Eli Lilly and Co. may not exclude a DEI-related proposal submitted by shareholders from the proxy materials for its upcoming annual meeting, the U.S. Securities and Exchange Commission said March 10.
The proposal, filed by shareholder advocacy group As You Sow in November, requests that Eli Lilly report to shareholders on the efficacy of its DEI efforts, providing metrics on hiring, retention and promotion of employees, including gender, race and ethnicity data.
In late December, Eli Lilly notified the SEC about its intention to omit the shareholder proposal, reasoning that the company has already “substantially implemented” the proposal by tracking the information and reporting on its progress through multiple publicly available documents, including its proxy statement, website and ESG report.
Eli Lilly also argued the proposal relates to the company’s “ordinary business operations,” which are the purview of management and the board of directors, rather than shareholders. In addition, the company said, the proposal does not focus on a significant social policy issue and it seeks to micromanage the company.
In its brief response, the SEC disagreed with Eli Lilly’s arguments. The current public disclosures “do not substantially implement” the proposal, it said. Additionally, the proposal “transcends ordinary business matters because it raises human capital management issues with a broad societal impact and does not micromanage the Company.”
“As greater numbers of companies adopt DEI programs, shareholders seek information demonstrating the effectiveness of these human capital management programs,” Andrew Behar, CEO of As You Sow, said in a March 15 press release. “Quantitative hiring, promotion, and retention rate data show how well a company is managing and developing its workforce. Investors know that greater workplace diversity leads to outperformance, this data is needed to help make the best investing decisions.”
As You Sow, based in Berkeley, California, has pursued a range of issues through its shareholder activism, including environmental responsibility, CEO pay and DEI. In November, the group released a report showing that companies with greater management diversity financially outperform those with more homogenous management.
Correction: A previous headline misstated the scope of the SEC’s decision. The agency determined that Eli Lilly cannot exclude As You Sow’s proposal that the company report to shareholders on the effectiveness of its DEI efforts.