LIU, NYC PENSION FUNDS CALL ON ADVERTISING GIANTS TO PROVE COMMITMENT TO EQUAL OPPORTUNITY
As Two Ad Firms Prepare for Mega-Merger, NYC Funds Ask Them to Disclose Their Employee Composition and Demonstrate Diversity
Yesterday, New York City Comptroller John C. Liu announced that he has called on the boards of two advertising firms, Omnicom (NYSE: OMC) and Publicis Groupe (PUB: FP), to disclose the makeup of their employees across a range of titles by gender and ethnicity before shareowners vote on their proposed merger.
"These companies operate in an industry with an abysmal record of hiring and promoting women and minorities, particularly African Americans. They claim they care about diversity and are making progress, but unless they disclose the actual makeup of their employees it's impossible to know whether it's just empty talk," Comptroller Liu said. "Studies have demonstrated that workplace diversity leads to innovation and innovation increases value. We want these firms to prosper by hiring the best and brightest and we expect them to demonstrate that they pay more than lip service to equal opportunity employment."
The advertising industry, like the financial services industry, has a history of wide and pervasive employment disparities, particularly among senior positions. One 2009 study found that racial disparity is 38 percent worse in the advertising industry than in the overall U.S. labor market, and that the "discrimination divide" between advertising and other U.S. industries is more than twice as wide as it was 30 years ago.
Omnicom and Publicis have both declined Comptroller Liu's past requests that they disclose the composition of their workforce by race and gender. The pending Omnicom-Publicis merger heightens the need for disclosure. The merger will not only create an advertising behemoth; it will create the least transparent major ad firm in the world, by combining the two firms that have consistently refused to demonstrate their commitment to equal employment opportunities.
Despite the companies' assurances that they have existing diversity programs, their refusal to provide employment data makes it impossible for shareowners to determine managements' effectiveness in this important area. Meanwhile, the other global ad giants, Interpublic (NYSE: IPG) and WPP Group (WPP: LN), have taken steps to disclose annual data on the diversity of their employees.
BACKGROUND
In Nov. 2011, on behalf of the NYC Funds, Comptroller Liu wrote several advertising firms — Omnicom, Publicis, Interpublic, and WPP — to ask they disclose employment data.
When Comptroller Liu filed this request in the form of a shareholder proposal at Omnicom, the company tried and failed to exclude it from their 2012 annual meeting. At that meeting, 33.8% of voting shares backed the NYC Funds' proposal, which was the highest ever vote on such a proposal. Despite broad shareowner support, Omnicom declined to provide employment disclosures even as its peers have done so.
Comptroller Liu and the NYC Funds have also engaged numerous financial services firms — Goldman Sachs (NYSE: GS), MetLife (NYSE: MET), AIG (NYSE: AIG), BNY Mellon (NYSE: BK), and US Bancorp (NYSE: USB) — all of which subsequently agreed to provide comprehensive employment disclosures.
The NYC Pension Funds hold a combined 829,714 shares in Omnicom and Publicis with a market value of $61 million.
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FULL TEXT OF COMPTROLLER LIU'S LETTER TO OMNICOM AND PUBLICIS:
November 15, 2013
Bruce Crawford
Chairman
Omnicom Group, Inc.
437 Madison Avenue
New York, NY 10022
Maurice Levy
Chairman and Chief Executive Officer
Publicis Groupe
133 avenue des Champs Elysees
75008 Paris
France
Dear Messrs. Crawford and Levy:
It has been two years since, in separate letters to each of you, I called on Omnicom and Publicis to disclose the composition of their employees by race and gender across major job categories. As a consequence of your unresponsiveness, the recently proposed Omnicom-Publicis merger is poised to create not only the world's largest advertising firm, but also the least transparent of the top firms with respect to management's performance in hiring and promoting minorities.
Given the acute underrepresentation of minorities in the advertising industry, particularly in senior roles, your recalcitrance—which contrasts with recent steps by other major firms—undermines investor confidence in your commitments to diversity and non-discrimination at a critical moment. Therefore, as part of the joint proxy statement seeking shareowner approval for the merger, I urge you to include comprehensive, pro-forma data on the composition of your combined workforce by race and gender across major job categories and, assuming the merger is approved, to update the data annually in a Corporate Social Responsibility report.
