Item 7-Stockholder Proposal Relating to Diversity on the Board of Directors
This stockholder proposal was submitted by the Board of Pensions, Evangelical Lutheran Church in America, 800 Marquette Avenue, Suite 1050, Minneapolis, MN 55402-2885, beneficial owners of 3,200 shares, and is quoted directly from their submission.
"WHEREAS, in 1993 shareholders introduced a resolution urging Texaco to make its Board of Directors inclusive. We believed then, as we do now, that our board of directors needs to be more representative of shareholders and reflect a diverse population, workforce and marketplace, so our company can remain competitive. The loss of $170 million in discrimination settlements in 1996 strongly underscores Texaco's need for expanded diversity on our Board.
In 1994, the Investor Responsibility Research Center reported inclusiveness at senior management and board levels was only 9% within the Fortune 500 companies. If we are to be prepared for the twenty-first century, we must learn how to compete in an increasingly diverse global marketplace by selecting the best people regardless of race, gender, religion or physical challenge.
We believe the judgements and perspectives of a more diverse board would improve the quality of corporate decision-making. Since the board is responsible for representing shareholder interests, we urge our corporation to enlarge its search for qualified board members including women and minorities. The Teachers Insurance and Annuity Association and College Retirement Equities Fund, the largest institutional investor in the United States, recently issued a set of corporate governance guidelines including a call for "diversity of directors by experience, sex, age and race."
Robert Campbell, CEO of Sun Oil, stated in the Wall Street Journal of August 12 1996; "Often what a women or minority person can bring to the board is some perspective a company has not had before - adding some modern-day reality to the deliberation process. Those perspectives are of great value, and often missing from an all white-male gathering. They can also be inspirational to the company's diverse workforce."
W.R. Grace's 1996 proxy states their Board... "recognizes that its composition should reflect the global nature of the company's operations and the diversity of its workforce. The Board also recognizes that it is in a unique position to `set the tone at the top' and to demonstrate its belief that diversity makes good business sense." While Texaco has one woman and one African American on its Board, we believe the recent scandal and legal settlement highlight the need for additional Board members.
We request the Nominating Committee of the Board take urgent steps to include additional women and minority candidates for nomination to the Board in 1997 and 1998.
THEREFORE, BE IT RESOLVED that the shareholders request:
- The Board issue a policy publicly committing the company to a more diverse board, a program of steps, and the timeline to move further in that direction.
- The Board make available a report by September 1997 summarizing effort to encourage and increase the diversification of:
- our Board of Directors
- our executive board search firms
- Texaco's Public Responsibility Committee
- all Board of Directors committees"
The Board of Directors recommends a vote AGAINST this proposal for the following reasons:
We are strongly committed to the promotion of diversity and inclusiveness not only on our Board of Directors, but throughout the company. This commitment has been communicated both through the company's statement of Vision and Values and its Corporate Conduct Guidelines, which are provided to each employee and available to stockholders upon request to the Corporate Secretary, and through a comprehensive plan to ensure fairness and economic opportunity for employees and business partners, including minorities and women, the details of which were published and widely disseminated on December 18, 1996.
Consistent with this commitment, the Committee on Directors and Board Governance continually seeks opportunities to enhance the diversity of the Board. The search for and selection of director candidates is by its very nature extremely sensitive. Intensive research and review of qualifications is required to identify candidates who have the necessary skills and experience to meet the company's published standards and to effectively represent the interests of stockholders. Often, when appropriate candidates are initially identified they may be unable or unwilling to serve on the Board as a result of a variety of legal or other concerns. Arbitrary deadlines could sacrifice the thoroughness of this effort. All of this activity occurs, of necessity, "behind the scenes," where the level and intensity of the effort cannot be apparent to stockholders.
To pursue successfully such an inherently sensitive process, the Committee on Directors and Board Governance and the Board as a whole must have maximum flexibility to review and consider the broadest range of appropriate candidates. We are concerned that the mandates in this stockholder proposal would be too restrictive to allow the Board to identify candidates who represent both the desired degree of diversity and the outstanding qualities needed to best serve the interests of stockholders. The company does accept the essence and intent of the proposal, shares completely the objectives behind it and wishes to re-emphasize that the Board is already moving aggressively and responsibly in the direction suggested.
Therefore, the Board of Directors recommends a vote AGAINST this proposal.
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