DEFA14A: Hexcel Corporation Defends Board Diversity Amid ISS Recommendation Against Director Re-election

Hexcel Corporation is urging stockholders to vote for the re-election of director Cynthia M. Egnotovich, despite a recommendation from ISS against her re-election due to concerns about ethnic/racial diversity on the board.

Summary

• Hexcel Corporation is addressing an advisory report from Institutional Shareholder Services (ISS) recommending stockholders vote against the re-election of Cynthia M. Egnotovich, chair of the nominating, governance and sustainability committee.
• ISS's recommendation is based on a perceived lack of ethnic/racial diversity on the Board, particularly after Dr. Marilyn L. Minus leaves the Board to become Hexcel's Chief Technology Officer in April 2024.
• Hexcel's Board currently has 40% gender diversity and has had racial/ethnic diversity since 2019.
• The Board believes diversity is important but should be balanced with other factors when selecting directors.
• Hexcel emphasizes its commitment to diversity, noting its history of gender diversity and its practice of recruiting from diverse slates.
• The company appointed James J. Cannon and Dr. Patricia Hubbard to the Board in January 2024, focusing on defense industry experience and technical expertise.
• Hexcel is asking stockholders to vote FOR the re-election of all directors, including Cynthia M. Egnotovich, at the 2024 Annual Meeting of Stockholders on May 2, 2024.

Sentiment

Score: 6

Explanation: The sentiment is neutral to slightly positive. While there's a disagreement with ISS, Hexcel is proactively addressing the issue and highlighting its commitment to diversity. The appointment of Dr. Minus as CTO is a positive development.

Positives

• Hexcel's Board has a strong history of diversity, including 40% gender diversity currently.
• The company has had racial/ethnic diversity on the Board since 2019.
• Hexcel is committed to recruiting from diverse slates for future director selections.
• The appointment of Dr. Marilyn L. Minus as Chief Technology Officer is seen as a positive step for the company's technology roadmap.

Negatives

• ISS recommends voting against the re-election of Cynthia M. Egnotovich due to a perceived lack of ethnic/racial diversity on the Board.
• The departure of Dr. Marilyn L. Minus from the Board will temporarily cease racial or ethnic diversity on the board.

Risks

• Negative perception from ISS and potentially other stakeholders regarding the Board's diversity.
• Potential for stockholders to vote against the Board's recommendations based on ISS's report.
• Risk of not being able to attract and retain diverse candidates for future Board positions.

Future Outlook

Hexcel expects its commitment to diversity will continue to be reflected in the composition of its Board and believes recruiting from diverse slates will result in the addition of a racially or ethnically diverse director in the near future.

Management Comments

• The Board believes it is their responsibility to identify and appoint directors who possess the backgrounds, experiences and skillsets that best serve the needs of Hexcel and its stockholders.
• While we greatly value diversity on our Board, we believe it is one factor among many that should be considered and balanced when selecting and appointing a new director.
• We further believe that the Board should be allowed the flexibility to identify and appoint the most highly-qualified candidates to the Board.

Industry Context

The focus on board diversity reflects a broader trend in corporate governance, with increasing pressure from investors and proxy advisory firms to improve representation of women and minorities on corporate boards. Companies are being held accountable for their diversity efforts, and those that lag behind may face negative scrutiny.

Comparison to Industry Standards

• Many companies in the aerospace and defense industry are facing similar pressures to diversify their boards.
• Companies like Boeing and Lockheed Martin have made public commitments to increase diversity on their boards.
• The average board diversity in the S&P 500 is around 30%, with some companies exceeding 50%.

Management Changes

Stakeholder Impact

• Stockholders are being asked to vote on the re-election of directors.
• Employees may be impacted by the company's diversity initiatives.
• The appointment of Dr. Minus as CTO could impact the company's product strategy and technology roadmap.

Next Steps

• Stockholders will vote on the re-election of directors at the Annual Meeting on May 2, 2024.
• Hexcel will continue its efforts to recruit diverse candidates for future Board positions.

Key Dates

Keywords

Hexcel, Board of Directors, Diversity, ISS, Proxy Statement, Cynthia M. Egnotovich, Marilyn L. Minus, Director Election, Corporate Governance