Discovery Communications over the years has taken steps to appeal to female and minority audiences, expanding its lineup to include Discovery Familia, the Oprah Winfrey Network and Investigation Discovery, which focuses on domestic violence and civil-rights issues.
But the Silver Spring, Md.-based company still has an all-white, all-male board of directors — and shareholders are increasingly speaking up.
Last week, during an annual meeting at Discovery’s headquarters, shareholders presented and voted on a proposal urging the company to outline the steps it has taken to “foster greater diversity on the board.” Discovery reported Friday that shareholders rejected the request by more than a 4-to-1 margin.
“Discovery is lagging its peers on this issue,” said Susan Baker, vice president of shareholder advocacy at Trillium Asset Management, which co-authored the proposal and holds 357,000 shares of Discovery in client portfolios. “The list of publicly traded companies with zero women on their boards is shrinking, and Discovery continues to be an outlier.”
The television programming company is one of just two public companies in the Standard & Poor’s 500-stock index that doesn’t have a woman or minority on its board, according to ISS QuickScore, a database compiled by Rockville, Md.-based Institutional Shareholder Services. The other company is Diamond Offshore Drilling in Houston.
A Discovery spokeswoman said the company declined to comment.
In a Securities and Exchange Commission filing, Discovery’s board urged shareholders to vote against the proposal, arguing that the company’s nomination process “allows for identification of the best possible nominees for director, regardless of their gender, racial background, religion or ethnicity.”
Discovery — which employs 1,500 people in the Washington area and more than 7,000 worldwide — said that 41 percent of the company’s executives are women, and 37 percent of its U.S. employees are minorities.
But shareholder advocacy groups are asking for the company to take additional measures. Nationally, 97 percent of companies in the S&P 500 have at least one female board member, up from 88 percent in 2008, according a recent report by the audit and consulting firm PwC. A number of other media companies, including Yahoo, Netflix and Scripps Networks Interactive, have at least three women directors on their boards.
“This board needs an injection of diversity,” said Michael Pryce-Jones, director of corporate governance at CtW Investment Group, a District-based organization that advocates on behalf of union pension funds. “It’s one of the stalest, most entrenched boards you’ll see on the S&P 500.”
The shareholder vote comes two weeks after Discovery’s chief executive, David M. Zaslav, announced a round of voluntary buyouts and possible layoffs as the company looks to cut up to $120 million per year in costs. Two years ago, Zaslav was the country’s highest-paid executive, with a total compensation package of $156.1 million. Last year, he received $32.28 million in compensation.
Diversity on corporate boards has become a hot-button issue in recent years, as shareholder groups and government regulators have put pressure on companies to look beyond white men to a larger pool of possible directors.
Earlier this year, SEC Chairman Mary Jo White said that boardroom diversity would be a top priority and that the agency may beef up related requirements. A number of countries, including Germany, France and Spain, have set quotas requiring companies to appoint a set percentage of women to their boards.
“We are seeing investors paying a lot more attention to who’s serving in the boardroom,” said Sean Quinn, head of U.S. research for Institutional Shareholder Services, which advised Discovery shareholders to vote for the diversity measures. “Investors have different views on what constitutes diversity — certainly gender diversity is a big part of that, but it can also mean geographic diversity, generational diversity and skills diversity.”
A PwC survey released this month found that about 20 percent of directors said their board had changed its composition in the past year as a result of shareholder influence.
Some companies have sought to add diversity by increasing the number of directors on their boards and nominating women or minorities to fill those positions, said Pryce-Jones of CtW Investment Group. But his group advocates for replacing board members — many of whom tend to be part of the same circles — with new ones.
“Departures are important to break up the clubbiness of a board,” he said. “It’s much harder for the board to say, ‘Which one of us needs to leave?’ It’s very hard for directors to see when their time is up, when they’ve outlived their usefulness to the board.”
Fifty-five percent of Discovery’s public shareholders withheld their votes from the reelection to the board of Paul A. Gould, managing director of Allen & Co., a New York investment bank, while 37 percent withheld them from M. LaVoy Robison, director of the Anschutz Foundation in Denver, according to CtW. Both were overwhelmingly approved when the votes of corporate insiders and those with ties to the company were included.
The shareholder votes, however, are non-binding, meaning it is ultimately up the board to decide whether to reappoint those members.
Anne Sheehan, head of corporate governance for the California State Teachers’ Retirement System, said Discovery has long failed to address a number of investor concerns, including a lack of diversity, inflated executive pay packages and poor corporate governance packages.
“That’s why we’re speaking up,” she said. “We plan to own [a part of] this company for as long as they’re around — and we’re going to continue to voice our concerns through our vote.”