Executive Pay-Incorporate Diversity and Sustainability Metrics

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WHEREAS: Studies suggest that companies that integrate environmental, social, and governance (ESG) factors into business strategy reduce reputational, legal, and regulatory risks and improve long­ term performance. Leading companies have integrated sustainability metrics into executive pay plans, among them Unilever and Walmart. The UN Principles for Responsible Investment (2012) state that considering ESG factors in compensation can help protect long-term shareholder value.

Diversity, inclusion, and equity are key components of business sustainability and success:

  • McKinsey research shows that companies in the top quartiles for gender and racial/ethnic diversity were more likely to have above-average financial returns ("Diversity Matters," McKinsey & Company, 2015).
  • In a 2013 Catalyst report, diversity was positively associated with more customers, increased sales revenue, and greater relative profits.

Yet technology companies have not seized this opportunity. Underrepresented people of color hold just 9 percent of technical roles in the sector (Intel/Dalberg, 2016). Women hold 36 percent of entry­ level tech jobs and just 19 percent of C-suite positions ("Women in the Workplace," McKinsey, 2016).

The tech diversity crisis threatens worker safety, talent retention, product development, and customer service. These human capital risks are playing out as controversies and employee unrest at Alphabet:

  • In 2018, approximately 20,000 workers walked out protesting Alphabet's mishandling of sexual misconduct cases.
  • In 2019, "more than 2,000 Googlers ... signed a petition to remove a member of the company's newly formed council on artificial intelligence ethics for alleged anti-trans and anti-immigrant views. The board was disbanded after only a week, in response to the outcry." ("Google loses diversity chief amid unrest over workplace issues," CNET, April 2019)

Alphabet has taken steps to address inclusion, but risks remain as our Company remains predominantly white and male. According to Google's 2019 diversity report, underrepresented people of color account for only 7.3 percent of Google's tech workforce and only 6.6 percent of leadership. In contrast, Silicon Valley's lower-wage subcontracted workforce (e.g. janitors, cafeteria workers, shuttle drivers) is 58 percent Black or Latinx, earning on average $19,900 yearly (UC Santa Cruz, 2016) and often facing housing instability.

Investors seek clarity regarding how Alphabet drives improvement and how that strategy is supported by executive accountability. Clearly disclosed, comprehensive links among sustainability, diversity, and executive compensation would enhance Alphabet's approach.

Peers such as Microsoft, Intel, and IBM have already set diversity goals and begun linking parts of compensation to such goals. Alphabet should consider changing to keep pace with leaders and to strengthen human capital management.

RESOLVED: Shareholders request the Board Compensation Committee prepare a report assessing the feasibility of integrating sustainability metrics, including metrics regarding diversity among senior executives, into performance measures or vesting conditions that may apply to senior executives under the Company's compensation plans or arrangements. For the purposes of this proposal, "sustainability" is defined as how environmental and social considerations, and related financial impacts, are integrated into long-term corporate strategy, and "diversity" refers to gender, racial, and ethnic diversity.

Lead Filer

Pat Tomaino
Zevin Asset Management

Co-filer

Heidi Soumerai
Boston Trust Walden
David L. Moore
American Baptist Home Mission Society
Kate Monahan
Friends Fiduciary Corporation
Abby McCoy
Reynders McVeigh Capital Management LLC
Belinda Burke
Warren Wilson College