Women on Boards: Asset Managers and Institutional Investors Weigh In

iStock_000007749988XSmallBy Melissa J. Anderson (New York City)

How loud does money talk? That’s the question posed by the asset managers, institutional investors, senior business executives, statewide elected officials, and national women’s organizations that make up the Thirty Percent Coalition. The group aims to encourage companies to ensure their boards are composed of at least 30 percent women by 2015. And they’re doing it by leveraging some serious dough: the investors in the group represent over $1.2 trillion in assets under management.

Last year, the Coalition contacted all of the companies in the Fortune 500 that had no women on their boards, and this year they sent letters to all 127 companies on the Russell 1000 that have no women on their boards, urging them to hire more. The issue resonates with investors – research shows that companies with more women on their boards perform well financially and are better governed.

Members of the Thirty Percent Coalition argue that by keeping women out of the boardroom, these companies may not be performing at their highest capability for their shareholders.

Tim Smith, Senior Vice President and Director of ESG Shareowner Engagement at Walden Asset Management, a division of Boston Trust & Investment Management, said, “The business case is quite compelling for investors. It is important for the reputation and image of the company, as well as a way to protect the long term sustainability of the firm, including the long term bottom line.”

He added, “Obviously women’s organization’s leadership is exceedingly important on this issue. But investors also have power – after all, we are the owners of companies.”

Fund Managers and Women on Boards

“Our firm works with a whole range of Environmental, Social and Governance (ESG) issues and we have been working on Board diversity for decades. But we are part of a growing group of investors that feels this is a pertinent issue for good governance,” Smith explained. His firm was one of the first investment firms recruited to the Coalition because of its early support of women on boards.

The Thirty Percent Coalition’s investors include asset mangers like Walden, as well as statewide elected officials representing public retirement and pension funds in California, Connecticut, Massachusetts, Maryland, New York, Pennsylvania, Rhode Island and Washington. It also includes mutual funds and other asset managers, along with the backing of groups like the AFL-CIO, non-profit foundations, and religious institutions. Participating women’s groups include the American Association of University Women, Feminist Majority, National Council for Research on Women, and the National Council of Women’s Organizations.

The issue is gaining a lot of steam across the country, he continued, with shareholders voting for diversity resolutions more and more often. “The vote is a sign that this issue is becoming mainstream. These resolutions often get in the 30 percent plus range. It’s not just groups like ESG investors who focus on it, but mainstream mutual funds and investment managers as well.”

Looking back, he continued, we are seeing progress on the issue. “We’ve been writing letters for decades and ten years ago, companies might have responded in a casual way. Now it’s much more respectful. They understand the importance of diversity and the business case. We don’t get as much pushback on the concept today. But of course follow through is still dismal.”

Often, companies will indicate that they are working on boardroom diversity, but don’t have the ability to do it in a year’s time. But, Smith says, that’s still not enough to meet the Thirty Percent Coalition’s goal (for 30 percent of all board directors to be female by 2015). “The needle hasn’t moved in five or six years. We need significantly more women on boards.”

How It Works

Smith explained how the Thirty Percent Coalition identifies boards to press for diversity. “First of all, we research companies to see what their board composition is. We find out if they have a charter with a commitment to non-discrimination or if they have a commitment to proactively work to expand or diversify the board.”

Next the group engages the company or files a shareholder resolution for a vote at at the stockholder meeting. “If there are no women on the board, some groups, like Walden and Pax World, will just vote no on our proxy.”

So far, Smith said, investors have filed shareholder resolutions with about 20 companies, although not every one will go to a vote. However, he clarified, “It’s not a screen to determine if an investor will buy stock.”

This year the group identified 127 companies in the Russell 1000 without any women on their boards. “We can look at this in a positive way. It tells us that the vast majority of companies do have some diversity on their boards. But even just one women on a board is still insufficient in this day and age.”

Smith says the participation of big funds like CalSTRS and New York City Pension Funds this proxy season should help turn up the heat on companies without board diversity. “It’s notable that we have major, mainstream investors who care about this issue.”