Newsroom

I. Recent Trends

As the new Trump administration makes sweeping changes related to DEI¹, investors need to be aware of increasing shareholder proposals to study or enforce corporations’ hiring practices, both in favor and opposed to DEI. These proposals may be tricky to navigate. As Egan-Jones prepares for proxy season, we offer the following perspective:

II. Potential pros of merit-based hiring

The Merit-based hiring has a laudable goal: to hire the most capable talent. Companies succeed when they have well-qualified and knowledgeable employees. If implemented properly, merit-based hiring ensures that nobody is excluded due to their gender or race. Additionally, merit-based hiring eliminates nepotism.

III. Potential cons of merit-based hiring

However, where merit-based hiring is challenged is in defining “merit.” Candidates are evaluated across multiple selection criteria including past experience, interest, personability, curiosity, etc. Defining “merit” in a hard-headed way to focus solely on past experience would prove damaging to talent acquisition and unnecessarily disadvantage newcomers to a role or industry.

IV. Proxy proposals

Proxy proposals must be carefully considered in how they define, study, or implement “merit” based hiring or DEI hiring as they can impose burdensome restrictions on HR departments.

To navigate these nuances, the philosophy of the Egan-Jones Wealth-Focused Policy is that the management of a company should run its business how it sees fit. Management should be free to adopt hiring practices that optimize the company’s financial performance. Thus, we do not support shareholder proposals to adopt merit-based hiring, nor do we support shareholder proposals to adopt DEI-based hiring. If a company performs poorly financially, directors will hold executives accountable, and shareholders, in turn, will hold the directors accountable.

Unlike our peers, the Wealth-Focused Policy does not seek to push for any political or social agenda but is instead based solely on protecting and enhancing investor wealth.

For more information on how to solve your proxy guidance, voting, and N-PX report needs, schedule a meeting at ejproxy.com/book.

Sources

[1] https://apnews.com/article/dei-trump-executive-order-diversity-834a241a60ee92722ef2443b62572540