NYS Common Fund Imposes Strict Diversity Rules for Companies in Its Portfolio

The fund has announced more shareholder proposals and expanded its proxy voting requirements to the Russell 1000.

Mark Kauzlarich/Bloomberg

Mark Kauzlarich/Bloomberg

The New York State Common Retirement Fund is increasing its efforts to incorporate diversity, equity, and inclusion into the proxy voting process.

The $279.7 billion retirement fund has developed measures that include more stringent requirements for boards at Russell 1000 companies, as well as a new set of shareholder proposals.

“Corporate America must foster and protect racial and gender equity in the workplace, in company policies, and in how it interacts with customers,” New York state comptroller Thomas DiNapoli said in a statement. “When companies fall short and fail to address inequities, they put themselves and their shareholder value at risk.”

The fund has filed shareholder proposals with Electronic Arts, Monster Beverage, Take-Two Interactive Software, and HCA Healthcare, seeking disclosures on their progress on improving workplace diversity and inclusion, according to an announcement on Wednesday.

Specifically, the retirement fund is looking for disclosures on recruitment, retention, promotion rates, and pay data of employees by gender, race, ethnicity, sexual orientation, age, disability, and veteran status. HCA Healthcare reached an agreement with NYS Common, which has since withdrawn its shareholder proposal.

The fund has also filed proposals with Activision Blizzard, Tesla, and Starbucks regarding allegations of discrimination and harassment.


The proposals are working. In 2021, NYS Common filed a board diversity proposal with First Community Bankshares. In 2022, the two reached an agreement for the company to consider diversity in nominating new board members, according to Wednesday’s announcement.

The fund also released updated proxy voting guidelines that expand the pension’s scrutiny of board diversity. The state already has a track record of voting its proxies when boards aren’t diverse.

Since 2018, the pension has voted against all incumbent board members at companies with no women on their boards. At those with one woman on their board, NYS Common voted against all incumbent nominating committee members. In the past, the pension fund also applied some of these new criteria to S&P 500 companies, but it is now expanding that work to include all Russell 1000 companies in its portfolio.

The fund will now vote against all incumbent board nominees if there are no directors identifying as an underrepresented minority on the board, as well as all incumbent nominees if the board does not have more than one director identifying as an underrepresented minority.

New York Common will also vote against incumbent nominees at companies that do not disclose the diversity metrics of their board, and if those nominees haven’t listed diversity as an explicit consideration in their search for directors.

In a new provision, the fund will vote against incumbent compensation committee members at S&P 500 companies for failing to disclose EEO-1 data — information on workforce demographics — to investors.

Although it is not a proxy voting measure, NYS Common is encouraging its portfolio companies to disclose whether they are LGBTQ+ or are a person with a disability.

“We’re seeing more and more companies do the right thing and make real progress on diversity, equity, and inclusion, but there’s so much more work to do,” DiNapoli said. “The fund will continue to expand its efforts to hold its portfolio companies accountable.”

The state’s pension fund peers have not set such strict proxy voting rules. Instead, they first engage with companies that lack board diversity.

According to the California Public Employees Retirement System’s voting guidelines, it will only withhold votes from nominating or governance committee members on boards that lack diversity and which don’t have a plan to improve when other avenues of engagement fail.

Meanwhile, the California State Teachers’ Retirement System stipulates in its corporate governance policy that boards should consider diversity in the nominating process, and should disclose the policies and procedures used to ensure diversity.

“CalSTRS will hold members of the board’s nominating and governance committee and if necessary the entire board accountable if, after engagement about the lack of board diversity, sufficient progress has not been made,” the policy says, although it doesn’t specify whether the only action CalSTRS will take on this matter is proxy voting.