State Street Says It Will Start Voting Against Companies That Don't Have Women Directors
March 07 2017 - 12:30AM
Dow Jones News
By Joann S. Lublin and Sarah Krouse
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., says
it will 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 it attempted 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/ASX 300 about a year to
enact changes before voting against the reelection 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 it owns 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 did not 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. The firm manages $2.47 trillion in assets,
the majority of which are in index-tracking funds.
U.S.-based mutual funds and exchange-traded funds that track
indexes owned 11.6% of the S&P 500 at the end of June, up from
4.6% a decade ago, according to a Wall Street Journal analysis of
data from Morningstar Inc. and S&P Global Market
Intelligence.
Compared with rivals, State Street sometimes has taken more
aggressive -- and public -- stances on certain 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 say research shows companies with
more board women and senior female staffers perform better than
rivals without them. A study MSCI 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
investment 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/ASX 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.
"Some companies may say you're wrong and we agree to disagree.
In those cases we have no choice but to use our vote," she
said.
Boardrooms at 76 U.S. public companies have had no female
directors for the entire past decade, according to an exclusive
analysis completed in December for The Wall Street Journal by
governance researchers Equilar Inc.
Mr. O'Hanley plans to send letters about gender diversity this
week to the heads of the more than 700 Russell 3000, FTSE 350 and
S&P/ASX 300 companies with no women on their boards. State
Street Global Advisors also plans to place the bronze statue on
Wall Street early Tuesday morning.
The firm secured permission from the city to place it in front
of the bull for one month, but would agree to leave it longer if it
is well received, a spokeswoman said.
Write to Joann S. Lublin at joann.lublin@wsj.com and Sarah
Krouse at sarah.krouse@wsj.com
(END) Dow Jones Newswires
March 07, 2017 00:15 ET (05:15 GMT)
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