Activism and Board Diversity

Activism at public companies can reduce board diversity, or it can increase it, depending on the circumstances. In recent years, activist hedge funds have installed dissident nominees who collectively have trailed the S&P 1500 index significantly in terms of gender and racial diversity. In contrast, institutional shareholders and asset managers are promoting board diversity to an unprecedented extent, with concerted public efforts already producing results. Several institutional investor initiatives, announced earlier this year, and the New York Comptroller’s Boardroom Accountability Project 2.0, announced earlier this month, may be game-changing initiatives on the path to greater board diversity.

Source: Activism and Board Diversity

Equilar | Declassified Boards Are More Diverse

The Equilar Gender Diversity Index (GDI) has reported that, at the current pace of growth in female representation on public company boards of directors, gender parity would not be reached until Q4 2055 for the Russell 3000. However, annually elected boards may already have an edge against their classified counterparts….Over the past five years, corporations have seen a strong migration away from classified boards to annually elected boards with no director classes. Indeed, almost 90% of large-cap companies now have declassified boards, up from about two-thirds in 2011.<P><P>In the Russell 3000, boards are more evenly split….For the Russell 3000, median prevalence of female directors for Q2 2017 in the Gender Diversity Index was 14.3% overall. However, when split into categories according to whether or not the board is classified, median prevalence differs notably—classified boards had 12.5% female directors at the median vs. 16.7% for declassified boards….Size doesn’t mean everything, but when it comes to gender diversity company size clearly correlates to higher female prevalence on boards overall.

Source: Equilar | Declassified Boards Are More Diverse

BlackRock supports effort to boost number of women board members

BlackRock Inc (BLK.N) voted for eight proposals pushing U.S. and Canadian companies to adopt policies boosting their boards’ diversity during the most recent quarter, the world’s largest asset manager said on Thursday.

BlackRock said it supported the shareholder motions to press companies to develop or disclose policies geared to promote gender diversity. It did not name the companies it pushed but said the “majority” had boards of directors lacking women.”

We’ve been particularly focused on increasing the number of women on U.S. boards because progress in the U.S. has been slower than in many other markets,” BlackRock said in a report it distributed.

“Board diversity, particularly in terms of gender, is important from a sustainable investment perspective, given that diverse groups have been demonstrated to make better decisions,” it added. “This appears to be because they are better able to consider, where appropriate, alternatives to current strategies – a proposition that can ultimately lead to sustained value creation.”

Source: BlackRock supports effort to boost number of women board members

Listen to Experts on Governance and Diversity

Patricia Lenkov and Elizabeth Aris are creating a new digital program, Board-Talk: Diversity & Corporate Governance, created in partnership with the National Association of Corporate Directors (NACD),.

The program will be live streamed on digital platform MOSH., as well as recorded as a video, each week from April 19. The format will be a host (Patricia Lenkov, specialist board exec recruiter) in conversation with leading global Corporate Directors, Investors, Governance and Diversity experts, as below.

April 19 Brenda Gaines – Corporate Director – Tenet Healthcare, Southern Company Gas, Former Corporate Director CNA Financial, Fannie Mae, Office Depot, AGL Resources, Nicor, former CEO Diners Club NA

April 26 Rakhi Kumar – Managing Director, Head of Corporate Governance, State Street (TBC)

May 3 Holly Gregory – Partner & Co-Head Global Corporate Governance & Executive Compensation Group – Sidley Austin LLP

May 10 Michelle Edkins – Managing Director Blackrock Global Investment Stewardship Team

May 17 Tim Smith – SVP ESG Engagement, Walden Asset Management

May 24 Rochelle Campbell – NACD Board Recruitment Practice

May 31 Sol Trujillo – Corporate Director – WPP, Western Union, Former Corporate Director Target, PepsiCo, Bank of America, EDS, Orange, Telstra, Gannett, former CEO US West, Orange, Telstra

June 7 Cari Dominguez – Corporate Director Manpower Group Inc, Triple-S Management Corporation, Calvert Funds, Former Chair US Equal Employment Opportunity Commission

June 14 Virginia Gambale – Corporate Director JetBlue Airways, First Derivatives, Dundee Corporation

Equilar | The Gender Pay Gap for Board Chairs

Companies are increasingly electing women to their boards, but the number still pales in comparison to male representation at public corporations. According to the Equilar Gender Diversity Index, 15.1% of Russell 3000 director seats were held by women at the end of 2016, an increase from 13.9% in 2015. However, in 2016, men accounted for 96.3% of the non-executive board chair positions in the Russell 3000, vs. 3.7% for women. This statistic clearly illustrates the gender disparity among board leadership positions, particularly with board chairs, as Equilar noted in a recent study.

