WHEREAS:

In the U.S., the lack of diversity on corporate boards of directors has become a significant concern for investors and companies. Though a focus on racial equity was fueled by country-wide racial justice protests in 2020, progress on boardroom diversity remains slow;

The Proponent has engaged Badger Meter (“the Company”) on persistent board diversity concerns and the potential negative effect on long-term share value since fall 2016. After a similar proposal garnered 85% of the shareholder vote at the 2021 annual meeting, the company added one racially diverse board member. While this is an important step forward, 89% of the expanded board still self-identifies as non-diverse by race or ethnicity and, to the Proponent’s knowledge, the Company has not set in place actionable plans to achieve greater board diversity;

Research has shown that diverse teams are beneficial in many ways, including a higher likelihood to “radically innovate and anticipate shifts in consumer needs and consumption patterns—helping their companies to gain a competitive edge” and likeliness to outperform industry peers on profitability over time. Importantly, it has also been found that the level of diversity matters, with a 48% performance differential between most and least diverse companies ;

Research has also demonstrated that the “critical mass” for diversity on boards is three or more. At this level, the diverse members can “cause a fundamental change in the boardroom and enhance corporate governance.” While this study focused on gender diversity on boards, the Proponent asserts its applicability to people of color as well and notes that the Company’s board has not met this critical mass level for gender diversity either;

The Proponent believes that committing to concrete, actionable steps to further diversify the board of directors would serve the long-term value of shareholders and the company.