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How Can Investors Help Close the Gender Gap?

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Gwen Le Berre

Director, Responsible Investing

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With recent setbacks to the advancement of women’s rights, it’s more important than ever for investors to help ensure that American companies continue their push toward gender equality.

On Women’s Equality Day, with the overturn of Roe v. Wade in the United States a mere two months ago, it feels disingenuous to celebrate without acknowledging the challenges ahead. While women’s rights have recently taken a major step backward, let’s not lose track of the tremendous progress made in the longer run. One hundred and two years ago today, women were finally granted the right to vote in the United States. This long-overdue right came after nearly 100 years of steadfast and often perilous effort on the part of many activists and reformers.

A lot has changed in the past century when it comes to women’s rights. Today, 144 congressional seats are held by women—more than 27%, a record-high number and a 50% increase in the past 10 years. According to Catalyst, 31% of senior managers are now women. Women college graduates have outnumbered men for the past couple of decades, with 58% of degrees awarded to women in 2022. 

Corporations are instrumental to the advancement of women because they can provide a safe and fair workplace for all employees; investors have a key role to play in ensuring they do so. There are three timely issue areas that are top of mind for investors these days: reproductive freedom, pay equity, and gender parity in senior leadership and boards. Let’s talk about each of them in turn.

What can be done about reproductive freedom?
Months before Roe v. Wade was officially overturned, shareholders filed resolutions to ask TJX, Walmart, and Lowe’s to publicly report the risks and costs to their business caused by state policies that severely restrict access to reproductive health care, along with the strategies they’re contemplating to mitigate those risks. These were a brand-new type of shareholder proposal that we expect will become more common over time in this political climate. While none of the proposals garnered majority support, more than 30% of non-insider investors supported them. For first-time proposals, this is a strong level of support that signals investors are eager for more disclosure of what these risks mean to companies.

The push for gender pay equity
According to the Department of Labor, the pandemic has set the women’s labor participation back more than 30 years, with a loss of 1.1 million women in the labor workforce. In parallel, women in the US earn 83 cents for every dollar earned by men. At the current rate of change, we don’t expect the wage gap to close until 2059. In this context, it’s not surprising that firms like Parametric and Calvert are engaging with companies to better understand the processes for measuring and mitigating pay differences for women and people of color. 

Six shareholder proposals asking for reports on race- and gender-based pay gaps have come to a vote in 2022, with average investor support of 38%, a large increase from last year’s 24% average. Moreover, two of these proposals have garnered majority support, one at Disney and the other at Lowe’s. Demonstrating the effectiveness of active ownership, Microsoft immediately committed to disclosing its gender pay equity ratio when 40% of its shareholders voted for a gender pay equity proposal last fall. We encourage all companies to act—like Microsoft did—when they see a large level of support for shareholder proposals. 

Empower portfolios through responsible investing.

Striving for gender parity in senior leadership

Investors have engaged with companies to encourage more gender diversity on boards for years. While we see board gender parity on only 9% of Russell 3000® boards, we’ve witnessed significant progress over the years. In fact, women hold about 30% of board seats at companies listed on the Russell 3000, up from 17% a mere four years ago. As investors continue their efforts on boards, they’re focusing more attention on the diversity of companies’ senior leadership. At the highest level of management, only 15% of CEOs at Fortune 500 companies today are women. While that’s a tenfold increase from 2002, it’s still a far cry from parity. 

A growing number of investors are not only talking to companies about board diversity but also taking a more critical stance by voting accordingly. In the past five years, since the Fearless Girl sculpture first made its appearance on Wall Street, it’s become common for asset managers to vote against directors when the board lacks diversity. Each manager defines their own tolerance level for the lack of diversity on a board, but it isn’t unusual now to see asset managers voting against directors when they see less than 2% or even 30% of women on the board.

The bottom line
Despite notable advances for the rights of women over the last century, more work remains to be done. Investors can help encourage progress within the companies in which they invest. This can be done either by voting for proposals and engaging with management to prioritize gender equality or by investing with managers who do this important work on their behalf.

“Russell®” and all Russell Index names are trademarks or service marks owned or licensed by Frank Russell Company (“Russell”) and London Stock Exchange Group plc (the “LSE Group”). This strategy is not sponsored or endorsed by Russell or LSE Group, and they make no representations regarding the content of this material. Please refer to the specific provider’s website for complete details on all indexes.

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