An activist shareholder is criticizing Charlotte’s Cato Corporation for its all-male board, in the latest backlash the women’s fashion retailer is getting over the issue.
The shareholder, Ohio-based Needmor Fund, describes Cato’s board as consisting of “all white men,” according to a statement a Needmor representative is expected to read Friday at Cato’s annual meeting of shareholders. The statement praises the seven-member group for its competence, skills and experience, but adds: “unfortunately our board does not reflect a commitment to racial and gender diversity,” according to a copy obtained by the Observer.
Cato, which operates roughly 1,300 stores in about 33 states, has been facing growing scrutiny from some shareholders and others for its board composition. Such concerns echo heightened attention that public company board diversity is receiving nationwide, with some corporate governance experts, academics and others arguing that greater diversity enhances company performance.
Needmor’s statement comes after the Thirty Percent Coalition, an organization pushing for women to hold 30 percent of public company board seats, urged CEO John Cato in a March letter to increase the board’s diversity, according to a copy also obtained this week by the Observer.
In a statement to the Observer, Cato’s chief executive said the company values diversity and inclusion and is committed to increasing board diversity “when we have the opportunity.”
“We have a strong board in place that will continue to serve, but we will make every effort to broaden the expertise and backgrounds of our board as openings arise,” Cato said.
Needmor’s stake of roughly 1,000 shares in Cato represents less than 1 percent of the retailer’s more than 24 million outstanding shares.
The Thirty Percent Coalition’s website lists more than 80 members, which include large investors such as the California State Teachers’ Retirement System as well as pension funds in other states, and other big names like Ernst & Young.
In a response to Thirty Percent Coalition’s letter obtained by the Observer, Cato legal chief Lowell Pugh wrote to the coalition that nominees for Cato’s board members are selected based on a “variety of important factors, which include diversity.”
“Our board of directors believes that greater diversity leads to better corporate governance,” Pugh wrote, noting that directors “should possess a diverse and extensive background of knowledge and both professional and life experience that can support growth, evaluate risk and provide sufficient oversight to Cato.”
Cato is expected to hear from shareholders pushing for other changes during the meeting that starts at 11 a.m. at Cato’s headquarters off South Boulevard.
Boston-based Walden Asset Management, a member of Thirty Percent Coalition and manager of Needmor Fund’s Cato shares, plans to call on Cato to explicitly prohibit in its written employment policies discrimination based on sexual orientation and gender identity.
Cato rejected Walden’s request to allow shareholders to vote at Friday’s meeting on whether such language should be added to its policies.
In a statement this week, Cato’s chief executive said the company does not tolerate discrimination of any kind, and that its current employment policies already provide protections for lesbian, gay, bisexual and transgender employees.
Full statement from John Cato, president, chairman and CEO of Cato Corporation:
Cato values diversity and inclusion, and we are committed to increasing the diversity of our Board when we have the opportunity. We have a strong Board in place that will continue to serve, but we will make every effort to broaden the expertise and backgrounds of our Board as openings arise.
Cato does not tolerate discrimination of any kind. It is important to understand that our current employment policy already provides protections for our LGBT associates and prospective associates – a fact that has been affirmed by the U.S. Securities and Exchange Commission. SEC staff reviewed the shareholder proposal that Cato add specific language to our policy, and they determined that Cato’s policies, practices and procedures had already “substantially implemented” this request.
Cato has worked hard and successfully created a culture that welcomes and treats everyone with respect. We are proud of our track record and our environment, which is open and inclusive for all of our associates, vendors, partners and customers.