Out Leadership’s LGBT+ Board
Diversity and Disclosure Guidelines

About Quorum
Quorum, an initiative of Out Leadership, is dedicated to increasing LGBT+ representation andinclusion at the corporate board level.
Only nine Fortune 500 companies include sexual orientation and/or gender identity as diversity
criteria in their nomination and governance policies, and less than 0.3% of Fortune 500 board
directors are openly LGBT+. Quorum is taking strides to drive forward this conversation. We’ve built
a network of over 900 LGBT+ leaders interested in board leadership, created the first-ever white
paper to encourage companies to amend their governance guidelines to include LGBT+ diversity,and engaged with policy leaders across the country to help foster change.

About Out Leadership
Out Leadership is the most influential global network of LGBT+ business leaders and major
companies. We convene leadership summits, direct talent initiatives, and provide advisory
solutions that champion the positive business impact of LGBT+ inclusion.
We create a Return on Equality™ by helping out leaders and companies realize the economic
growth and talent dividend derived from inclusive business.

About the Diverse
Corporate Directors Coalition
Quorum is a founding member of the Diverse Corporate Directors Coalition, which brings together
associations whose memberships are composed of corporate directors representing the nation’s
major diverse population segments. Coalition members include Ascend Pinnacle (Pan-Asian
directors), the Black Corporate Directors Conference, the Latino Corporate Directors Association,
Quorum, and the WomenCorporateDirectors Foundation. Our groups represent some of the mostrespected and accomplished business leaders at the pinnacle of corporate governance. We
are working collectively and leveraging the strengths of our individual organizations to amplify
awareness, advocate, and work with stakeholders to advance diversity and inclusion on corporateboards as an integral component of board effectiveness and competitive business advantage.

Out Leadership’s LGBT+ Board Diversity Guidelines2

Board Diversity and Disclosure Guidelines:
The Business Case
Boardroom diversity is a topic that has gained significant traction – with institutional investors, among
good governance proponents, and in the general and business media. The conversations havetouched on various aspects of diversity, including gender, race/ethnicity, age, industry, and expertise.
LGBT+ diversity, however, has until recently largely been left out of the conversation.
As noted in the Commonsense Principles of Governance, developed by business leaders including
Warren Buffett and Jamie Dimon of J.P. Morgan, “Diversity along multiple dimensions is critical to ahigh-functioning board”. This is consistent with the numerous studies showing a correlation between
gender diversity on the board and corporate performance. Large institutional investors, such as
BlackRock and State Street, have made board diversity a priority as a matter of their fiduciary duty to
act in the interests of their investors.
Given the larger sample size and greater availability of data, studies assessing the correlation between
board diversity and corporate performance have tended to focus on gender. While the precise
reason for the positive correlation between gender diversity and better corporate performance isunknown, many of the reasons that gender diversity is considered beneficial are also applicable toLGBT+ diversity. LGBT+ diversity in the boardroom may create a dynamic that enables better decisionmaking, and it brings to the boardroom the perspective of a community that is a critical component of
the company’s consumer population and organizational talent.
Boards are, at their core, teams. Research comparing decision-making between diverse and nondiverse groups clearly indicates that diverse groups make better decisions.1 Indeed, one prominent
study found that non-diverse groups made wrong decisions more often than diverse groups, andwere more confident in those decisions. There is a healthy tension that develops when a diverse
member joins a group, which leads to more careful information processing and the generation of new
ideas. While the studies were performed using gender diversity, it is not much of a leap to assume
that LGBT+ diversity would have at least the same effect.
Boards that lack a LGBT+ lens on their business may overlook important risks and opportunities.
According to a recent Credit Suisse study, an index of LGBT+ inclusive companies outperformed thebroader MSCI ACWI index by an average of 3.0% per annum.2 The LGBT+ consumer and talent markets
are also becoming increasingly important. The purchasing power of the LGBT+ community in the U.S. isestimated to be $917 billion,3 with global purchasing power standing at $5.7 trillion.4 Per a recent Harris
Poll, 20% of respondents aged 18-34 (Millennials) identified as LGBT+.5 Companies cannot afford to ignore
this cohort as it enters the labor force and consumer market. And they cannot afford to ignore the valueof a LGBT+ diverse board – both from the perspective that is added to the boardroom discussion and themessage that it sends about the company to current and prospective employees and consumers.

