In late 2024, ISS and CGI Glass Lewis released their US benchmark policy updates for 2025 (see HERE and HERE). Both policy updates had maintained the status quo on DEI  in the context of the US Court of Appeals decision on 11 December 2024 to reverse  the SEC’s 2021 approval of Nasdaq Board Diversity Rules. The rules required annual disclosure of board diversity statistics in a standardised matrix form and for companies to explain why they did not meet diversity objectives if they did not.

Subsequently, President Donald Trump issued a Presidential Executive Order on 20 January 2025 ending DEI programs and preferencing in US Federal Government Departments, prompting a rethink of benchmark policy guidelines (See HERE). This announcement and its repercussions for government suppliers probably influenced the proxy advisers.

ISS came out first on 11 February stating that in light of recent increased attention on DEI practices, it would “indefinitely halt consideration of certain diversity factors in making vote recommendations” and “would no longer consider gender and racial/ethnic diversity of a company’s board when making a recommendation on the election or re-election of directors.” (See HERE).

CGI Glass Lewis has not released an official statement on the Executive Order. The only change between 2024 and 2025 guidelines is the removal of Nasdaq stock exchange diversity disclosure requirements in response to the Court of Appeals decision (See HERE).

As featured in our February newsletter (see HERE), Blackrock and Vanguard  responded to the changing DEI environment by softening their language from specific board diversity targets to  boards reflecting “market norms”. This month, State Street released its guidelines requiring companies that receive a shareholder proposal on diversity risk (for and against) it will assess the proposal against disclosures of:

• Board Oversight: Describe how the board executes its oversight role in risks and opportunities related to diversity, equity and inclusion.
• Strategy: Articulate the role that diversity, equity, and inclusion plays in the company’s broader human capital management practices and long-term strategy, as well as how the company intends to implement that strategy.
• Metrics: Provide disclosure on the company’s global employee base and board demographics, where permitted.
• Board Composition: Articulate the role of diversity of skills, backgrounds, experiences, and perspectives in the board’s nominating process

See HERE for the 2025 State Street 2025 voting guidelines.

How has this been playing out in Australia? Albeit concerns are privacy related rather than “radical and wasteful” criticisms. See our article regarding the dropping of the proposed 5th draft of the ASX Corporate Governance Principles and Recommendations (see HERE).

Guerdon Associates conducted a recent survey of ASX 50 companies with US exposure, which revealed either a “wait and see” or “remain firmly committed to DEI/gender parity” approach.

There may be a softening or pull back on diversity metrics within ASX listed company STI KPIs over next 3 years in favour of greater weight on financial targets except prudentially regulated companies. Despite this, it is expected that WGEA pay equity reporting will keep the heat on large employers, including those with predominately male workforces.

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