Next week, Mastercard will hold its annual general meeting, which shareholders are invited to attend. It promises to be more interesting than such events typically are since no fewer than five proposals formally submitted by individual investors or outside organizations are up for a vote. As usual in these circumstances, the board unanimously recommends voting against the proposals. And, indeed, unless something unexpected occurs, none will pass. Still, the proposals indicate that cultural politics loom large in the corporate boardroom.
A report last month by ISS Corporate Solutions analyzed the shareholder proposals submitted to Russell 3000 companies in the first five months of the year and compared the data from previous years. Among the conclusions: the start of 2023 saw a record number of resolutions, the vast majority of which were to S&P 500 companies; and the issues that investors care most about are environmental, social, and governance (ESG) investing, human rights, and the role of diversity, equity, and inclusion (DEI).
You might think that such proposals would be coming solely from the left, which has in recent years become known for its “demand letters.” One of the five Mastercard proposals (disclosure: I own a small amount of stock) comes from New York City comptroller Brad Lander, who is among the city’s most progressive politicians. Lander, on behalf of the New York City Retirement Systems, requests that Mastercard report on its stance on a new merchant category code for gun retailers. The idea that credit-card companies should do a better job of tracking ammunition sales has been circulating since last August, but it took a significant hit earlier this year, when Republican lawmakers threatened legal action if the plan moved ahead.
Two of this year’s proposals to Mastercard come explicitly from the right: one, proposed by the National Center for Public Policy Research, on “ensuring respect for civil liberties,” and the other, from Ridgeline Research, on behalf of the American Conservative Values ETF, on “the cost-benefit analysis of diversity and inclusion efforts.” As part of the original proposal or the board’s negative response, both cite two of Mastercard’s detailed documents on “inclusion,” namely the 2021 Global Inclusion Annual Report and its DEI website, which offers a link to the 2022 ESG Report.
The first proposal states:
As shareholders of Mastercard, we believe it is of great import that the company respect civil rights by identifying potential factors that may contribute to discrimination in the provision of services based on race, color, religion, sex, national origin, or social, political, or religious views.
And the shareholders go on to say that they are “particularly concerned with recent evidence of religious and political discrimination by companies in the financial services industry.”
To see in short order what the board makes of this, it will suffice to quote only part of one sentence from the corporate response: “Mastercard . . . does not discriminate on the basis of race, color, religion, sex, national origin or any other protected classes.” Whether Mastercard in fact discriminates against religious employees or consumers I cannot say, but the board here makes explicit through rhetorical absence that it will not necessarily respect people’s social and political views (or, it would seem, their religious views as opposed to their religion—a distinction worth exploring elsewhere).
Then consider the second proposal, which asks for a report to “evaluate any risks, benefits and costs to the company associated with Mastercard’s Global Diversity & Inclusion program, initiatives, policies, and training.” Lest anyone believe that such an analysis would be conducted solely from the point of view of shareholders, for whom the value of the stock is paramount, the proposal states that “[i]n its discretion, the board’s analysis may include any costs or effects on employee morale and cohesion, hiring, retention, and productivity, etc.”
The board responds that none of this is necessary because of Mastercard’s “demonstrated commitment to diversity, equity and inclusion.” To back this up, the board mentions, for example, the introduction of its “Touch Card” for the blind and visually impaired, the fact that the company has “pledged to support micro and small businesses, women entrepreneurs and Black communities,” and such statistics as this: “[i]n 2021, the vast majority of our final candidate interviews in the U.S. included a person of color candidate and globally included a woman, and 51% of our new hires in the U.S. were people of color and 41% of our global new hires were women.”
Such dismissive responses are not encouraging. Though the proposals almost certainly won’t pass, “even a 30% vote in favor of an issue is often viewed by proponents as a strong message that the company needs to seriously consider it,” as Wall Street Journal reporter Richard Vanderford recently wrote. And yet board members resist proposals, no doubt because, to quote Vanderford, merely studying them, never mind implementing them, “eats up board time.” (Don’t board members, who often make hundreds of thousands of dollars of extra money in these side hustles, have both a fiscal and a moral responsibility to think about what might be done better for employees, consumers, and shareholders?)
Diversity of gender and ethnicity are the only kinds of diversity that companies and management consultants like McKinsey appear regularly to prioritize these days. Diversity of social, political, or religious views is strongly disfavored. If, however, diversity contributes at all to corporate creativity—and, thus, success—surely it is viewpoint diversity that matters most. Race, color, religion, sex, and national origin can all have a significant effect on how one thinks about the world, and to the extent that a company employs and caters to people of different genders and ethnicities, diversity of viewpoint may exist. But diversity of gender and ethnicity is not itself a guarantee of viewpoint diversity.
It hardly needs saying that the terms “diversity,” “equity,” and “inclusion” have all been hijacked, with the first frequently meaning “people who look different but think alike.” And what they think is often appalling: that white people are inherently racist, that biological sex is a social construct, and so on. As Christopher F. Rufo pointed out last year, every Fortune 100 company “has submitted to DEI ideology and begun to make it a permanent part of its legal and human resources bureaucracy.” Meanwhile, it is becoming increasingly evident that certain forms of DEI training not only don’t work but actually worsen the problems they purport to help solve.
Perhaps Mastercard has succeeded where others have not. A recent article in the Harvard Business Review by three partners at Bain credits the company with “impressive work” and claims that “it’s clear that a DEI-focus has helped Mastercard thrive in an industry undergoing marked change.” If this is so, then all the more reason for the board to wish to produce a report that trumpets its success—honestly. Of course, such a report should reckon with diversity of social, political, and religious views as well as with other kinds: just imagine how much more still a company could thrive whose employees not only look but also (as they may once have done at Apple) “think different.”
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