On February 11, 2025, Institutional Shareholder Services, Inc. (ISS) announced that it will be halting consideration of certain diversity factors indefinitely when making vote recommendations with respect to the election and re-election of U.S. company directors under its Benchmark and Specialty policies. ISS will no longer be considering the gender, racial or ethnic diversity of company board members in shareholder meeting reports published on or after February 25, 2025. This shift in voting recommendations is in response to the January 21, 2025 executive order, “Ending Illegal Discrimination and Restoring Merit-Based Opportunity,” which called on agencies to “combat illegal private-sector DEI preferences, mandates, policies, programs, and activities.” For more information about the executive order, see Mayer Brown’s legal update: President Trump Issues Executive Order on Diversity Efforts by Government Contractors and Private Employers.
This announcement comes at a time when public companies are already grappling with questions about diversity-related disclosure in their annual reports and annual meeting proxy statements. A combination of the actions of the Trump Administration, ISS’s announcement and similar announcements by some large asset managers, and the overturning of Nasdaq’s Board Diversity Listing Requirements, have led many companies to consider refinements to their disclosures about board diversity and DEI programs in general compared to prior years. At the same time, companies should note that certain diversity-related line item disclosure requirements have not changed. Companies are still required under Item 407 of Regulation S-K to disclose, “whether, and if so, how the nominating committee considers diversity in identifying nominees for director.” Item 401(e) of Regulation S-K also requires companies to describe briefly the specific experience, qualifications, attributes or skills that led to the conclusion that a person should serve as a director, which may be interpreted to mean that criteria, such as that specified in Item 407 of Regulation S-K, be disclosed under Item 401(e) of Regulation S-K if it was a consideration. Finally, Item 101 of Regulation S-K requires companies to disclose, “any human capital measures or objectives that the company focuses on in managing the business,” including measures or objectives that address the development, attraction and retention of personnel.
A link to the ISS announcement can be found here.