I was introducing a new intern to one of our internal tools that we use for data processing. We have a number of dashboards that are populated with data when there is a missing value or if the system populates a field with an unexpected value. One of those dashboards is triggered when we are processing compensation data. If a new director or executive has not been included in any prior filing we are not likely to have a GENDER value. In this case the data shows up in a queue for someone to review and code.
When one of the team has to review a filing to identify the right code to use we provide them a link to the document in a dashboard with a place to enter the value they determine is correct. We have developed some proprietary tools to scan the document to identify the use of some specific person titles (Mr, Mrs, Ms, and the names that follow those title words. In addition – parts of the sentences personal pronouns are included in the dashboard with the referent names. If there are multiple titles or pronouns associated with one name (MR. KEALEY is the husband of MRS. KEALEY) these are flagged.
My intern wondered if we were making a mistake by limiting our search to those honorifics/titles. He became even more concerned when I explained the process we followed when we were not able to identify the GENDER using the dashboard. In those cases (when there no gender relating title or a gender explicit personal pronoun (he, she, her, him, he, his) associated with a person in a filing (yes it happens more than you would believe) we Google for a reference or image of the person. We make a determination based on a search result that contains the name of the person and the name of the entity that made the filing. Historically we have really thought it made our job easier if one of the search results has a picture of the person (presumably we did not find a picture in the proxy).
If you haven’t sorted out the problem yet, his question was – is this appropriate in a world where people are willing/prefer to identify as something other than the binary classification we use?
We try to add an indicator of GENDER to allow our research clients to test hypotheses on the association between various dimensions of firms and the characteristics of their executives and board. If we don’t sort out how to identify those executives and directors who believe that that the binary classification of their personage does not reflect some dimension of their identify we are failing to provide the right data. That was an awkward sentence but it reflects the truth and the problem.
While this is important I am stymied at the moment about how to move forward. I did a search in proxy (DEF 14A) filings made since 2005 for words that I thought would help identify these cases (gay, queer, lesbian, non-binary, LGBTQ). This seemed like a reasonable start to me – however a recent article in the New York Times made me less than confident that I had enough knowledge to create the right search (more on that later).
My first search was limited to filings made from 2005 to 2015. I found only 324 documents from 169 companies. There were only 135 documents from 69 companies where the context indicated that the finding was something other than about a Mr. or Mrs. Gay or an address (Gay Avenue, Gay St.). What was even more interesting was that there was no mention of directors with one or more of these attributes. All of the filings where these words existed the context was generally related to a statement about the registrant’s view of human rights and the value they place on a diverse workforce. The only other context for these words was when the words were included in shareholder proposals. I found no language used to indicate a person might prefer a non-binary classification.
However, when we move forward to the filings made in 2016 – 2020 some filers started indicating that some of their directors were LGBTQ. Usually this was disclosed in a Diversity matrix. One interesting thing about this disclosure is that it is not consistent across filers, even if they have a common board member. Specifically I have found examples where one board has a category to indicate which members of the board identify as members of the LGBTQ community – another filer with the same board member does not provide any indication about this characteristic of their board members. I will also observe that 2 registrants began providing a diversity matrix in 2019 that includes a non-binary classification related to gender. So far in 2021 (through 3/25) there are 4 registrants that have included this dimension in their diversity matrix. Despite the addition of this dimension to these matrices there is no indication of a director using this classification in any of the examples I could find.
This is something we are going to have to think about. Note – the only information I have found so far is just an indication that some board member identifies as LGBTQ. I have not yet identified information that would indicate a board member would classify themselves as other than F/M.
In an earlier paragraph I observed that I ran a search using words that I consider relevant. There was a really interesting New York Times article in the paper on 3/21 (the article first appeared online on 3/15) Who is making sure the A.I. Machines Aren’t Racist . I think I have read this article four times now. It is relevant to this problem – how can I/we authoritatively use language to classify a person who identifies as non-binary. This is kind of tricky. I keep telling myself that our first step is to focus on the personal pronouns used in text that describes the person. We can code for that and bring it up for review whenever there is more than one gender indicator or there are none that we are currently familiar with. The article though reminds me that we can get this wrong and need to be humble about the steps we intend to follow.
My current plan is to anticipate more nuanced disclosures about this attribute of board members and executives. Once we start finding evidence that is relatively unambiguous about diversity I think I am going to try to reach out and communicate with the filer to confirm our interpretation of their language. If we receive some positive confirmation then we will begin expanding the values used in the GENDER field.
I thought about putting up some example images of the disclosures we have found. I have decided that the people making these disclosures are intentionally making them to readers of the proxy – they are not necessarily making an announcement to the world. Thus I have decided not to provide examples at least until I can have a conversation with one or more of the directors who have made/supported the disclosure choices made by their companies.
A related problem is whether or not we propagate a disclosure choice made by one director to all of the registrants they are associated with. Imagine director FIRST_NAME LAST_NAME is identified as a member of the LGBTQ community and prefers the use of XIE as disclosed or apparent in proxy filings by FIRST_COMPANY in 2021. They are also directors of SECOND_COMPANY in 2018 – 2021 but the proxies for SECOND_COMPANY make no mention of this attribute. In the proxies for SECOND_COMPANY all references to FIRST_NAME LAST_NAME are made using either male or female pronouns. Do we change the GENDER from M/F in the data for SECOND_COMPANY or do we honor the disclosure choices they made in SECOND_COMPANY filings?
Bottom line is – this is now on our radar. I will indicate once we start needing to expand the values we report in the GENDER field. Right now I can’t imagine pointing to specific entities or people or even the documents where we drew the data to make our inferences. However, I am always happy to engage with you and take feedback on the classification decisions we ultimately make.