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.
ETFs trade like stocks, are subject to investment risk, fluctuate in market value and may trade at prices above or below the ETFs net asset value. Brokerage commissions and ETF expenses will reduce returns.
Standard & Poor's®, S&P® and SPDR® are registered trademarks of Standard & Poor's Financial Services LLC (S&P); Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC (Dow Jones); and these trademarks have been licensed for use by S&P Dow Jones Indices LLC (SPDJI) and sublicensed for certain purposes by State Street Corporation. State Street Corporation's financial products are not sponsored, endorsed, sold or promoted by SPDJI, Dow Jones, S&P, their respective affiliates and third party licensors and none of such parties make any representation regarding the advisability of investing in such product(s) nor do they have any liability in relation thereto, including for any errors, omissions, or interruptions of any index.
Distributor: State Street Global Advisors Funds Distributors, LLC, member FINRA, SIPC, an indirect wholly owned subsidiary of State Street Corporation. References to State Street may include State Street Corporation and its affiliates. Certain State Street affiliates provide services and receive fees from the SPDR ETFs. ALPS Distributors, Inc., member FINRA, is the distributor for DIA, MDY and SPY, all unit investment trusts. ALPS Portfolio Solutions Distributor, Inc., member FINRA, is the distributor for Select Sector SPDRs. ALPS Distributors, Inc. and ALPS Portfolio Solutions Distributor, Inc. are not affiliated with State Street Global Advisors Funds Distributors, LLC.
THIS SITE IS INTENDED FOR QUALIFIED INVESTORS ONLY.
No Offer/Local Restrictions
Nothing contained in or on the Site should be construed as a solicitation of an offer to buy or offer, or recommendation, to acquire or dispose of any security, commodity, investment or to engage in any other transaction. SSGA Intermediary Business offers a number of products and services designed specifically for various categories of investors. Not all products will be available to all investors. The information provided on the Site is not intended for distribution to, or use by, any person or entity in any jurisdiction or country where such distribution or use would be contrary to law or regulation.
All persons and entities accessing the Site do so on their own initiative and are responsible for compliance with applicable local laws and regulations. The Site is not directed to any person in any jurisdiction where the publication or availability of the Site is prohibited, by reason of that person's nationality, residence or otherwise. Persons under these restrictions must not access the Site.
Information for Non-U.S. Investors:
The products and services described on this web site are intended to be made available only to persons in the United States or as otherwise qualified and permissible under local law. The information on this web site is only for such persons. Nothing on this web site shall be considered a solicitation to buy or an offer to sell a security to any person in any jurisdiction where such offer, solicitation, purchase or sale would be unlawful under the securities laws of such jurisdiction.
Before investing, consider the funds' investment objectives, risks, charges and expenses. To obtain a prospectus or summary prospectus which contains this and other information, call 1-866-787-2257, download a prospectus or summary prospectusnow, or talk to your financial advisor. Read it carefully before investing.
Not FDIC Insured * No Bank Guarantee * May Lose Value