State Street Falls Short in Bid for Women Directors -- WSJ
July 27 2017 - 3:02AM
Dow Jones News
By Justin Baer and Joann S. Lublin
This article is being republished as part of our daily
reproduction of WSJ.com articles that also appeared in the U.S.
print edition of The Wall Street Journal (July 27, 2017).
Roughly 400 publicly traded American companies with no women on
their board ignored a request to make a bigger effort on gender
diversity when approached by one of the largest asset managers in
the world.
Index-fund giant State Street Global Advisors, which oversees
more than $2.5 trillion in assets, had pledged in March to throw
its weight behind the issue this year. The company found 468
companies it owns shares of in the U.S. lacked a single female
board member. Of that group, the Boston-based firm said about 400
companies failed to address gender diversity in any meaningful
way.
The money manager, a unit of custody bank State Street Corp.,
then voted against the re-election of directors charged with
nominating new board members at each of these companies. Directors
faced reelection at those companies' latest annual meetings.
The paucity of women directors has drawn more scrutiny in recent
years, emerging as a rallying cry for investors seeking to improve
companies' governance practices. Progress has been slow. Nearly a
quarter of the companies in the Russell 3000 index lack a female
director, according to ISS Analytics, a unit of Institutional
Shareholder Services.
"The fact that you have over 400 companies was surprising to
me," said Rakhi Kumar, head of asset stewardship as State Street
Global Advisors, referencing the almost 470 companies that lacked a
female board member.
Boards have been slow to add women for various reasons,
including their infrequent turnover and preference for experienced
chief executives. But there also has been limited pressure from big
institutional investors.
State Street hopes to change that picture.
Primarily a manager of exchange-traded funds and other passive
investments, the firm reviewed companies within the Russell 3000
Index in the U.S., the U.K.'s FTSE 350 and S&P/ASX 300 in
Australia. State Street, which owns a combined 3,500 stocks in
those three indexes, said it contacted a total of 476 companies in
those countries.
Health-care companies were the worst performing group,
accounting for about a quarter of those with no women on their
boards.
2020 Women on Boards, an organization that's working to bring
better boardroom gender diversity, praised State Street's action
this proxy season.
The votes set an example for "companies that may talk about
diversity but don't take action," the group's president, Malli
Gero, wrote in an email.
In a report last week, 2020 Women found that nearly half of the
75 biggest initial public offerings of the last three years
featured companies that lacked board women when they first sold
shares to the public.
State Street is among the largest passive fund managers in the
world -- a sector that is amassing significant governance power as
investors pour billions into lower-cost index-tracking funds like
ETFs. Since those investments are through passive vehicles, it
doesn't have the ability to simply sell shares in a company.
Instead, the firm has to use its voting power to bring about
change.
"There are terrific longitudinal studies that show gender
diversity leads to better performance," said Ronald O'Hanley, chief
executive of State Street Global Advisors. "If there is clear
evidence companies aren't making progress, or not attempting to
make progress, we will use our power of vote."
Fellow passive investment giant BlackRock Inc. backed eight
shareholder proposals this spring promoting gender diversity. In
five of those instances, the money manager voted against the
nominating committee chairman's re-election.
"We are an engagement-first company," a BlackRock spokesman
said. "We meet with 1,500 companies a year to talk about a variety
of issues. We do that because we believe a vote against a director
or management is the end of the engagement process."
State Street said some of the boards that failed to address
their lack of women directors had reasonable explanations. For
instance, several shared that they had been close to naming someone
when the candidate changed jobs and could no longer serve. In
another case, the company's board lost a female director when it
went through a merger.
State Street isn't alone in its efforts to add gender diversity
to corporate America. The 30% Club, which started in the U.K. and
has since expanded globally, encourages companies to promote more
women throughout their ranks and chairmen to put more women on
boards. Notably, very few of the companies with no female board
members came from the U.K.
Write to Justin Baer at justin.baer@wsj.com and Joann S. Lublin
at joann.lublin@wsj.com
(END) Dow Jones Newswires
July 27, 2017 02:47 ET (06:47 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
State Street (NYSE:STT)
Historical Stock Chart
From Jun 2024 to Jul 2024
State Street (NYSE:STT)
Historical Stock Chart
From Jul 2023 to Jul 2024