WHEREAS: We believe that diversity, inclusive of gender and race, are critical attributes of a well-functioning executive team and necessary to meaningfully drive diversity throughout an organization.

Currently, IPG Photonics’ management team has no women and an undeterminable number of people of color. [1]

The business case for workforce diversity is compelling. McKinsey & Company found in 2015, 2017, and again in 2019 that companies with highly diverse executive teams had higher returns on equity and earnings performance than those with low diversity.[2] Further, McKinsey reports an increased likelihood of financial outperformance in each successive study.  ISS Analytics examined companies where the CEO had a tenure of at least three years and found companies that combined gender diversity in the boardroom and the C-Suite showed, overall, the best results in terms of risk-adjusted quality of performance. (ISS Analytics /Governance Insights/October, 2018)

Yet, the number of women and people of color in leadership roles remains low. Nine percent of top executive roles in the Russell 3000 are held by women. Black men and women hold just 3 percent of executive or senior-level roles, according to Equal Employment Opportunity Commission data.

Racial discrimination and violence leading to protests in nearly every corner of the U.S. in 2020 has compelled more corporate leaders to examine current practices and set quantitative diversity goals, specifically for racial and ethnicity diversity. For example, Alphabet, Wells Fargo[3], Starbucks, and Citigroup[4] announced diversity goals to expand diversity in the executive ranks. Alphabet’s Google committed to increase underrepresented groups in leadership by 30 percent by 2025[5] and Starbucks states that in five years it wants each of the five job levels in its corporate group to be comprised of at least 30 percent people of color.[6]

IPG Photonics has resisted recent shareholder requests to report on its assessment of management team diversity. At the 2020 annual meeting, according to our calculations, this proposal received the support of 45% of the votes cast. However, the board has not acted on this important signal from its shareholders.

RESOLVED: Shareholders request that the Board of Directors prepare a report (at a reasonable cost, in a reasonable time, and omitting confidential information) providing its assessment of the current state of its management team diversity and if and how it plans to make the company’s management team more diverse in terms of race, ethnicity, and gender.

Supporting Statement: A report adequate for investors to assess IPG Photonics’ strategy and performance could include disclosures such as use of “Rooney Rule” practices, and hiring, retention and promotion rates of women, Black, Indigenous and people of color across employment.

[1] https://investor.ipgphotonics.com/governance/management-team/default.aspx

[2] McKinsey & Company, Diversity wins: How inclusion matters; S. Dixon-Fyle, K. Dolan, V. Hunt, S. Prince; May, 2020

[3] https://www.bloomberg.com/news/articles/2020-06-16/wells-fargo-ties-senior-executives-pay-to-improving-diversity

[4] https://www.citigroup.com/citi/about/esg/download/2019/diversity_2019_english.pdf?ieNocache=28

[5] https://blog.google/inside-google/company-announcements/commitments-racial-equity/

[6] https://stories.starbucks.com/stories/2020/workforce-diversity-at-starbucks/