Push For Board Gender Equity
By Eve Tahmincioglu
Today is International Women’s Day, and as a gift to women everywhere, financial services firm State Street Corp. -- one of the biggest institutional investors in the country -- announced plans to start pressuring boards to make gender diversity a top priority.
In a statement released Tuesday, State Street said its asset management business, Global Advisors, or SSGA, “is calling on the more than 3,500 companies that SSGA invests on behalf of clients, representing more than $30 trillion in market capitalization to take intentional steps to increase the number of women on their corporate boards.”
Clearly, the steps taken thus far haven’t done enough to move the gender needle.
The percentage of women on boards at S&P 1500 companies is only 18%, and that number saw a 1% gain from the previous year, according to research from a 2017 EY proxy report released earlier this year. “This growth is the same rate as each of the past 5 years — suggesting that parity will not be reached for more than 30 years,” the report found.
It’s something State Street has seen up close.
“As part of our review of boards’ gender diversity, we analyzed and compared the level of diversity in three markets: Australia, the U.K. and the U.S.,” explains Rakhi Kumar, head of corporate governance at SSGA. “Most large cap company boards in these markets have at least one female director but have yet to fully embrace gender equality in their ranks.”
With such sluggish growth, there has been a growing frustration among many who see gender parity in Corporate American as a boon for business and the economy.
“A key contributor to effective independent board leadership is diversity of thought, which requires directors with different skills, backgrounds and expertise,” says Ron O’Hanley, president and chief executive officer of State Streets Global Advisors. “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.” State Street Global Advisors holds a Gender Diversity Index fund with the ticker symbol SHE.
State Street pointed to an MSCI study that found companies with strong female leadership generated a higher return on equity.
The company is going beyond just recommending companies take gender equity more seriously, issuing guidelines to foster changes through real dialogue and engagement with company leaders.
And there will be consequences for dragging feet. “In the event that a company fails to take action to increase the number of women on its board, SSGA will use proxy voting power to influence change -- voting against the chair of the board’s nominating and/or governance committee if necessary,” State Street said in its statement.
At State Street, Kumar explains, “We believe boards have an important role to play in increasing gender diversity and believe our guidance can help directors take action now.”