision Blizzard, Inc.; Dover Corporation; Expedia Group, Inc.; Fastenal Company; Genuine Parts Company; Hilton Worldwide Holdings, Inc.; L Brands, Inc.; MarketAxess Holdings Inc.; Nektar Therapeutics; Robert Half International Inc.; Ross Stores, Inc.; UDR, Inc.; and VeriSign, Inc. Lamb Weston Holdings, Inc. also subsequently adopted and publicly disclosed a CEO/board diversity in response to a proposal submitted for the company’s fall 2020 annual meeting.

Proposals went to a vote at Expeditors International of Washington, Inc., Arthur J. Gallagher & Co., and Berkshire Hathaway Inc. At Expeditors International, the proposal received 53% of votes cast, an unusually strong outcome for a proposal that was new to institutional investors and thus not already addressed in their proxy voting policies. At Arthur J. Gallagher, which took a half step by adopting a policy governing only director searches but not external CEO searches, the proposal received the support of 24% of votes cast.

At Berkshire Hathaway, where Chairman Warren Buffett controls a significant percentage of the company’s voting shares, the proposal received 12% of votes cast. Notwithstanding his vote against the proposal, and in a move described by one commentator as innovative, [3] Buffett took significant time at the Berkshire annual meeting to introduce the NYCRS shareholder proposal. He stressed the “serious and important” nature of the subject, encouraged shareholders and others to read the material related to the proposal, including the original arguments made by NYCRS in the proxy as well as the company’s response, and called attention to the proposal presentation statement at the meeting. Buffett expressed interest in entertaining a substantive discussion on the topic, acknowledged the constraints that precluded the Comptroller’s Office from an in-person presentation, and asked Berkshire CFO Mark Hamburg to read the NYCRS’ statement. Buffett also issued an invitation to the Comptroller’s Office to present and participate in a more fulsome discussion at next year’s annual meeting. [4]

The work of Boardroom 3.0 is consistent with a large and growing body of empirical research that suggests a positive relationship between diversity and performance. In a 2019 study, FCLTGlobal reported that board gender diversity is as important as revenue growth in predicting a company’s long term success. [5] A McKinsey study also found that companies with the most ethnically/culturally diverse executive teams were 33% more likely to outperform their peers on profitability, comparable to the 35% greater likelihood of outperformance reported in 2014. [6] MSCI research suggested that gender diverse boards have fewer instances of bribery, corruption, and fraud. [7]

Despite an increased focus by both investors and companies on diversity in the boardroom, representation of women and minorities in both the boardroom and CEO position ranges from low to abysmally low. Only 29 women hold CEO positions at S&P 500 companies, [8] and today there are only 4 black CEOs among the 500 largest companies in the country, no different from the number of black CEOs in the Fortune 500 in 2017. [9] In 2019, women represented 26% of all S&P 500 directors, up from 24% in 2018 and 16% in 2009, according to Spencer Stuart and 19% of all directors at the top 200 S&P 500 companies were male or female minorities, up from 17% the prior year and 15% in 2009. [10]

Adopting a policy that requires the consideration of women and minority candidates in director and CEO searches can assist the board in developing a diverse board and executive team. According to PwC’s 2016 Annual Corporate Directors Survey, 87% of directors said they relied on board member recommendations to recruit new directors. [11] Moreover, a 2016 study published by the Harvard Business Review concluded that including more than one woman or minority in a finalist pool changes the status quo to help combat unconscious bias among interviewers. The researchers found that the odds of hiring a woman were 79 times greater when there were at least two women in the finalist pool, and the odds of hiring a minority were a 193 times greater when there were at least two minority candidates in the finalist pool. [12]

In the end, progress in this arena has been too slow and uneven, with the number of directors in a 2019 survey saying that diversity on their boards is very important falling by nearly 10 points since 2018. However, individual directors appear open to the direction in which Boardroom 3.0 has headed. In the 2019 PwC Annual Corporate Directors Survey, 82% of directors surveyed expressed support for board policies of always interviewing a diverse slate of candidates (52% very much, 30% somewhat), and 80% supported a search firm policy of always offering a diverse slate of candidates (49% very much, 31% somewhat). [13]

The goal of Boardroom 3.0 is meaningful, long-lasting and structural change in market practice such that women and people of color are welcomed in the door and considered for a director seat as well as the job of CEO. NYCRS portfolio companies should further the creation of long-term shareholder value by institutionalizing their boards’ robust commitment to a diverse search process.


1After the public launch of the Comptroller’s Initiative, Regions Financial adopted a CEO diversity search policy, extending its existing Rooney Rule policy for director searches to also apply to searches for section 16 executive officers, including the CEO.(go back)

2As reported in 2019, the number of the largest U.S. companies (i.e., Fortune 100) that explicitly disclosed their board members’ race doubled from 23% to 45% in the prior three years. See Klemash, Steve W. Smith, and Jamie C., EY Center for Board Matters, “Five Takeaways From the 2019 Proxy Season,” Harvard Law School Forum on Corporate Governance and Financial Regulation, August 8, 2019, back)

3Laura Rittenhouse, “Did You Miss Warren Buffett’s Great Idea?,” Forbes, May 9, 2020, back)

4Ethan Wolff-Mann, “Buffett Rejects Diversity Measure but Throws Support Behind its Goal,” Yahoo Finance, May 2, 2020, back)

5Bhakti Mirchandani, Steve Boxer, Allen He, Evan Horowitz, Victoria Tellez, “Predicting Long-term Success for Corporations and Investors Worldwide,” FCLTGlobal, September 2019,; See also Bhakti Mirchandani,”The Results are In: The Surprising Relationship Among Revenue Growth, Board Gender Diversity and Long-Term Value Creation,” March 2020, back)

6Vivian Hunt, Sara Prince, Sundiatu Dixon-Fyle, Lareina Yee, “Delivering Through Diversity,” McKinsey & Company, January 2018,; Vivian Hunt, Dennis Layton, Sara Prince, “Why Diversity Matters,” McKinsey & Company, January 2015, back)

7Linda-Eling Lee, Ric Marshall, Damion Rallis, Matt Moscardi, “Women on Board: Global Trends in Gender Diversity on Corporate Boards,” MSCI, November 2015, back)

8Catalyst, Women CEOs of the S&P 500, June 15, 2020, back)

9David Gelles, “Corporate America has Failed Black America.” The New York Times, June 6, 2020,; Gillian B. White, “There are Currently 4 Black CEOs in the Fortune 500,” Atlantic, October 26, 2017,; Lucinda Shen, “The Retirement of Amex’s Ken Chenault Means Just 3 CEOs on the Fortune 500 Are Black,” Fortune, October 18, 2017, back)

10Spencer Stuart, 2019 U.S. Spencer Stuart Board Index, back)

11Paula Loop, “2016 Annual Corporate Directors Survey,” Harvard Law School Forum on Corporate Governance, October 27, 2016, back)

12Stefanie K. Johnson, David R. Hekman, Elsa T. Chan, “If There’s Only One Woman in Your Candidate Pool, There’s Statistically No Chance She’ll Be Hired,” Harvard Business Review, April 26, 2016, back)

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