When American companies talk about seeking diverse board members, they usually refer to differences in gender, ethnicity and experience. The National Center for Public Policy Research thinks they should be focused on something else: political diversity.
Generally, shareholder proposals tend to try to push companies to adopt more progressive policies. NCPPR’s motion is unusual because it comes from an explicitly conservative perspective, and because it wants to bring politics into the boardroom — something most corporations avoid.
The group, a self-described conservative communications and research foundation, wants companies that are — or appear to be — led by liberal directors to adopt a “true diversity” policy and add conservative members to their boards. The group has submitted such proposals to about a dozen companies including Amazon (AMZN), Apple (AAPL) and recently, Starbucks (SBUX).
The proposal states that “there is ample evidence that the company operates in ideological hegemony that eschews conservative people, thoughts, and values.” It adds that the “ideological echo chamber” may become “a major risk factor for shareholders.”
Justin Danhof, general counsel for NCPPR, presented the measure during Starbucks’ annual shareholder meeting on Wednesday. He argued that diversity policies which require companies to consider minority and female candidates for open board seats are racist and sexist.
“Not all women think alike based on the fact that they’re a woman,” he said. “Similarly, not all Asian or Latino or Black Americans think the same based on their respective skin colors.”
The measure did not garner enough votes to pass.
Starbucks advised shareholders to vote against the proposal, arguing that its own diversity policy is comprehensive.
“Our board of directors believes that the company already addresses the disclosure requested by this proposal,” Starbucks said in materials provided to investors, “and does not believe that implementing this proposal would enhance our shareholders’ understanding of our board diversity.”
It’s not surprising that the proposal wasn’t adopted. Most shareholder measures are voted down. Plus, three influential proxy advisory boards that analyze proposals and provide recommendations to shareholders on how to vote — Glass-Lewis, Institutional Shareholder Services and Egan-Jones — all sided with Starbucks.
For Danhof, the issue isn’t just about Starbucks.
Danhof told CNN Business in an interview prior to the vote that years ago, NCPPR noticed that shareholder proposals tend to promote liberal policies. So in 2007, it launched the Free Enterprise Project to propose policies that represent conservative views.
“If you’re going to be involved in politics, you have to hear from the other side,” said Danhof, who also serves as director of the FEP. He argued that polarized, liberal boards are likely to make decisions that will eventually chase away conservative consumers, threatening shareholder value in the long term. Conservative directors could serve as a check on their liberal counterparts, he said.
In a press release after the vote, the Free Enterprise Project called Starbucks a “far-left coffee giant” that “caters to a far-left clientele.”
A 2013 study published in the Journal of Empirical Finance found that politically diverse boards may help firms perform better than ones that are ideologically aligned.
But some experts argue that politics has no place in corporate governance. “Politics and business don’t mesh,” said Charles Elson, director of the John L. Weinberg Center for Corporate Governance at the University of Delaware.
That doesn’t mean that companies shouldn’t embrace diversity of thought, he said. But those differences should be about how to run a business, like a preference for acquisitions over organic growth or debt over equity. That type of “diversity of viewpoint and experience is critical on the board,” he said.
