Executive Compensation

Blackrock

• Does not have position on whether companies should include Environmental, Social, & Governance (ESG) metrics in their compensation plans. However, if a company includes ESG metrics, the metrics must be aligned with the strategy and business model and incorporate the same rigors as other financial or operational targets.
• Expect performance-based compensation to include metrics that are “relevant to the business and stated strategy risk.”

Vanguard

• No update for 2022. For full policy, please see the link provided at the end of this document.

State Street

• No update for 2022. For full policy, please see the link provided at the end of this document.

Compensation Committee Voting

Blackrock

• Previously noted that they would consider voting against Compensation Committee members where a company has failed to align pay with performance. The new language states that they will vote against Compensation Committee members.

Vanguard

• No update for 2022. Policy only applies if Vanguard votes against a company’s Say on Pay proposal for two consecutive years, in which Vanguard will vote against the Compensation Committee members.

State Street

• As disclosed in 2021, for S&P 500 companies, may vote against the Chair of the Compensation Committee if the company does not disclose its Equal Employment Opportunity-1 (EEO-1) report.

Human Capital Management (HCM)

BlackRock

• New section added in 2021.
• In 2022 added that they expect companies to show, “a robust approach to HCM and provide shareholders with disclosures to understand how their approach aligns with their stated strategy and business model.”
• Where a company’s practices do not appear aligned with long-term shareholders’ interests or where disclosures do not provide sufficient clarity on the board and management’s effectiveness in addressing HCM issues, Blackrock may vote against directors responsible for these decisions.

Vanguard

• No update for 2022. Expect boards to disclose relevant processes, programs and metrics used to measure a company’s diversity, equity and inclusion programs.

State Street

• Expectations for HCM disclosures include the following topics:
  • Board Oversight: Board oversees human capital-related risks and opportunities;
  • Strategy: How the company’s approach to HCM advances its overall long-term business strategy;
  • Compensation: How pay strategies help to attract and retain employees and incentivize contributions to an effective human capital strategy;
  • Voice: How concerns and ideas from employees are solicited and how the workforce is engaged; and
  • Diversity, Equity and Inclusion: How the organization advances diversity, equity and inclusion.
• Expects companies to provide detailed public disclosure on these topics.
• For companies not making progress in these areas, State Street may support shareholder proposals or vote against directors.

Board Composition

Racial/Ethnic Diversity

BlackRock

• Boards should target 30% membership diversity and have at least one director who identifies from an underrepresented group.
• Blackrock may vote against the members of the Nominating / Governance Committee for an apparent lack of commitment to board effectiveness.
• Expects companies to disclose the aspects of diversity the company believes are relevant to its business and how the diversity characteristics of the board, in aggregate, are aligned with the company’s long-term strategy and business model and whether a diverse slate of nominees is considered for nomination.

Vanguard

• Boards can inform shareholders of the board’s current composition and related strategy by disclosing:
  • Statements of the boards intended composition strategy, including year-over-year progress;
  • Policies related to promoting progress toward increased board diversity; and
  • Current attributes of the board’s composition.
• Policy clarifies that a board should represent diversity of personal characteristics inclusive of at least diversity in gender, race, and ethnicity on the board.
• Policy also clarifies that boards should take action to reflect board composition that is appropriately representative, relative to their markets and to the needs of their long-term strategies.
• Board diversity disclosure should at least include the genders, races, ethnicities, tenures, skills and experience that are represented on the board.
• Disclosure of personal characteristics (such as race and ethnicity) should be on a self-identified basis and may occur at an aggregate level or at the director level.
• Vanguard will generally vote against the Nominating or Governance Chair if a company’s board is not making sufficient progress in its diversity composition and/or in addressing its board diversity-related disclosures.

State Street

• As disclosed in 2021, S&P 500 companies in 2022 should have a minimum of at least 1 director from an underrepresented community.
• State will vote against the Chair of the Nominating Committee if this requirement is not met.
• State Street may vote against the Chair of the Nominating Committee of an S&P 500 company if the company does not disclose the racial and ethnic composition of their boards.

Board Composition

Gender Diversity

Blackrock

• As noted above, boards should target 30% membership diversity and have at least two directors who identify as female.
• Blackrock may vote against the members of the Nominating / Governance Committee for an apparent lack of commitment to board effectiveness.

Vanguard

• See policy under Racial/Ethnic Diversity above.

State Street

• For 2022, companies must have at least one female director on the board (prior policy only applied to major indices).
• For 2023, any company in the Russell 3000 must have at least 30% female directors on the board.
• State Street may vote against the Nominating Committee Chair if a company does not meet the requirements listed above.
• State Street may vote against all the members of the Nominating Committee if a board does not meet the requirements outlined above for three years in a row.

Director Overboarding

Blackrock

• No update for 2022. Current policy is two public company boards for active executives. For non-executive directors the guideline is four boards.

Vanguard

• Two public company boards for a named executive officer (NEO). The two boards could comprise either the NEO’s “home board” plus one outside board or two outside boards if the NEO does not serve on their home board. For non-executive directors, there is no change to the current policy (4 public company boards).

State Street

• No update for 2022. Commencing in March 2022, two public company boards for an NEO, three public boards for a non-executive Board Chair or lead independent director and four public company boards for non-executive directors.
• New for 2022, State Street would waive their policy if a company discloses its own director commitment policy in a publicly available manner (e.g., corporate governance guidelines, proxy statement, company website).