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Learn how to make the business case for diversity, October 25-27.
For the third straight year, Urban Outfitters investors failed to win enough support to put more women and minorities on the clothing and houseware retailer’s board of directors, but they vowed to bring the same issue to shareholders in 2014.
At Urban Outfitters’ May 28, 2013, annual general meeting in Philadelphia, shareholders rejected a resolution calling on the company to “take every reasonable step to ensure that women and minority candidates are in the pool from which board nominees are chosen” and to “publicly commit itself to a policy of board inclusiveness.”
Only 28 percent of shareholders who voted endorsed the resolution; 72 percent rejected it.
The vote drew sharp criticism from the shareholders who promoted the resolution: Calvert Investment Management Inc.; New York State Comptroller Thomas P. DiNapoli, who is trustee of the New York State Common Retirement Fund; Connecticut State Treasurer Denise L. Nappier, who is trustee for the Connecticut Retirement Plans and Trust Funds; Portico Benefit Services; and Mercy Investment Services, the investment arm of the Catholic Sisters of Mercy.
Urban Outfitters had a six-member, all-male, all-white board until late May 2013, when shareholders approved the nomination of Margaret Hayne—wife of Urban Outfitters CEO, board chairman and founder Richard Hayne—as the first woman to sit on the board of the 43-year-old company. Hayne, 54, has worked for the company since 1982 and has been president of its Free People division for the past six years.
In a press release, DiNapoli called Hayne “the ultimate insider.” In another release, Nappier called Hayne’s nomination “a calculated insult” and a “bogus representation of diversity” that “reinforces the need to change” the company’s culture. The state of Connecticut, which also promoted the diversity resolution, has 23,000 Urban Outfitters shares, worth $1 million, in its retirement plans and trust fund.
This was not the first proxy season that major investors expressed concern with the lack of diversity on Urban Outfitters’ board. When investors introduced a similar diversity resolution in 2011, 23 percent of shareholders voted for it; in 2012, 39 percent did.
“Every year we go to them saying we want them to broaden the pool they seek directors from,” said Christine De Groot, an account sustainability analyst at Calvert Investment Management Inc., a Bethesda, Md.-based firm with $12.8 billion in assets under management and what De Groot called “significant” investments in Urban Outfitters. “They say they believe it’s restrictive, that it may be more expensive. I can’t tell what the thinking is.”
Company representatives did not respond to requests for comment. In a proxy statement filed with the U.S. Securities and Exchange Commission, the board said it “acknowledges the benefits of broad diversity throughout the company, but believes the proposal could impede its ability to select the most suitable and qualified candidates for membership on the board of directors and would impose unnecessary administrative burdens and costs.” In the same statement, the board said Hayne “brings a wealth of both company-specific and industry-wide knowledge and experience to the board.”
Calvert, which has filed more than 65 diversity resolutions with other companies during the past decade, plans to put the same resolution before Urban Outfitters shareholders in 2014.
Urban Outfitters has three brands that market exclusively to women—Anthropologie, Free People and BHLDN.
“You have to think women shop differently than men and that a large retailer of women’s apparel would want the voices of its customers” in the boardroom, said Suzanne Hopgood, corporate governance consultant for the Connecticut Retirement Plans and Trust Fund. “I once consulted for a company that owned hair salons, and the first time I went to the meeting, they were all men. It was like, ‘This is a joke, right? You don’t have any input from people who may be your customers or who may have similar experiences?’ Not having those voices at the table is just strange.”
Ralph Ward, a well-known board of directors and corporate governance expert and publisher of boardroominsider.com, agreed that Hayne’s appointment “seems a bit of a cynical move.”
“In the long term it’s kind of dubious governance,” he said. “It’s just a dishonest approach to boardroom diversity.” The diversity resolution noted that the company’s primary competitors—The Gap, Nordstrom and Abercrombie & Fitch—“have at least one woman and/or racially diverse member on their board of directors” and that more than 80 percent of companies in the Russell 1000 Index have at least one woman on their boards, as do 90 percent of companies in the S&P 500 Index and 95 percent in the S&P 100 Index. “A growing body of academic research shows that there is a significant positive relationship between firm value and the percentage of women and minorities on boards,” the resolution added.
Resolution backers said two studies by New York-based Catalyst, a nonprofit that promotes opportunities for women in business, found that when it comes to return on sales and return on invested capital, companies with more female board directors significantly outperformed those with fewer.
“Certainly in today’s very complex environment, you absolutely need boards that are responsive to global forces and that will impact the company’s path toward long-term shareholder value,” Hopgood said.
Yet, a lack of board diversity doesn’t seem to have hurt Urban Outfitters’ share value: During the past 12 months its shares rose 49 percent, and its latest quarterly report showed record sales and a 39 percent earnings jump.
Ward said it’s “arguable” whether board diversity translates into company profits. “Some research can seem convincing, but the research tends to be comparable to, say, an association of barbers proving why frequent haircuts are good for you. You have to wonder what the agenda is.”
Firms may not actively try to keep women and minorities off their boards, Ward explained, but instead “simply suffer from inertia.”
“The board is, by nature, a small group, where there tends to be a lot of self-selection and self-reproduction. If you have a board vacancy, whoever will be picked more likely than not looks like the other people in the boardroom.”
Dana Wilkie is an online editor/manager for SHRM.
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