Based on your reading of Article “Not Walking the Walk on Board Diversity”, please answer the following question.
Sketchers and Monster Beverage made a promise to their shareholders to improve board diversity.
In your opinion should they be held to their promise? Explain.
Solution
Corporations whose main aim is to look after the interests of shareholders cannot ignore the promises made to its shareholders. Companies earn substantial points for listening to their shareholders. However, listening doesn’t mean “listening and not implementing.” It means putting in the effort to make those changes required by the shareholders and get the desired results. Therefore, if the companies like Monsters Inc. and Sketchers did not bring the changes as per their promised measures to the shareholders, they should be held for it.
Sketchers Inc. on the proposal of one of its investors, Calsters, promised to incorporate diversity in their corporate boards. Similarly, Monsters Inc incorporated it in its charter for nominating the Directors on the request of its investor Calsters and Calvert Investments. However, both companies failed to implement it on the ground. They both lack any woman director and any minority representative as well. Monster Inc. just had appointed a new director as well. And the director appointed is still a white male and also an insider of the company. The ignorance of the shareholder proposals by companies should be a great concern for its shareholders. The inclusion of “diversity” in the list of the factors for consideration of the appointment of the director by Monsters Inc and then not considering it at all shows its ill will.
Similarly, the case of Sketchers raises concerns as well. The company Sketchers Inc. promised its investor, Calsters, to bring about the changes in its charter for the nomination of the Director if it withdraws its shareholder proposal which was intended to be submitted for voting. Even after withdrawing the proposal, Sketchers never made the changes. This rings bell as the company management and board seems to remain stubborn to make any changes to its current structure.
It should not be taken lightly by the investors. Resistance showed against positive changes in the corporate governance of the companies without giving any logic-based reasoning should be considered a red flag. It might point out towards any underlying problems in the corporate governance, which has until now remained in the dark (Morgenson, 2014).
Reference
Morgenson, G. (2014, May 31). Not Walking the Walk on Board Diversity. Retrieved February 15, 2018, from https://www.nytimes.com/2014/06/01/business/not-walking-the-walk-on-board-diversity.html
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