IPG Photonics' Board of Directors has only one woman member and racial and ethnic diversity is undeterminable from the proxy.

We believe that diversity, including gender and race, is a critical attribute of a well-functioning board and a measure of sound corporate governance.

Corporate leaders recognize the strong business case for board diversity. The Guiding Principles of Corporate Governance of the Business Roundtable, an influential association of chief executives, state: "Boards should develop a framework for identifying appropriately diverse candidates that allows the nominating/corporate governance committee to consider women, minorities and others with diverse backgrounds as candidates for each open board seat."1 Board and management diversity benefits include a larger candidate pool from which to pick top talent, better understanding of consumer preferences, a stronger mix of leadership skills, and improved risk management.

Numerous institutional investors have adopted proxy voting guidelines reflecting their belief that board and management diversity is an indicator of good corporate governance. BlackRock, the world's largest asset manager, published in 2020 investment stewardship guidelines that state, "If there is no progress on enhancing diversity at the board level within a reasonable time frame, we may hold nominating and/or governance committees accountable for an apparent lack of commitment to board effectiveness. Deliberate action needs to be taken by boards with a lack of diversity."2 State and city pension plans nationwide have adopted proxy voting policies with minimum thresholds for board diversity.

Legislation mandating board diversity has arrived in the U.S. California legislation enacted in 2018 mandates gender diversity on the boards of companies with headquarters in that state and other states and municipalities are following suit. In 2020, California signed into law a similar mandate to increase racial and ethnic representation. Potential regulatory action seeking disclosure of racial, ethnic, and gender diversity is also under consideration at the federal level.

Despite recent progress, women and people of color remain significantly underrepresented on U.S. corporate boards. Women account for 21.1 percent of the directorships in the Russell 3000, up slightly from 20.7 percent a year ago.3 Among board members of Russell 3000 companies whose race was identified, non-white directors represent less than 11 percent.4 Continued progress on board diversity requires serious attention to the board search process and board refreshment.