Furthermore, there is pay gap between men and women when it comes to the top positions on these boards. A separate Equilar study looked at the median board fees for non-executive board chair positions for the same group of companies—the Russell 3000—and found a gap in pay between males and females across percentile ranges. At the median, female chairs received $234,934 in total compensation as disclosed in the director compensation table of proxy statements filed for fiscal year 2015, more than $10,000 below the median for men at $245,143. This difference was notably smaller at the middle of the study sample. At the 25th and 75th percentiles, male board chairs earned approximately $30,000 and $46,000 more, respectively.

Source: Equilar | The Gender Pay Gap for Board Chairs

State Street to Start Voting Against Companies That Don’t Have Women Directors – WSJ

Index-fund giant State Street Global Advisors on Tuesday will begin pushing big companies to put more women on their boards, initially demanding change at those firms without any female directors.The money manager, which is a unit of State Street Corp., says it will vote against board members charged with nominating new directors if they don’t soon make strides at adding women. Firms won’t have an exact quota to be in compliance with State Street’s mandate, but must prove they attempted to improve a lack of diversity. A firm that doesn’t add women, for example, would have to prove to State Street it attempted to cast a wider net and set diversity goals.

Source: State Street to Start Voting Against Companies That Don’t Have Women Directors – WSJ

Annalisa Barrett on Board Gender Diversity

Shareowners around the world have been calling on companies to increase gender diversity in corporate boardrooms for many years. Despite the increasing number of studies that show that companies with female directors perform better, there is still a very long way to go before gender parity is reached among corporate directors. This article presents some of the most recent research on the topic and highlights legislative efforts in the United States.


Current Research Findings


Over the past several years, numerous studies have examined links between gender diversity in the boardroom and financial performance. Most recently, MSCI found that U.S. companies which began the five-year period from 2011-2016 with three or more female directors reported, at the median, earnings per share which was 45% higher than those companies which had no female directors at the beginning of the period.[i] In 2014, Credit Suisse found that companies with at least one woman on the board had an average Return on Equity (ROE) of 12.2 percent, compared to 10.1 percent for companies with no directors. Additionally, the price-to-book value of these firms was greater for those companies with women on their boards: 2.4 times the value in comparison to 1.8 times the value for zero-women boards. [ii]


Other studies have focused on the less quantitative features of corporate performance. For example, a 2012 study shows that companies with more women on their boards are more likely to “create a sustainable future” by, among other things, instituting strong governance structures with a high level of transparency.[iii] Importantly, one study found that female directors have improved board governance, risk management, and the board’s willingness to “hold CEOs accountable.”[iv]


Efforts to Increase Gender Diversity in the U.S.


Despite these research findings, fewer than 20 percent of the board seats of S&P 1500 companies are held by women. A study recently found that 17.8 percent of the board seats held by directors serving on S&P 1500 boards are filled by women.[v]   In December 2015, a report by the U.S. Government Accountability Office found that, assuming women join boards in equal proportion to men, this number will likely not reach 50 percent – gender parity – before the year 2054.[vi]


So, what is being done to encourage U.S. companies to increase the number of women on their boards? While other countries have implemented, or are contemplating, quotas to address the issue of gender diversity in the corporate boardroom, the U.S. has been reluctant to do so. At the federal level, a bill introduced last year in the House of Representatives called on the Securities Exchange Commission to, among other things, “establish a Gender Diversity Advisory Group to study and make recommendations on strategies to increase gender diversity among the members of the board of directors of issuers.” [vii]


In addition, a few U.S. states have taken on the issue by passing resolutions calling on the companies in their state to set the standard for board diversity. The first state to act was California, whose legislature passed a resolution (CA SCR-62) calling for the boards of publicly-traded companies in the state to have:

  • at least one female director if the board has fewer than six total directors,
  • at least two female directors if the board has six, seven or eight total directors, or
  • three or more female directors if the board has nine or more total directors. [viii]


Of course, CA SCR-62 was only a resolution, so companies in the state face no legal ramifications if they do not fulfill the resolution’s goal; however, it did set a precedent which other states are following. In 2015, the House of Representatives in Illinois passed HR 0439[ix] and the Senate of the Commonwealth of Massachusetts passed S1007[x], both of which are resolutions that closely mirror the California resolution.