1

https://insight.kellogg.northwestern.edu/article/better_decisions_through_diversity2

Credit Suisse Securities Research & Analytics, “LGBT: the value of diversity,” April 15, 2016.

3

Jeff Green, “LGBT Purchasing Power Near $1 Trillion Rivals Other Minorities,” Bloomberg Businessweek, July 20, 2016.

4LGBT Capital, “Estimated LGBT Purchasing Power,” May 2016.

5

GLAAD and Harris Poll, “Accelerating Acceptance 2017,” March 20, 2017.

Out Leadership’s LGBT+ Board Diversity Guidelines

3

Evaluation and Implementation:
Recommendations
U.S. public companies typically review criteria for board composition annually, in a process led
by the Nominating and Governance Committee and supported by the company’s internal and/or
external legal counsel. However, without an internal request for change or an external catalyst suchas communication from an institutional investor or a proxy proposal by an activist, board composition
guidelines often remain unchanged from year to year.
As a consequence, leadership by champions and stakeholders will be important to catalyze
discussion and action. Champions may include the CEO, a Board member, the company’s GeneralCounsel or Corporate Secretary, or outside counsel. The company’s statements on diversity andinclusion for employees may provide a useful model; at most companies, these statements now
include diversity of sexual orientation and gender identity.
Board composition, including diversity of board membership, is typically disclosed in companies’
proxy statements, and sometimes also on the governance sections of company websites. Companies
use various formats including tables, graphs, and text descriptions.

Out Leadership’s LGBT+ Board Diversity Guidelines4

Board Diversity Guidelines:
Recommendations
Recommended board diversity language
Our Nominating and Governance Committee seeks to develop a Board that reflects diverse
backgrounds, experiences, expertise, skill sets and viewpoints. We actively seek director candidates
who bring diversity of age, gender, nationality, race, ethnicity, sexual orientation and gender identity.

Current examples
1. As specified in our Corporate Governance Guidelines, members of our Board should be persons
with broad experience in areas important to the operation and long-term success of our company.
These include areas such as business, science, medicine, finance/accounting, law, businessstrategy, crisis management, corporate governance, education or government. Board members
should possess qualities reflecting integrity, independence, leadership, good business judgment,
wisdom, an inquiring mind, vision, a proven record of accomplishment and an ability to work
well with others. The Corporate Governance Guidelines also express the Board’s belief that its
membership should continue to reflect a diversity of gender, race, ethnicity, age, sexual orientationand gender identity.7
2.Our Governance Committee considers a number of demographics including race, gender,
ethnicity, sexual orientation, culture and nationality, seeking to develop a Board that, as a whole,reflects diverse viewpoints, backgrounds, skills, experiences and expertise. Among the factors that
the Nominating and Governance Committee considers in identifying and evaluating a potential
director candidate is the extent to which the candidate would add to the diversity of our Board.
The Committee considers the same factors in determining whether to re-nominate an incumbent
director. Diversity is also considered as part of the annual Board evaluation.8

3. The Board’s policy is to seek the most qualified candidates without regard to race, gender,
national origin, religion, disability, age or sexual orientation. However, in evaluating candidates
the Committee will consider these diversity criteria. The Board seeks to maintain a balanceof perspectives, qualities and skills on the Board to obtain a diversity of viewpoints to better
understand the technical, economic, political and social environments in which the Company
operates. Existing Board members and outside agencies recommend candidates to further thesepolicy objectives. The Board’s success on these objectives is measured by the range of viewpoints
represented on the Board.9

7

Bristol-Myers Squibb Company proxy, March 22, 2018, p. 98Goldman Sachs Group proxy, March 23, 2018, p. 16

9Emerson Electric Co. proxy, December 14, 2018, p. 13

Out Leadership’s LGBT+ Board Diversity Guidelines

54.In addition to experience and expertise, the GCN and Board consider several additional factors
in assessing Board composition and director nominees:

10•

Diversity of backgrounds, experience and thought is important in ensuring
effective risk oversight•Ethnicity, gender, age, disability, veteran status, sexual orientation, race, national
origin, color, religion, creed, geographic representation, education and personality
are considered10

Xcel Energy Inc. proxy, April 3, 2018, p. 16

Out Leadership’s LGBT+ Board Diversity Guidelines

6

Board Diversity Disclosure:
Recommendations
Institutional investors and other corporate stakeholders value diversity, but information about thediversity of Board members has been difficult to obtain. Stakeholders have resorted to searchingdirector biographies for pronouns to determine gender, or scrutinizing photographs to assess race.
“Invisible” diversity such as sexual orientation is obviously difficult to assess.