As Comptroller of the City of New York, I serve as investment adviser to the City's pension funds (the "NYC funds"). The NYC funds are substantial long-term shareowners of both companies, with 653,928 shares of Omnicom common stock and 175,786 shares of Publicis common stock valued at a combined $61 million. Since my November 28, 2011 letters to you:
● Interpublic and WPP Group now disclose annual data on the ethnic diversity of their employees, leaving Omnicom and Publicis as the only major global advertising firms that provide no such disclosure. While not comprehensive, the recent disclosures show that in 2012 minorities made up: 18 percent of WPP's senior managers, up from 16 percent in 2008, and 23 percent of total employees; and 15.6 percent of Interpublic's managers, an increase of 61 percent since 2005, and 24.7 percent of the professionals.
● Omnicom shareowners have twice cast substantial votes for the NYC funds' shareowner proposal to require annual disclosure of the company's EEO-1 report submitted to the U.S. Department of Labor (the report includes comprehensive demographic data for a company's U.S. workforce), including a 33.6 percent vote in 2012 that we believe to be the highest vote ever on such a proposal.
● AIG, Bank of NY Mellon, Goldman Sachs, MetLife and U.S. Bancorp, all of which are also in an industry plagued by an underrepresentation of minorities and women in senior roles, now disclose comprehensive diversity data in response to our requests.
Omnicom has stated in its proxy statement that it "agrees with the [NYC funds] that workplace diversity creates value for the Company and fosters a positive corporate culture." Publicis similarly claims that diversity is one of its "core values" and is "a source of intelligence and creativity" that provides the company with "major advantages."
While both Omnicom and Publicis highlight their commitments to diversity and describe various initiatives to recruit, retain, and promote minorities and women, neither provides data on its minority employees and only Publicis discloses the gender breakdown of its workforce. Absent comprehensive disclosure of workforce demographics, it is impossible to evaluate and benchmark the effectiveness of these efforts.
I look forward to your timely response.
Sincerely,
John C. Liu
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In addition to Comptroller Liu, the New York City Pension Funds trustees are:
Teachers' Retirement System: Deputy Chancellor Kathleen Grimm, New York City Department of Education; and Sandra March, Melvyn Aaronson (Chair) and Mona Romain, all of the United Federation of Teachers; Carolyn Wolpert and Joseph Lewis, Mayor's Representatives.
New York City Employees' Retirement System: New York City Public Advocate Bill de Blasio; Borough Presidents: Scott Stringer (Manhattan), Helen Marshall (Queens), Marty Markowitz (Brooklyn), James Molinaro (Staten Island), and Ruben Diaz, Jr. (Bronx); Lillian Roberts, Executive Director, District Council 37, AFSCME; John Samuelsen, President Transport Workers Union Local 100; Gregory Floyd, President, International Brotherhood of Teamsters, Local 237; Carolyn Wolpert, Mayor's Representative (Chair).
New York City Police Pension Fund: Mayor Michael Bloomberg; New York City Police Commissioner Raymond Kelly (Chair); Patrick Lynch, Patrolmen's Benevolent Association; Michael Palladino, Detectives Endowment Association; Edward D. Mullins, Sergeants Benevolent Association; Louis Turco, Lieutenants Benevolent Association; Roy T. Richter, Captains Endowment Association; and, New York City Finance Commissioner Beth Goldman.
New York City Fire Department Pension Fund: Mayor Michael Bloomberg; New York City Fire Commissioner Salvatore Cassano (Chair); New York City Finance Commissioner Beth Goldman; Stephen Cassidy, President, James Slevin, Vice President, Robert Straub, Treasurer, and John Kelly, Brooklyn Representative and Chair, Uniformed Firefighters Association of Greater New York; John Farina, Captains' Rep.; James Lemonda, Chiefs' Rep., and James J. McGowan, Lieutenants' Rep., Uniformed Fire Officers Association; and, Sean O'Connor, Marine Engineers Association.
Board of Education Retirement System: Schools Chancellor Dennis Walcott; Mayoral: Judy Bergtraum, David Brown, Tino Hernandez, Joseph Lewis, Jeanette Moy, Allison Rogovin, Ian Shapiro, and Milton Williams; Patrick Sullivan (Manhattan BP), Fred Baptiste (Brooklyn BP), Dmytro Fedkowskyj (Queens BP), Robert Powell (Bronx BP) and Diane Peruggia (Staten Island BP); and, employee members Joseph D'Amico of the IUOE Local 891 and Milagros Rodriguez of District Council 37, Local 372.