The Midwest Investor Diversity Initiative (MIDI), a 14-member alliance of institutional investors dedicated to board diversity, recently reported increased board diversity for companies headquartered in the Midwest.1
We know that diversity is good for business. We also know that change is hard, especially inside our nation's boardrooms. Many corporate leaders agree that diversity benefits their operations and board performance. Our focus is to help them navigate this change.
- Michael Frerichs, Illinois State Treasurer, lead member for Midwest Investor Diversity Initiative
MIDI works to increase racial, ethnic, and gender diversity on boards of companies; the group among the first investor initiatives in the U.S. to call for racial and ethnic diversity.1 MIDI's approach to accelerating board diversity for Midwest-based companies is rooted in direct company engagement, as well as promotion of adoption of the Rooney Rule. The Rooney Rule is borrowed from the NFL, which requires teams to interview minority candidates for front office positions.
Since its launch in 2016, MIDI has conducted over 50 direct engagements with Midwest-based companies, with 32 companies adopting the Rooney Rule. This year, MIDI engaged with 12 companies, six of which committed to adopting diverse director policies. Overall, MIDI's efforts have led to 19 people of color and 50 women gaining corporate board seats.
To assist corporate boards in developing robust diverse search policies, in addition to direct engagement, MIDI offers tools, including the "Diverse Search Company Toolkit" and "Examples of Diverse Candidate Search Language", to help identify best practices and resources for diverse director search policies and board composition strategies. The group also works with the Thirty Percent Coalition, another organization committed to diversity on corporate boards.
MIDI has tracked related Midwest companies that adopted diverse search policies since its launch in 2016, see year by year list below:
- 2020 Companies that committed to adopt diverse search policies include: AAR Corp., Artisan Partners Asset Management, Inc., Lancaster Colony Corp, Heritage-Crystal Clean, Inc., ANI Pharmaceuticals, Inc., Escalade, Inc., and SPS Commerce2
- 2019 Companies that adopted diverse search policies include: American Axle, Assertio Therapeutics, Bio-Techne Corporation, Exact Sciences Corp., Generac Holdings, Gardner Denver Holdings, Parker Hannifin, and Steel Dynamics.
- 2018 Companies that adopted diverse search policies include: Century Aluminum, CME Group, Ferro, First Industrial Realty Trust, Gogo Inflight, Marathon Petroleum, Taubman Centers, and United Continental Holdings.
- 2017 Companies that adopted diverse search policies include: Knowles Corp., Littelfuse, Marten Transport, Rex American Resources Corporation, SPS Commerce, Thor Industries, The Tile Shop and TransDigm Group.
A sampling of three policy language examples is provided below:
AAR Corp Diversity Policy (Adopted policy in 2020)
The Nominating and Governance Committee considers the racial, ethnic and gender diversity of the Board and director candidates, as well as the diversity of their knowledge, skills, experience, background and perspective, to assure that the Company maintains the benefit of a diverse, balanced and effective Board. In order to help facilitate the evaluation of diverse candidates, the Board adopted amended Corporate Governance Guidelines in December 2019 that mandate that a diverse candidate must be included in any director search. The Nominating and Governance Committee and the full Board maintain a current matrix of skills, competencies and experiences of each director. This matrix enables the Committee and the Board to ensure that the Board as a whole has the diversity of expertise and experience necessary for the effective oversight of the Company.
Parker Hannifin (Adopted in 2019)
The Corporate Governance and Nominating Committee firmly believes diversity is critical to a well-functioning Board of Directors, and is committed to enhancing diversity on our Board. As a result, the Corporate Governance and Nominating Committee directs its search firms to identify and evaluate a robust selection of qualified candidates representing a broad range of diverse characteristics, including gender, race, ethnicity, and cultural and geographical backgrounds. In our most recent Director search, for example, a majority of the candidates presented for consideration were diverse candidates and the search ultimately resulted in the election of a female Director.
Marathon Petroleum (Adopted in 2018)
The Board is committed to diversity, as it believes that having a variety of perspectives contributes to more effective oversight and decision-making. Our Corporate Governance Principles emphasize the importance of diversity of director backgrounds and experiences. The Board amended our Corporate Governance Principles in January 2018 to expressly affirm its commitment to actively seek in its director selection efforts women candidates and candidates of diverse ethnic and racial backgrounds who possess the skills and characteristics identified within our Corporate Governance Principles.
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1 Members include: Illinois State Treasurer's Office , Minnesota State Board of Investment, Illinois State Board of Investment, YWCA Metropolitan Chicago, Ohio Public Employees Retirement System, School Employees Retirement System of Ohio, SEIU Master Trust (Illinois), Sundance Family Foundation (Minnesota), Trinity Health (Michigan), UAW Retiree Medical Benefits Trust (Michigan), Wespath Benefits and Investments (Illinois), Seventh Generation Interfaith Coalition for Responsible Investment (Wisconsin), and the Treasurer of the City of Chicago (Illinois).
2 A 2018 McKinsey study found companies in the top quartile for gender diversity on their executive teams were 21 percent more likely to experience above-average profitability than the fourth quartile.
3 According to MIDI, company had previously engaged in 2017, adopted more robust Rooney Rule language in 2020.