Fortunately, companies are increasingly using proxy and website disclosures to describe thecomposition of their Boards along various dimensions of diversity. We applaud this trend, andencourage more companies to undertake such disclosures.

For example, Prudential Financial’s 2018 proxy statement includes a Board Diversity section, andprovides information such as:•

80% of our non-employee directors are diverse•

2 director nominees are Hispanic, and•1 director nominee is LGBT11

A matrix format to describe Board capabilities, experience and demographics is another approach.
For example, the New York City Comptroller and the New York City Pension Funds have publisheda template board matrix that summarizes the board tenure, sexual orientation, gender, age andrace/ethnicity of directors.12

Prudential Financial, Inc. proxy March 22, 2018, p. 10“Comptroller Stringer, NYC Pension Funds Launch National Boardroom Accountability
Project Campaign — Version 2.0”, September 8, 201711

12

Out Leadership’s LGBT+ Board Diversity Guidelines

7

FAQs
Won’t it be difficult to identify and recruit qualified LGBT+ director candidates ?
Adding specificity to the diversity categories in director selection criteria will stimulate Board
conversations regarding, and identification of, diverse Board candidates. Nominating andGovernance Committees may find the following approaches helpful in generating more diverse
pools of potential directors:•

Ask current directors to identify and recommend diverse candidates from theirown professional networks•

Direct search firms to ensure that pools of potential directors represent a rangeof diverse candidates, including those who bring diversity of sexual orientationand gender identity•

Engage companies’ LGBT+ employee affinity groups in identifying potential
candidates from among their executive networks•

Access specialized resources, such as Out Leadership’s Quorum database ofqualified LGBT+ director candidates

What are the benefits of including reference to sexual orientationin Board diversity language?
Companies that have updated their Board diversity language cite a number of motivations, including:•

Ensuring that the company attracts and evaluates a broad range of qualified
Board candidates•

Communicating to key stakeholders, including investors, employees andcustomers, the company’s commitment to diversity, including at the Board level

In addition, a growing body of research is demonstrating the value of heterogeneous groups indecision-making. Inclusion of sexual orientation in these discussions may be viewed as a logicalextension of current efforts to promote gender and other dimensions of board diversity.
Some companies already include language to the effect that candidates will not be excluded
from the board on the basis of sexual orientation. Going beyond this and including sexual
orientation as a positive attribute in director selection criteria may also serve to catalyze Board
and C-suite discussions of diversity, raise awareness of the low number of openly LGBT+ directors
on corporate boards, and spur boards to actively seek and nominate more diverse directors.

Why now?
There have been significant advances for LGBT+ people across a range of business and social
settings in recent years, but progress in representation on U.S. corporate boards has been limited.
With discussions about the importance of diversity on corporate Boards gaining significant
traction with institutional investors, in good governance discussions, and increasingly in thebusiness and general media, the time is right to add LGBT+ diversity.

Out Leadership’s LGBT+ Board Diversity Guidelines8

What are investors’ perspectives on LGBT+ Board diversity?
Building on efforts to increase gender and racial/ethnic diversity on corporate Boards inconnection with their focus on diversity as important to board effectiveness and long-term value
creation, institutional investors have begun to focus on LGBT+ diversity. Recent initiatives haveincluded:•

CalPERS13, CalSTRS 14 and New York City pension funds15,16have corporate
governance policies and proxy voting guidelines that encourage companies
to recruit diverse Boards and explicitly include the LGBT+ community intheir definition of diversity.

