Five Questions on Board Gender Diversity

State Street’s Fearless Girl campaign has generated clear impact over the last three years. Below, Caitlin McSherry from State Street’s Asset Stewardship Team tells us more about importance of gender diversity on boards of directors.

Caitlin McSherry
AVP, Asset Stewardship

1. Why did State Street decide to focus on gender diversity?

Caitlin: We want our portfolio companies to be as well run as possible. State Street Global Advisors believes that good governance is a function of strong, effective, independent board leadership. Board diversity enhances board quality as it brings together directors with different skills, backgrounds and expertise. We recognize that there are many ways to achieve board diversity and we support all forms of diversity, but as a starting point, we focused on gender diversity, establishing the expectation that boards should have (at least) one independent female director. Further, we also expect boards to set expectations for senior management to enhance gender diversity within their ranks and the broader organization.

2. What is the business case for gender diversity?

Caitlin: Research shows that companies with greater levels of gender diversity have stronger financial performance as well as fewer governance-related issues such as bribery, corruption, shareholder battles and fraud. A 2017 report by the Conference Board suggests that the reason for the outperformance is largely attributed to the outside perspectives brought into the boardroom by adding women to the board. A study by Future Fund and Willis Towers Watson pointed to improved “cognitive diversity” as one of the key factors in helping to meet investment goals given the uncertain outlook in capital markets, and gender diversity is an essential component of achieving cognitive diversity.

3. What type of impact have you seen from State Street’s gender diversity initiatives?

Caitlin: There’s a heightened global focus on the value of diversity in the boardroom, which is evidenced in our engagements with companies. When we engage with companies that lack gender diversity, the conversation is no longer about “why” we are engaging on this issue. Instead, the focus is on “why not” enhance their board by embracing the value of diversity. We’ve also found that many companies are not stopping with one candidate, but rather are seeking to add multiple diverse candidates to their boards. To me, this is a real proof point of companies recognizing the value that board diversity creates. As we conclude the third year of the Fearless Girl Campaign, more than 650 companies around the world have responded to our outreach by adding a female director. Still others have signaled a willingness to add a female director in the near term. While there is certainly more work to be done, we are pleased with the responsiveness of companies we’ve seen over the past three years.

4. In what geographies does State Street use board gender diversity to inform its proxy voting?

Caitlin: When State Street launched its Fearless Girl campaign in 2017, we introduced a gender diversity voting guideline in the US, UK and Australia. In 2018, we expanded this guideline to Europe, Canada and Japan. In 2020 we are expanding this guideline to Hong Kong and Singapore (22% of Hang Seng companies and 20% of Straits Times companies have all-male boards). As we’ve done with previous markets covered by the guideline, we will be sending letters to all companies in both indices notifying them of the new voting guideline and requesting an engagement that can help us better understand each company’s approach to enhancing gender diversity at the board level as well as throughout the company.

5. How exactly does State Street use its vote when a board has failed to meet gender diversity expectations?

Caitlin: Our preferred approach is to drive greater board diversity through an active dialogue and engagement with company and board leadership. However, in the event that companies fail to take action to increase the number of women on their boards, despite our best efforts to actively engage with them, we use our proxy voting power to effect change—voting against the chair of the board’s nominating and/or governance committee (or the board leader in the absence of a nominating and/or governance committee). In 2020, we will vote against the entire nominating and governance committee, not just the chair, of companies in our target markets if for four consecutive years we have concerns about the lack of gender diversity and are unable to engage in a productive dialogue.


United States: State Street Global Advisors, 1 Iron Street, Boston, MA 02210

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EXP: March 31, 2021