MERCK & CO., INC. | Revisit DEI goals in executive pay incentives at MERCK & CO., INC.

Status
AGM passed
AGM date
Previous AGM date
Proposal number
6
Resolution details
Company ticker
TTTT
Lead filer
National Legal and Policy Center
Resolution ask
Adopt or amend a policy
ESG theme
  • Social
  • Governance
ESG sub-theme
  • Diversity, equity & inclusion (DEI)
  • Remuneration or pay
Filer type
Shareholder
Company sector
Health Care
Company HQ country
United States
Resolved clause
Shareholders request the Board of Directors’ Compensation and Management Development Committee to revisit its incentive guidelines for executive pay, to identify and consider eliminating discriminatory DEI milestones from compensation inducements.
Whereas clause
Since the June 2023 U.S. Supreme Court decision in Students for Fair Admissions v. Harvard College,1 hundreds of higher education institutions have shuttered their diversity, equity and inclusion (DEI) programs and positions.2
Consequently, “there has been a sharp uptick in litigation challenging corporate DEI programs and initiatives, alleging that they require unlawful employment and contracting decisions to be made on the basis of race, in violation of Title VII of the Civil Rights Act of 1964 ... ”3
Corporations’ compliance lawyers now advise clients that “DEI initiatives and programs that are not open to all applicants or those that apply an explicit race- or gender-based focus will likely face continued and heightened scrutiny.” Also: “We also expect to see ongoing scrutiny of perceived hiring quotas and set-asides, particularly those that may appear to be incentivized by bonuses for management or company leadership.”4
Further, “companies, and their management teams and boards, should be prepared for increased employment-related litigation including litigation that seeks to hold executive officers and directors personally liable for purported breaches of their fiduciary duties in connection with the corporation’s DEI policies.”5
Many corporations dramatically reduced or eliminated their DEI programs,6 and companies face retribution for their discrimination. For example, Starbucks was the subject of a $28.3 million judgment after a former worker claimed she was fired for being white.7
Supporting statement
Merck & Co., Inc. (“Merck” or “Company”) maintains an employee and executive annual cash incentives “scorecard,” in which 10 percent of its formula is dedicated to “sustainability” goals, which “reflects our focus on driving greater access to health to patients around the world and on the engagement and inclusion of our employees.”8 These goals are grounded in DEI.

Merck offers to its employees “leadership development programs,” which “reinforces our commitment to [DEI], which remains a key differentiator and priority for us.”9 Its special women’s leadership program “advance[es] the ability to recognize and manage gender differences and subtle micro-inequities by leading through courageous action.” The Company’s Diverse Leader Program “use[s] a combination of experiential and formal learning focused on” components including “headwinds and challenges unique to diverse, underrepresented talent,” DEI, and “social identity mapping.” Other dedicated leadership development programs focus on black professionals and LGBTQ+ leaders, and the Diverse Leader Acceleration Program is designed to speed “the career growth and increase representation of African American/Black, Latino/Hispanic and Native American employees within our U.S. leadership ranks.”

These discriminatory programs leave Merck ripe for regulatory, reputational and litigation risk. FTI Consulting advises there is a “heightened focus” on “litigation risk,” which “has transitioned from being merely an operational concern to becoming a strategic priority for the highest levels of corporate governance.”

How other organisations have declared their voting intentions

Organisation nameDeclared voting intentionsRationale
Kutxabank Gestion SGIIC SAU.Against
THEMATICS Asset ManagementAgainst
Rothschild & co Asset ManagementAgainst
Anima SgrAgainstGiven the established oversight role of the C&MD Committee and the comprehensive disclosures related to its practices, the committee is well positioned to determine the most appropriate metrics and considerations for executive compensation decisions.

DISCLAIMER: By including a shareholder resolution or management proposal in this database, neither the PRI nor the sponsor of the resolution or proposal is seeking authority to act as proxy for any shareholder; shareholders should vote their proxies in accordance with their own policies and requirements.

Any voting recommendations set forth in the descriptions of the resolutions and management proposals included in this database are made by the sponsors of those resolutions and proposals, and do not represent the views of the PRI.

Information on the shareholder resolutions, management proposals and votes in this database have been obtained from sources that are believed to be reliable, but the PRI does not represent that it is accurate, complete, or up-to-date, including information relating to resolutions and management proposals, other signatories’ vote pre-declarations (including voting rationales), or the current status of a resolution or proposal. You should consult companies’ proxy statements for complete information on all matters to be voted on at a meeting.