Palo Alto Networks Avoids Disclosing Diversity Data Despite Shareholder Vote

Palo Alto Networks does not really want to share the demographics of your workplace.

When an investment firm asked the cybersecurity company to reveal its diversity numbers, Palo Alto Networks, which has 11 men and one woman on its management team, refused.

When the investment firm, Trillium Asset Management, put it to a vote of the shareholders, the board of Palo Alto Networks, consisting of 10 men and one woman, officially opposed.

Then, earlier this month, the shareholders of the technology company voted. There were more than 30 million votes in favor of disclosure and just over 29 million votes against. It was a large majority for a shareholder resolution that faced opposition from the company.

But Palo Alto Networks did not see it that way. By counting almost two million abstentions as votes against the proposal, the technology company proclaimed that the resolution failed, with 49 percent in favor.

Palo Alto Networks did not respond to requests for comment. Susan Baker, vice president of shareholder protection for Trillium, described the company's short-sighted approach.

"The shareholders of Palo Alto Networks sent a strong message," he said. "It's time to stop making excuses."

Technology companies face the pressure to reveal the race and gender breakdown of their employees as a way to account for diversity efforts. All companies with 100 or more employees already provide the data to the government each year in what is called an EEO-1 report.

This year, Reveal of The Center for Investigative Reporting surveyed 211 of the leading technology companies in Silicon Valley, asking them to provide their EEO-1 reports. Only 23 released them.

Members of Congress, such as Representative Ro Khanna, whose district covers Palo Alto Networks headquarters, have asked technology companies to share the numbers.

Institutional Shareholder Services, which provides research and advice on shareholder resolutions to large investors, recommended an affirmative vote to Palo Alto Networks diversity proposal.

In an analysis provided to clients, the consulting firm wrote that Palo Alto Networks "does not provide information on any board or management-level oversight of its diversity and inclusion practices." Diversity, according to the analysis, "can have a positive effect on long-term value creation."

"Greater disclosure of the type requested in this proposal could be of value to shareholders without causing undue burden on the company, given the fact that the company already collects EEO-1 data that is requested," he said.

The California State Teachers Retirement System, which had 162,677 shares in Palo Alto Networks as of November 30, voted in favor of the diversity proposal.

The decision of Palo Alto Networks to count abstentions as votes against the resolution is a controversial practice. A 2013 survey found that 52 percent of companies in the Standard and Poor's 500 index accounted for abstentions in that way, while slightly less than 48 percent did not.

Major investors, such as the New York City pension funds and the California public employee retirement system, oppose the practice. The same goes for the California teachers' pension fund.

"We believe that abstentions should NOT be counted when calculating votes," a spokesperson for a teachers' pension fund wrote in an e-mail.