As CEO of State Street Corp., STT 2.10% Ronald O’Hanley is on the front lines of shareholders’ push to bring change to corporate boardrooms.
State Street, STT 2.10% whose money-management arm oversees $2.7 trillion in assets, has amassed significant governance power in recent years as investors shifted more money into the lower-cost, index-tracking funds it helped popularize—and away from actively managed funds. One of its most visible efforts has been its “Fearless Girl” campaign urging companies to add women to their boards.
Since 2017, State Street has put about 1,350 companies around the world on notice for not having a single female director. Some 580 have since added at least one woman to their boards or promised to do so. Last year, State Street voted against the re-election of board members at 667 companies that hadn’t. Yet, big passive-investment managers like State Street have also drawn scrutiny from some shareholder activists, who argue they aren’t doing enough to make corporate boards accountable for their diversity efforts and issues such as executive pay.
We are particularly intrigued by his answer to the question of the power of institutional fund managers:
It’s almost inevitable when you see this kind of concentration that it probably will make sense to do something about it or the regulator is going to step in. The idea of forcing the underlying beneficiary [investing in passive index funds] to vote just won’t happen. Nobody’s going to want to bear the proxy costs. One potential solution is to have the voting be at the fund level as opposed to the aggregated asset level. My view is we should be open to change on this.