Unfortunately, only about 20 percent of the companies in the Russell 3000 index with headquarters in California met the goals established by CA SCR-62. While the boards of companies based in Illinois and Massachusetts have until 2018 to meet the gender diversity goals outlined in their respective states resolutions, it is likely that many will not do so.


However, the increasingly public efforts of institutional investors and diversity advocacy groups are sure to have a positive impact. As more and more companies reap the financial and nonfinancial benefits of having a diverse board, others will surely follow.





[i] Eastman, M., Rallis, D. & Mazzucchelli, G. (2016). The Tipping Point: Women on Boards and Financial Performance. MSCI ESG Research LLC, retrieved from MSCI website:

[ii] Dawson, J., Kersley, R., & Natella, S. Credit Suisse Research Institute, (2014). The CS Gender 3000: Women in senior management. Retrieved from Credit Suisse AG website:;

See also: Dawson, J., Kersley, R., & Natella, S. Credit Suisse Research Institute, (2016). The CS Gender 3000: The Reward for Change. Retrieved from Credit Suisse AG website

[iii] McElhaney, K. A., & Mobasseri, S. (2012). Women create a sustainable future. Research sponsored by KPMG with Women Corporate Directors, Center for Responsible Business, Haas School of Business, University of California, Berkeley. Berkeley, CA.

[iv] Adams, R., & Ferreira, D. (2009). Women in the boardroom and their impact on governance and performance. Journal of Financial Economics94, 291-309. doi: 10.1016/j.jfineco.2008.10.007

[v] McGurn, P. (2017). Board Refreshment Trends at S&P 1500 Firms: 2008-2016. Study conducted by Institutional Shareholder Services Inc. and published by the Investor Responsibility Research Center Institute. Retrieved from the IRRCi website:

[vi] United Stated Government Accountability Office. Corporate Boards – Strategies to Address Representation of Women Include Federal Disclosure Requirements. (2015). Retrieved from GAO website:

[vii] H.R. 4718 – Gender Diversity in Corporate Leadership. Sponsored by U.S. Representative Carolyn B. Maloney (D- NY). Introduced March 7, 2016. Retrieved from the website of the United States Congress:

[viii] Jackson, H.B., Corbett, E., Evans, N., Hancock, L., Liu, C., Pavley, F., Skinner, N., Garcia, C., & Lowenthal, B. Senate of the State of California, (2013). Senate concurrent resolution no. 62—relative to women on corporate boards. (SCR 62).

[ix] Mussman, M., House of Representatives of the State of Illinois. House Resolution 0439 URGE CORPS-WOMEN ON BOARDS (HR 0349)

[x] Spilka, K, Senate of the Commonwealth of Massachusetts (2015). Senate Resolution No. 1007 Resolutions encouraging equitable and diverse gender representation on the boards of companies in the commonwealth. (S1007)


Gender Parity on Boards Around the World

A new ISS report on board gender diversity is summarized on the Harvard Law School Forum on Corporate Governance and Financial Regulation:

Globally, the number of women on boards has been increasing for at least the last three years. According to ISS QualityScore data, overall female representation has increased on boards from 14.5 percent in 2014, to 15.3 percent in 2015, and 16.9 percent in 2016. While this is still a small proportion of all directorships, the 1.6 percentage point increase from last year through this year is a large jump, and also represents a significant number of global directorships now held by women.

At first glance, the greatest predictor of a more gender-diverse board seems to be the strength of any regulation mandating some minimum level of diversity. Stronger regulations with mandates for minimum gender representations are in place in many of the markets with the highest percentage of female directors, while markets with less stringent regulations or no mandates tend to have fewer female directors. However, this is somewhat of a simplistic approach; the reality is that social norms in various markets often drive the regulatory framework, and how that regulatory framework is fulfilled—and in some regions, social norms seem to have obviated the need for regulation entirely. For example, the Scandinavian countries Sweden and Finland are among the countries with the highest number of females on boards, whereas they have no targets regarding gender diversity….

