As the discussion about the importance of diversity in the boardroom rages on, State Street is openly taking measures to enact change at firms in which it owns shares. The index-fund giant has announced that it will mandate firms begin to add female directors to their boards, or require the firms to prove that a lack of diversity has no negative effects otherwise. This seems unlikely, given myriad research supporting the value of women in the boardroom, and how companies with diverse staffers consistently outperform those without such diversity.
This bold move is accompanied by State Street’s installation of its “Fearless Girl” bronze statue, which stands opposite New York City’s iconic Wall Street bronze bull. The visual representation is said to personify the resilience of women everywhere and inspire women to continue to push for inclusion at the top of the corporate ladder and in the boardroom. State Street said on its website after the statue was installed that despite certain gains for women on corporate boards, one out of every four companies that make up the Russell 3000 Index still have no female representation on their boards.
As we at Fenaroli & Associates continue to assist companies in finding the perfect mix of diverse and non-diverse candidates both in the C-Suite and in the boardroom, we laud State Street for its efforts in furthering this important conversation and supporting it with action. If we can assist you in your diverse search and placement efforts, please don’t hesitate to contact us.
Push for Women on Boards
State Street to demand change at companies lacking female directors
By Joann S. Lublin and Sarah Krouse, March 7, 2017 | Wall Street Journal
Index-fund giant State Street Global Advisors on Tuesday will begin pushing big companies to put more women on their boards, initially demanding change at those firms without any female directors.
The money manager, which is a unit of State Street Corp., said it would vote against board members charged with nominating new directors if they don’t soon make strides at adding women. Firms won’t have an exact quota to be in compliance with State Street’s mandate but must prove they attempted to improve a lack of diversity. A firm that doesn’t add women, for example, would have to prove to State Street its attempt to cast a wider net and set diversity goals.
The money manager plans to give most firms in the Russell 3000, U.K.’s FTSE 350 and Australia’s S&P/ASK 300 about a year to enact changes before voting against the re-election of heads of committees that nominate new board members.
“If someone could convince us that the absence of diversity or gender diversity is not a problem, we’re leaving that open. Will they? I doubt it,” said Ronald O’Hanley, chief executive of State Street Global Advisors.
Mr. O’Hanley said the $2.47 trillion asset manager also wants the companies where it owns shares to identify problems with their nominating procedures that may contribute to the dearth of female board members.
As part of its push, the firm is also placing a bronze statue of a young girl leaning toward Wall Street’s iconic bronze bull.
Nearly a quarter of the companies in the Russell 3000 index lack a female director, while 58% of the companies in the index have less than 15% women on their boards, according to Institutional Shareholder Services. American Railcar Industries Inc., Speedway Motorsports, Inc. and Nathan’s Famous Inc. are among the companies in that index with no female directors, according to ISS, a proxy-advisory firm.
Representatives for those firms didn’t respond to requests for comment.
State Street is among the largest passive managers in the world – a sector that is amassing significant governance power as investors pour billions into lower-cost index-tracking funds like exchange-traded funds.
Compared with rivals, State Street sometimes has taken more aggressive, and public, stances on corporate-governance matters. In recent years, for example, the firm focused on long-tenured board members.
State Street in 2015 voted against or withheld votes during the re-election of one or more board members at 380 companies globally because of tenure concerns. It estimates that 32% of those firms added at least one new director by 2016.
Now, State Street executives said research shows companies with more board women and senior female staffers perform better than rivals without them. A study MSCI Inc. released in December typifies such findings. During the past five years, U.S. companies that had at least three female directors in 2011 have financially outperformed those that had no board women in 2011, concluded the invest-research firm. Its study looked at return on equity and per-share earnings for 580 such concerns between 2011 and 2016.
State Street wants companies in that U.S. index, the U.K.’s FTSE 350 and Australia’s S&P/ASK 300 to address gender diversity at the board level and throughout their employee ranks, said Rakhi Kumar, the money manager’s head of corporate governance. “It’s all about creating the pipeline to introduce diversity within organizations,” she said.