Last week, Liz Dunshee at TheCorporateCounsel.net noted that ISS has updated its policies and procedures to explain how it assesses racial and ethnic diversity. Currently, ISS considers board diversity in making voting recommendations for two of its specialty policies: Socially Responsible Investing (SRI) and Catholic Faith-Based. Beginning in 2021, ISS, under its U.S. Benchmark policy, began identifying companies United States companies that have no apparent racial or ethnic diversity amongst directors. For shareholder meetings after February 1, of next year, ISS will make adverse vote recommendations based on a lack of apparent racial/ethnic diversity.
ISS classification scheme (available here) lists numerous racial and ethnic categories. Persons who did not fall within any of these categories default into the "Caucasian/White" category. ISS classifies "Caucasian/White" persons as non-diverse for purposes of its voting policy. What immediately struck me was the arbitrariness and illogic of ISS' diversity classification scheme. For example,
ISS also doesn't explain what it means to have "origins" in a particular place. Is a person's origin where he or she was born or where his or her ancestors were born? If it is the latter, must all of a person's ancestors be from an ISS favored region? If a person can claim his or her origin based on something less 100%, is a majority, plurality or some lesser quota sufficient?
Another problem with ISS' categories is the reference to "Spanish culture". What does it mean for a person to be of "Spanish culture"? Must he or she speak Spanish, enjoy Spanish music, and/or eat primarily Spanish food? Is the reference to "Spanish culture" a reference to the culture of the country of Spain or to countries in which the Spanish language is primarily spoken? If it is the latter, why does ISS consider Spanish culture diverse, but not the people whose origins are in Spain? Why is Spanish culture favored over Portuguese or Basque culture? Of all the many and varied cultures in this world, why does ISS refer only "Spanish culture" in determining who is and who isn't diverse?