Given the number of studies that strongly correlate more diverse boards with higher performance on any number of financial metrics, the pressure to continue to diversify the boardroom will likely continue to increase. And while progressive societal norms are the most effective way to build meaningful and impactful gender diversity on corporate boards, regulations also clearly have significant impact on increasing gender diversity levels in boardrooms. However, these laws generally take time to foment change, and this “brute force” method can have other potential drawbacks. In some countries where there is regulation but not societal acceptance, many companies fulfill the requirements at the absolute minimum level with little regard paid to creating any impetus for change. There is no “one size fits all” solution to increasing gender diversity; each region has different levels of societal acceptance for gender equality, and regulation would have different impacts in each region.

Source: Gender Parity on Boards Around the World

Building Boards Qualified to Grow Shareholder Value | The Huffington Post

Alice Korngold writes about the importance of board diversity.

“By increasing diversity among their board members, companies can unleash their greater potential to grow their value by finding innovative solutions to worldwide challenges. This will be good for business and good for the world.”

In the next two decades, the greatest opportunities for businesses to profit are in emerging markets, where three billion people will enter the middle class. Women also represent an important growing market worldwide, as they will control close to 75 percent of discretionary spending in the next five years.Unfortunately for shareholders, the vast majority of directors of the largest publicly held companies are still quite homogeneous. S&P500 board members are 80 percent men, with an average age of 63, older in fact than the average age of 10 years ago. (At 63, board members grew up when school materials were mimeographed; most were first exposed to the Internet at the age of 40.) Furthermore, in spite of extraordinary opportunities in emerging markets, directors of non-U.S. origin account for only 8 percent of directors on the boards of the top 200 S&P 500 companies, fewer than one per board; they are primarily from the U.K., India, Canada, France and Germany—only one of which is an emerging market country. Among the top 200 S&P 500 companies, minorities account for only 15 percent of all directors—fewer than two per board; the percentage of companies with at least one minority director dropped from 90 percent in 2005 to 86 percent in 2015. Women account for 20 percent of the total number of directors, with the average number of women per board at 2.16 (Spencer Stuart 2015). Among MSCI World companies, women hold 17.3 percent of board seats (MSCI 2014).

Imagine instead a board comprised of 10.8 people, the average board size, where directors of a variety of ages bring the necessary and relevant expertise and leadership experience, having grown up in various regions of the world, in a variety of socio-economic conditions. Such a group, some with academic credentials or particular subject mastery, others having built and led innovative ventures, climbed the ranks of multinational corporations in various parts of the world, had life experiences in emerging markets, or played and worked with the latest technologies from childhood, can truly envision what’s possible and also know what questions to ask management.

Source: Building Boards Qualified to Grow Shareholder Value | The Huffington Post

Male corporate board members aren’t stoked about adding women to their ranks.

According to a new survey of 884 directors of public companies, 10 percent of current board members think the ideal number of women on a corporate board is somewhere between 20 percent of the board and zero. Zero! One in 10 directors mulled over the prospect of sharing a conference table with women and thought, “I could tolerate zero women, or maybe a very tiny proportion of women, but that is absolutely it.”

The head of PwC’s Governance Insights Center, which conducted the survey, told Fortune that the not-unpopular desire for a board with as few women as possible is largely attributable to the old-school men who populate most corporate boards and, thus, the survey base. The average age of a board member of a major U.S. company is 63 and rising, and 83 percent of PwC’s survey participants are men.

Just as disconcerting as the 10 percent in the “few to no women, please” club is the 43 percent of participants who said the “optimal” share of women on a corporate board is 21 to 40 percent. (Women currently occupy 20 percent of S&P 500 companies’ board seats.) This means that more than half of all board members think women deserve significantly fewer than half the seats on corporate boards. Since women make up more than half of the world’s population, this suggests that more than half of current board members think women are inherently less capable of serving in corporate leadership positions. Another 43 percent said women should occupy 41 to 50 percent of board seats; only 5 percent thought the “optimal” proportion of women was greater than 50 percent.

Source: Male corporate board members aren’t stoked about adding women to their ranks.