Diversity is often touted as a key value in society and in business, but it is rarely realized; far too frequently, it’s simply been ignored. Some years ago, it became increasingly clear that issues of equity and inclusiveness weren’t merely matters of values to us as individuals - of what is morally right and wrong - but of value itself as investors. A growing body of evidence suggested that the lack of diversity in the top ranks of business was actually harmful to companies’ bottom lines - and that increasing diversity could benefit investment portfolios.
Notwithstanding empirical findings about the tendency for groups composed of people from similar backgrounds to refrain from challenging prevailing views - and the growing number of companies that credit innovation to the diversity of their workforce - as recently as 2017, a quarter of Russell 3000 companies did not have a single woman on their boards of directors. Fewer still publicly disclosed their boards’ racial and ethnic makeup.
How, then, could we actually change this conversation?
Enter Fearless Girl in 2017. Overnight, this bronze statue of a strong girl we commissioned and installed in the heart of Wall Street ignited a global conversation about the power and potential of women in leadership. Backed by our proxy voting policy that called on companies to create greater gender diversity on their boards, we saw 862 companies, representing approximately 60 percent of the companies we identified as having all-male boards, add women to their board leadership in the following years.
This work continued in the wake of George Floyd’s murder and inequities revealed by the COVID-19 pandemic. Drawing on State Street’s experience with the Fearless Girl campaign, in the summer of 2020 we called on companies to begin disclosure in five key areas as related to racial and ethnic diversity: strategy, goals, metrics, board diversity, and board oversight.
A majority of companies told us they were already looking at ways to prioritize racial and ethnic diversity across their organizations, not simply because they understood the reputational risk, but also because they understood the importance - the value - of having diversity of thought, or cognitive diversity, in their organizations.
Still, many companies are unsure where to go beyond disclosure. To that end, we partnered with Russell Reynolds and the Ford Foundation to create a playbook for effective board oversight of diversity. With insights from our work and input from more than two dozen experienced directors from S&P 500 and FTSE 100 companies, such as Ursula Burns and Jamie Gorelick, serving on boards from Amazon and Uber to Eli Lilly and MasterCard, we urge directors to consider 10 responsibilities:
Ensure the CEO and board chair have the capacity and commitment to drive the organization’s racial equity efforts long-term
Build a board whose directors are racially and ethnically diverse and have experience with oversight of diversity, equity, and inclusion (DE&I)
Make racial equity an active part of the business strategy and work toward clear and quantitative key performance indicators
Make racial and ethnic DE&I both a committee and a full-board responsibility
Regularly evaluate the potential impacts of the company’s operations on communities of color, embracing relevant opportunities and mitigating relevant risks
Facilitate boardroom discussions that are thoughtful, balanced, and intentional, and build a culture where directors are empowered to challenge ideas
Include the perspectives of stakeholders - including employees - in board discussions
Create a structured onboarding and ongoing training process that prepares all directors for effective oversight of DE&I
Build a coalition, share best practices, and learn from peers and experts
Realize this is a long journey - be patient and don’t give up
At State Street, we’re also on this journey. That is one reason we have been advancing 10 actions to eliminate racial inequity in our organization, including tripling our Black and Latinx leadership and increasing our spend with diverse suppliers. And we continue exploring ways to increase diverse board representation at every company - and in every market.
Today, more and more companies understand that whether it is gender, race and ethnicity, sexual orientation, educational background, or upbringing, diversity can help foster new ways of thinking. They recognize it is a matter of value. Will more investors capture its power to drive innovation and challenge conventional thinking? That will be the question in the months and years ahead.
The information provided does not constitute investment advice and it should not be relied on as such. It should not be considered a solicitation to buy or an offer to sell a security. Investing involves risk including the risk of loss of principal. It does not take into account any investor’s particular investment objectives, strategies, tax status or investment horizon. You should consult your tax and financial advisor.
All information is from SSGA unless otherwise noted and has been obtained from sources believed to be reliable, but its accuracy is not guaranteed. There is no representation or warranty as to the current accuracy, reliability or completeness of, nor liability for, decisions based on such information and it should not be relied on as such.
The whole or any part of this work may not be reproduced, copied or transmitted or any of its contents disclosed to third parties without State Street Global Advisors’ express written consent.
Issued by State Street Global Advisors, Australia Services Limited (AFSL Number 274900, ABN 16 108 671 441) ("SSGA, ASL" or "State Street Global Advisors, ASL"). Registered office: Level 14, 420 George Street, Sydney, NSW 2000, Australia · Telephone: 612 9240-7600 · Web: www.ssga.com.
State Street Global Advisors, ASL is the issuer of interests and the Responsible Entity for the ETFs which are Australian registered managed investment schemes quoted on the AQUA market of the ASX or listed on the ASX. This material is general information only and does not take into account your individual objectives, financial situation or needs and you should consider whether it is appropriate for you. You should seek professional advice and consider the product disclosure document and target market determination, available at www.ssga.com/au, before deciding whether to acquire or continue to hold units in an ETF. This material should not be considered a solicitation to buy or sell a security. ETFs trade like stocks, are subject to investment risk, fluctuate in market value and may trade at prices above or below the ETF's net asset value. ETFs typically invest by sampling an index, holding a range of securities that, in the aggregate, approximates the full index in terms of key risk factors and other characteristics. This may cause the fund to experience tracking errors relative to performance of the index. Investing involves risk including the risk of loss of principal. Diversification does not ensure a profit or guarantee against loss. Holdings and sectors shown are as of the date indicated and are subject to change. This information should not be considered a recommendation to invest in a particular sector or to buy or sell any security shown. It is not known whether the sectors or securities shown will be profitable in the future. Sector ETF products are also subject to sector risk and non-diversification risk, which generally results in greater price fluctuations than the overall market. SPDR®, Standard & Poor’s® and S&P® are registered trademarks of Standard & Poor’s Financial Services LLC, Dow Jones® is a registered trademark of Dow Jones Trademark Holdings LLC, ASX® is a registered trademark of the ASX Operations Pty Ltd, these trademarks have been licensed for use by S&P Dow Jones Indices LLC and sub-licensed for use to State Street Global Advisors, ASL. MSCI indexes are the exclusive property of MSCI Inc. (“MSCI”). MSCI and the MSCI index names are service mark(s) of MSCI or its affiliates and have been licensed for use for certain purposes by State Street. SPDR products are not sponsored, endorsed, sold or promoted by any of these entities and none of these entities bear any liability with respect to the ETFs or make any representation, warranty or condition regarding the advisability of buying, selling or holding units in the ETFs issued by State Street Global Advisors, ASL. State Street Global Advisors Trust Company (ARBN 619 273 817) is the trustee of, and the issuer of interests in, the SPDR® S&P 500® ETF Trust, an ETF registered with the United States Securities and Exchange Commission under the Investment Company Act of 1940 and principally listed and traded on NYSE Arca, Inc. under the symbol "SPY". State Street Global Advisors, ASL is the AQUA Product Issuer for the CHESS Depositary Interests (or "CDIs") which have been created over units in SPY and are quoted on the AQUA market of the ASX. The whole or any part of this work may not be reproduced, copied or transmitted or any of its contents disclosed to third parties without State Street Global Advisors, ASL's express written consent.