Ahead of Women’s Equality Day, we take a look at how far women have come in corporate America and how investors can track progress on gender and race.
Why does diversity matter?
Diversity data: Some for women, very little for minorities
How can investors encourage diversity?
Investors have several avenues to encourage companies to be more proactive in adding women and minorities to their boards, including the proxy voting process. Shareholders have filed proposals in recent years that call for boards to adopt a policy to include at least one woman or one minority candidate in the initial pool of applicants for an open board seat. This concept was adopted from the NFL’s Rooney Rule, which requires league teams to interview ethnic-minority candidates for head coaching and senior football operation jobs. Few of these shareholder proposals are filed every year, but investors should consider supporting them when they’re on the agenda.
Some institutional investors have taken a more assertive approach to improving board diversity by voting against the nominating chair or the entire nominating committee. This is a bold way to emphasize the importance of inclusion, potentially impacting a much broader universe of companies. Research from the EY Center for Board Matters shows that chairs of nominating committees at S&P 1500® companies with all-male boards have seen more than twice as many shareholders oppose their reelections in the past three years.
Institutional investors that are keen on making a more deliberate impact can go beyond voting against directors whose boards lack diversity. They can leverage shareholder engagement to explain their reasoning to the boards or nudge companies to start publicly disclosing their EEO-1 disclosure data. Instead of waiting for state or federal mandates, companies should proactively showcase their work to improve representation in their ranks. A board bears the ultimate responsibility for promoting a thriving company culture and setting an example for the rest of the organization. This can’t happen when the board holds back information.
The bottom line
It’s easy for companies to make bold statements about their support for women and minorities. But investors shouldn’t be content with hashtags and one-time donations. To get on the path toward true equality, companies must be willing to ask tough questions about what they’re doing to attract and keep a diverse workforce at all levels. We can’t know how deep a problem runs unless we start looking.