•

In February 2018, Amalgamated Bank announced that it will be the first
nongovernmental institutional investor to expand the definition of corporateboard diversity in its proxy and investment guidelines to include LGBTQ directors.17•

In May 2016, New York City Comptroller Scott Stringer and California State
Controller Betty Yee sent a joint letter to fiduciaries of 19 public pension funds toembrace policies and practices that promote Board diversity inclusive of sexual
orientation, gender and race.18•

In May 2016, a coalition of insurance commissioners from 6 states initiated theMultistate Insurance Diversity Survey that collected information fromover 600 insurance companies regarding their Board and supplier diversity,
including LGBT+, minorities and women.19

What are the data on inclusion of sexual orientation in Board diversity
guidelines?
A 2018 survey by Out Leadership found inclusion of sexual orientation as a desired component ofBoard diversity lags far behind other historically under-represented groups. Only nine companies
in the Fortune 500 report that they consider diversity of sexual orientation and/or gender identity inselecting director candidates.20 No data are available for the full set of U S publicly-traded and large
private companies.
The nine companies that are currently inclusive of sexual orientation and/or gender identity diversity
in their board diversity statements are:•

Altria•Goldman Sachs•

BNY Mellon•

Mastercard•

Bristol-Myers Squibb•

Progressive•

Emerson Electric•

Xcel Energy•

Fidelity National Financial

13“Global Governance Principles,” California Public Employees’ Retirement System (CalPERS), March 14, 2016, p. 19.

14“Corporate Governance Principles,” California State Teachers’ Retirement System (CalSTRS), July 14, 2016, p. 6.

15“Corporate Governance Principles and Proxy Voting Guidelines,” New York City Employees’ Retirement System et. al., April 2017, p. 11.

16“Corporate Governance Principles and Proxy Voting Guidelines,” Teachers’ Retirement System of the City of New York, April 2017, p. 11.

17https://www.amalgamatedbank.com/news/amalgamated-bank-first-industry-redefine-diversity-leadership

18“LGBT Inclusion in Board Diversity,” letter from California State Controller and New York City Comptroller, May 26, 2016.

19

Multistate Insurance Diversity Survey, May 3, 2017.

202018 Out Leadership review of Fortune 500 Board diversity guidelines.

Out Leadership’s LGBT+ Board Diversity Guidelines9

What are the data on representation of LGBT+ directors on U.S.
corporate Boards?
A 2018 survey by Out Leadership identified fewer than 20 openly LGBT+ directors serving on
Fortune 500 company Boards, constituting less than 0.3% of directors on those Boards, andsignificantly under-representative of the approximately 4% of Americans who identify as LGBT+.21
A 2016 review of 600 U.S. insurance companies by the Multistate Insurance Diversity Survey
found LGBT+ directors held only 0.5% of seats on their boards.22 Although no comprehensive
studies of LGBT+ membership on Boards of directors of all U.S. companies has been conducted,
representation of LGBT+ directors is assumed to be similarly rare.

What are regulatory requirements for companies with regard to
Board diversity?
The SEC requires that publicly-listed companies in the U.S. disclose whether, and if so how, aNominating Committee considers diversity in identifying candidates for director. If the Nominating
Committee has a policy with regard to the consideration of diversity in identifying nominees,
disclosure of how this policy is implemented is required, as well as how the Committee assesses
effectiveness of its policy. The SEC permits companies to define diversity in ways that they
consider appropriate, and have not defined diversity in Rule S-K.23

Will more specific Board diversity guidelines a d d to litigation risk
for companies?
Our discussions with corporate governance experts at leading law firms have not identified any
incremental risk to companies in adopting more expansive and Board diversity guidelines. We
encourage companies to consult with their corporate secretary and outside counsel in connection
with improving director selection criteria.

Will this change require creating a new policy?
That will depend on how each company documents its Board diversity objectives. Most
companies do not have a formal policy; instead, director selection criteria are generally describedin proxy statements and/or corporate governance guidelines. In any case, a change can usually
be made by a simple resolution of the Board, generally upon the recommendation of theNominating and Governance Committee. If the board does have a policy, guideline or practicewith respect to diversity, simply adding sexual orientation and gender identity to their alreadyexisting diversity considerations is an easy change.

