There’s been chatter about board gender diversity for a long time and, while there has been some modest progress, we have yet to see any dramatic breakthroughs. Now some of the largest asset managers are not just talking the talk, they are also walking the walk. Will it make a difference? Time will tell.
In its Investment Stewardship Report for Q2 2017, BlackRock (reportedly the largest asset manager, with $5.1 trillion under management) indicated that, in the second quarter, it supported eight out of nine shareholder proposals that requested the adoption of a policy on board diversity or disclosure around plans to increase board diversity. The majority of the companies did not have any women on their boards. In one instance, BlackRock report that it was told, during an engagement on the topic, that the company had difficulty finding a diverse slate; in another instance, the company appeared to make efforts to address the issue, but would not commit to a firm timeline. At five of the companies, BlackRock also voted against the nominating committee members “for failure to address investor concerns on board diversity.” BlackRock’s voting record this year seems to support the notion that the firm has turned the page on diversity proposals; according to Bloomberg BNA, from 2012 to 2016, BlackRock had supported only two out of 98 board diversity proposals.
The report indicates that BlackRock has “been particularly focused on increasing the number of women on US boards because progress in the US has been slower than in many other markets. Women held 16% of S&P 500 board seats in 2011 and 21% in 2016. At companies outside the S&P 500 the number of women in board seats is even lower.”
According to BlackRock, board gender diversity “is important from a sustainable investment perspective given that diverse groups have been demonstrated to make better decisions. In the board context, this appears to be because they are better able to consider, where appropriate, alternatives to current strategies — a proposition that can ultimately lead to sustained value creation over the long term.”
Earlier this year, another significant asset manager, State Street Global Advisors, which manages $2.47 trillion in assets, announced in this press release that it was “calling on the more than 3,500 companies [in which] State Street 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.” (See this PubCo post.) This article in the WSJ reports that State Street “voted against the reelection of directors at 400 companies this year on grounds they failed to take steps to add women to their boards.” According to the article, State Street found that 476 companies in its portfolio “lacked a single female board member. Of that group, the Boston-based firm said 400 companies failed to make any significant effort to address the issue.” As a result, State Street voted against members of the nominating committees of those companies’ boards. Of the 476 companies, the firm reported that “it had productive discussions with 42 that had zero female directors. In 34 instances, neither the chairman of the board’s nominating and governance committee nor the panel’s senior member came up for reelection this year.”
Interestingly, even the Chamber of Commerce may be getting on board, so to speak, although for a different reason. At a July hearing held by the Subcommittee on Capital Markets, Securities, and Investment of the House Financial Services Committee, the representative of the Chamber advocated that, to avoid the prospect of regulation, companies should make efforts on their own to address board diversity. (See this PubCo post.) Given the deregulatory bent of the current administration, regulation to promote board diversity seems highly unlikely in the near term. Notably, the SEC’s latest Regulatory Flexibility Agenda, which identifies those regs that the SEC intends to propose or adopt in the coming year and those deferred for a later time, regulatory action regarding board diversity disclosure— a topic in which former Chair Mary Jo White expressed a particular interest (see this PubCo post)—has been relegated to the back burner. (See this PubCo post.)