State Street Global Advisors' Guidance on Enhancing Gender Diversity on Boards

Background
Research shows that companies with greater levels of gender diversity have stronger financialperformance as well as fewer governance-related issues such as bribery, corruption, shareholder battles and fraud.1,2,3 A January 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.4

At SSGA, we view gender diversity as one of many ways aboard can introduce a varied set of skills and expertise among its directors to help improve financial performance. Gender diversity on boards has been a thematic engagement area for SSGA since 2015. During our conversations with companies, most boards have been supportive of enhancing gender diversity but cite a limited pool of suitable female director candidates as a primary obstacle to achieving greater diversity in the boardroom. However, based on  our discussions, we have found that current practices for nominating directors as well as behavioral biases that continue to undervalue the contributions of women in the workplace are  the leading obstacles. These include:

  • Excessive reliance on existing director networks and connections that continue to be the primary source for identifying director candidates
  • Requiring that all director nominees have CEO experience to be considered to serve on boards
  • Lack of female representation in leadership positions on boards and in senior management to help guide the companies on their journey to diversify the organization5,6
  • Limited appreciation for and understanding of the value and need for greater gender diversity within organizations
  • Lack of efforts to address behavioral gender biases inherent in workplace culture and HR-related practices within organizations
  • Limited organizational support in helping individuals achieve work-life balance, which can stymie the career progression of women, thereby adversely affecting the pipeline of women leaders

 

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Disclaimer

1 "Why Diversity Matters" McKinsey, Feb 2015.
2 "Women on Boards: Global Trends in Gender Diversity on Corporate Boards" MSCI, Nov 2015.
3 "Is Gender Diversity Profitable?" Peterson Institute for International Economic, Feb 2016.
4 "The Effect of Gender Diversity on Board Decision-making: Interviews with BoardMembers and Stakeholders” The Conference Board, Jan 2017.
5 As of December 2017, only 9.6% of the Australian Securities Exchange 100 (ASX 100); 4.9% of the Toronto Stock Exchange Composite Index (TSX Composite); 8.2% of the STOXX Europe 50; 1% of the Tokyo Stock Price Index 100 (TOPIX 100); 0% of the Financial Times Stock Exchange 100 (FTSE 100); and 4.4% of the Standard & Poors 500 (S&P 500) are led by Female Chairs, while only 4.3% of the Australian Securities Exchange 100 (ASX 100); 1.8% of the Toronto Stock Exchange Composite Index (TSX Composite); 0% of the STOXX Europe 50; 0% of the Tokyo Stock Price Index 100 (TOPIX 100); 6.4% of the Financial Times Stock Exchange 100 (FTSE 100); and 5.7% of the Standard & Poors 500 (S&P 500) have Female CEOs. Source: ISS Analytics as of December 2017.
6 Board profiling universe includes 94 companies listed on the Australian Securities Exchange 100 (ASX 100); 223 companies listed on the Toronto Stock Exchange Composite Index (TSX Composite); 49 companies listed on the STOXX Europe 50; 100 companies listed on the Tokyo Stock Price Index 100 (TOPIX 100); 94 companies listed on the Financial Times Stock Exchange 100 (FTSE 100); and 495 companies listed on the Standard & Poors 500 (S&P 500). Source: ISS Analytics as of December 2017.
7 Board profiling universe includes 289 companies listed on the Australian Securities Exchange 300 (ASX 300); 709 companies listed on Toronto Stock Exchange (TSX); 593 companies listed on the STOXX Europe 600; 500 companies listed on Tokyo Stock Price Index 500 (TOPIX 500) (as of June 2017); 302 companies listed on the Financial Times Stock Exchange 350 (FTSE 350); and 2,879 companies listed on the Russell 3000. Source: ISS Analytics as of December 2017 unless otherwise noted.

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ID11977-2014436.2.1.GBL.RTL 0218 Exp. Date: 02/28/2019