21

2018 Out Leadership review of Fortune 500 Board membership.

Multistate Insurance Diversity Survey, May 3, 201723 U.S. Securities and Exchange Commission Regulation S-K, Item 407(c)(2)(iv).
22

Out Leadership’s LGBT+ Board Diversity Guidelines

10How can General Counsel, Corporate Secretaries and outside law firms help?
Counsel are a vital source of advice for Boards on corporate governance matters. Nominating
Committees and Boards will typically look to their legal department leadership and outside law
firms for guidance during annual reviews of board diversity guidelines, and often rely on firms’“best practice” language.
We encourage law firms to:•

Review their template language for board diversity to ensure that sexual
orientation and gender identity is included, along with gender, race andother categories. This is particularly important for templates used by companies
preparing for their initial public offering.

•

Discuss with clients the opportunity to add sexual orientation and gender
identity to their board diversity guidelines.

Out Leadership’s LGBT+ Board Diversity Guidelines

11How can investors help?
The proxy voting guidelines developed by institutional investors have significant influence
over the policies and actions of the companies whose shares they own. Institutional investors
can include consideration of sexual orientation diversity in their voting guidelines for company
proxies, as investors such as CalPERS, CalSTRS, the New York City Pension Funds, andAmalgamated Bank have done.
Investors can also engage with the management teams and boards of their portfolio companies,
asking about LGBT+ diversity on company boards, and encouraging companies to report on thediversity of theirboardrooms.

How can LGBT+ employee affinity groups help?
Operating within their companies, LGBT+ employee affinity groups can:•Review their companies’ director selection guidelines, and encourage inclusionof language reflecting diversity including sexual orientation and gender identity.

•

Collaborate with other employee affinity groups to encourage recruitment ofdiverse directors.

•

Ask their companies to collect and report on the diversity of their boards,
including sexual orientation and gender identity.

How can board diversity advocacy organizations help?
Organizations advocating for other communities of directors, including those focused on diversityof gender, race/ethnicity, and other categories, can partner together to encourage companies
to review and expand their director selection guidelines, and to collect and report data on thediversity of theirboardrooms.

Doesn’t this foster a slippery slope for continually adding diversity categories?
The “slippery slope” argument has been used against historically under-represented minorities
for decades. The addition of sexual orientation and gender identity to board diversity language
brings Board diversity into alignment with companies’ existing employment guidelines, which
typically include diversity of sexual orientation, and reflects the greater inclusion of LGBT+
people in American society.

At what point should companies address LGBT+ board diversity?
Companies face unyielding deadlines for completion of their proxy statements in advance of
their annual stockholder meetings. As such, it is important to begin discussions about updates
to governance guidelines well in advance of the proxy filing, so that the Nominating andGovernance Committee and the full Board, respectively, have sufficient time to consider therecommendation and make their decisions.

Out Leadership’s LGBT+ Board Diversity Guidelines

12Egon Zehnder's Key Global Board Contacts

Artemio Garza
Miami

Artemio.Garza@egonzehnder.com
t. +1 305 569 1081

Peak Hong TAN
Singapore

PeakHong.TAN@egonzehnder.com
t. +65 6422 0868

Charlie Beasley
LondonCharlie.Beasley@egonzehnder.com
t. +44 207 943 5911

Ashley Summerfield
LondonAshley.Summerfield@egonzehnder.com
t. +44 20 7943 1915

Lisa G. Blais
BostonLisa.Blais@egonzehnder.com
t. +1 617 535 3540

Out Leadership’s LGBT+ Board Diversity Guidelines

13Appendix
Notes on terminology
The language used to refer to lesbian, gay, bisexual and transgender people can have a powerful
impact. Using the right words can convey a positive message about the company and enhance
productive discussions, while use of other words can be alienating or create confusion.
Out Leadership uses the term “LGBT+” to describe the community we serve, globally. Many stakeholders
in our community describe their identity as something other than Lesbian, Gay, Bisexual or Transgender– including Intersex, Asexual, and Queer – and we wanted to find a new term that would embrace
this diversity. We believe that LGBT+ accurately reflects the growing diversity of our community, whileremaining simple and clear.
When referring to lesbian, gay and bisexual people, the term “sexual orientation” is preferred over“sexual preference”, which has been used to suggest that being gay is a choice and can be changed.

Out Leadership’s LGBT+ Board Diversity Guidelines

14