(The author is a Reuters Breakingviews columnist. The opinions expressed are his own.)

NEW YORK (Reuters Breakingviews): Warren Buffett’s Berkshire Hathaway BRKa.N this year faced a challenge that is rare for large U.S. companies. Four New York City public pension plans asked fellow investors to tell the conglomerate to “include qualified female and racially/ethnically diverse candidates” for new senior openings. It was the only such resolution at the annual meetings of 250 big companies tracked by Proxy Monitor. The proposal won just 12% support.

Non-whites make up some 40% of the U.S. population, by Census Bureau data. But only last year did they fill more than 10% of board seats, and Black people 4%, at Russell 3000 companies, according to ISS Analytics. The imbalance remains stark and was cited in an unusual lawsuit a shareholder brought against Oracle ORCL.N directors and executives on July 2, alleging, among other matters, that the software giant failed to put Black candidates on its board.

Financial-sector demographics don't help. Only 5% of those working in the securities and investment industries last year were Black, Bureau of Labor Statistics data show. That mirrors their client base. Some 60% of white families had retirement accounts, almost double the level for Black families, according to a 2016 Federal Reserve survey.

George Floyd’s death in May while in police custody and the ensuing nationwide protests could prompt more action to address racial and other biases. For shareholders that could mean pushing for changes like the one proposed at Berkshire.

But proxy resolutions often lack punch. New York’s pension funds stated Berkshire “should” include diverse candidates; related proposals may simply ask for reports. It’s often similar for other issues shareholders agitate about, like climate change. And successful resolutions are usually not binding, so a company can choose to ignore them.

Even votes against board members can be shrugged off. A 2017 Equilar study suggested that the 32 directors who failed to secure majority support that proxy season remained in their seats. Rejecting executive-pay packages often spurs companies to act. But immediate self-interest plays a role: Shares in such companies on average underperform peers by up to 25% over the next year, Morgan Stanley calculates.

Shareholders can apply pressure away from annual meetings. Companies often make changes once the brouhaha around a vote has dissipated, too. But it's agonizingly slow. As issues from gender diversity to climate change have before them, racial equality is failing at the shareholder ballot box, too.

 

CONTEXT NEWS

- Oracle shareholder Andre Klein on July 2 filed a lawsuit against Oracle directors and executives. He alleges violations of the 1934 Securities Act, breaches of fiduciary duty and unjust enrichment by not ensuring the company has enough racial diversity. Among other demands, he wants at least three of Oracle’s board members to step down ahead of the November annual meeting, to be replaced by two Black people and someone from another minority.

 

(The author is a Reuters Breakingviews columnist. The opinions expressed are his own.)

(Editing by Richard Beales and Leigh Anderson) ((antony.currie@thomsonreuters.com; Reuters Messaging: antony.currie.thomsonreuters.com@reuters.net))