Mega Financial Firm’s Strong Diversity Message:

July 31, 2017

If you don’t get more women on boards we’ll vote against existing directors

By April Hall

Following through on the promise made with the installation of “The Fearless Girl” statue earlier this year, State Street Global Advisors (SSGA) sent a strong message to companies with little gender diversity.

The investment powerhouse voted against the reelection of members of board committees tasked with recruiting new board members at 400 companies in the United States and beyond.

The Fearless Girl, a bronze statue of a girl facing the iconic Wall Street bull in the heart of Manhattan’s financial district, was erected earlier this year by SSGA as a call to action for getting more women on corporate boards.

(Related article: Proxy Advisors Seeking More Than “Male, Pale & Stale” Directors.)

While the girl has gotten international attention, SSGA’s move last week to vote down certain directors, “made it clear there was no fear in taking on gender diversity as a top issue,” says Andrew Hopkins, a spokesman for State Street.

There are no signs that any of the directors SSGA voted against lost their seats, says Rahki Kumar, managing director and head of Environmental, Social and Governance Investments and Asset Stewardship, but the group hasn't done analysis on the results either.

Despite this, the “o" vote sends a strong message, she points out, because directors typically want to get a 99% affirmative vote for their positions.

"I think we're the only ones who took action," Kumar says. "But [taking action] also brings attention to how investors can take part in the future."

Seventy-six additional companies were put on notice by SSGA; 34 did not have nominating chairs up for re-election, while the firm believes the other 42 companies will make strides for diversity in the near future, Hopkins adds.

Such gender diversity strides have been hard to come by.

(Related article: Dismantling the Silicon Boys Network.)

According to a report by executive search firm Heidrick & Struggles, the number of new director appointments who were women fell 2% in 2016, to 27.8%. At this rate, the firm says, gender parity won’t happen in the boardroom until 2032, six years later than it last reported.

Getting more women on boards is more than just a nice-to-have.

(Related article: Is the Fearless Girl Crying?)

Companies with strong female leadership generated a return on equity of 10.1% per year versus 7.4% for those without a critical mass of women at the top, which is a 36.4% increase of average return on equity, found a study by research firm MSCI. And, according to a 2015 McKinsey Global Institute report, moving to a scenario where women participate in the economy identically to men would add up to $28 trillion, or an additional 26%, to annual global GDP by 2025 compared to a business as usual scenario.

In a statement released after the statue was installed, SSGA said the girl was a symbol of the future.

“We believe good corporate governance is a function of strong, effective and independent board leadership," said Ron O’Hanley, president and chief executive officer of SSGA in a statement in March. “A key contributor to effective independent board leadership is diversity of thought, which requires directors with different skills, backgrounds and expertise. Today, we are calling on companies to take concrete steps to increase gender diversity on their boards and have issued clear guidance to help them begin to take action.”