Happy International Women’s Day!

According to the latest Equilar Gender Diversity Index (GDI), based on the current rate of growth, board gender parity for companies in the Russell 3000 is now expected to be achieved by 2048, an advance from the estimate published in the inaugural 2017 GDI, which did not project parity until 2055. At that point, women held only 15.1% of board seats for the Russell 3000, compared to 16.5% as of the end of 2017. Should we cheer?

The number of boards with no women directors has also declined from 25% in 2016 to 20.8% in 2017, Equilar reports. In addition, there were 32 boards with women directors at the 50% level. (Let’s hear it for General Motors—not just a woman as CEO/Chair, but also true gender parity on the board.) Interestingly, smaller companies appear to be lagging; among the Fortune 500, the percentage of women directors at the end of 2017 was 22.5%.

Possibly, Equilar suggests, the new voting guidelines from proxy advisory firms Glass Lewis and ISS may be having some impact. In its 2018 voting guidelines, Glass Lewis advised that, in 2018, board gender diversity will be one of the considerations in evaluating companies’ oversight structures. However, starting in 2019, Glass Lewis will generally recommend votes against the chair of the nominating and corporate governance committee where the board includes no women directors. Moreover, “[d]epending on other factors, including the size of the company, the industry in which the company operates and the governance profile of the company, we may extend this recommendation to vote against other nominating committee members. Also, when making these voting recommendations, we will carefully review a company’s disclosure of its diversity considerations and may refrain from recommending shareholders vote against directors of companies outside the Russell 3000 index, or when boards have provided a sufficient rationale for not having any female board members, or have disclosed a plan to address the lack of diversity on the board.” ISS voting guidelines for 2018 provide that, although it will not make adverse vote recommendations as a result of the absence of gender diversity, it will “[h]ighlight boards with no gender diversity.” In addition, it will vote for proposals requesting reports on a company’s efforts to diversify the board, and will vote on a case-by-case basis on proposals asking a company to increase board diversity.

And perhaps even more significant, suggests Equilar, may be the emphasis placed on board gender diversity by institutional investors such as BlackRock, State Street and Vanguard.


In its survey of over 60 institutional investors with an aggregate of $32 trillion under management, the EY Center for Board Matters reported that, among investors’ top priorities for companies in 2018, board composition, particularly gender diversity, was a top priority for 82%. About half of respondents reported that they consider board diversity in voting, while a quarter do so in the context of proxy contests and shareholder proposals. The driver appears to be the “interest in effective board composition, given the wide range of studies demonstrating the benefits of diversity, including how diverse perspectives enhance issue identification and problem-solving ability and impede ‘group think.’” See this PubCo post.

And, in its voting guidelines for 2018, BlackRock, reportedly the largest asset management firm (with $6.3 trillion under management), makes clear that it expects “boards to be comprised of a diverse selection of individuals who bring their personal and professional experiences to bear in order to create a constructive debate of competing views and opinions in the boardroom. In addition to other elements of diversity, we would normally expect to see at least two women directors on every board.” In identifying candidates, BlackRock suggests that boards regularly assess the skills, performance and diversity of experience and expertise of current directors and consider how new directors might enhance them. BlackRock also encourages disclosure of board views on the “mix of competencies, experience, and other qualities required to effectively oversee and guide management in light of the stated long-term strategy of the company,” as well as the board’s process for identifying candidates, the board self-evaluation process and the consideration given to board diversity. If BlackRock believes “that a company has not adequately accounted for diversity in its board composition, [it] may vote against the nominating/governance committee members.” (See this PubCo post.)

According to the WSJ, BlackRock’s global head of investment stewardship sent letters to about 300 companies in the Russell 1000 with fewer than two women directors asking them to disclose their approaches to diversity and to establish a timeframe for improvement. The letter also cautioned that BlackRock believes that “a lack of diversity on the board undermines its ability to make effective strategic decisions. That, in turn, inhibits the company’s capacity for long-term growth.” Note that, in the past, BlackRock has frequently put its vote where its mouth is, having voted in favor of a number of proposals for board diversity. In its Investment Stewardship Report for Q2 2017, BlackRock indicated that, in the second quarter, it supported eight out of nine shareholder proposals that requested the adoption of a policy on board diversity or disclosure around plans to increase board diversity. (See this PubCo post.)

BlackRock is certainly not the only asset manager to try to tackle this issue. State Street Global Advisors, which manages $2.47 trillion in assets, announced in this press release that it was “calling on the more than 3,500 companies [in which] State Street invests on behalf of clients, representing more than $30 trillion in market capitalization to take intentional steps to increase the number of women on their corporate boards.” (See this PubCo post.) This article in the WSJ reports that, in 2017, State Street “voted against the reelection of directors at 400 companies…on grounds they failed to take steps to add women to their boards.” According to the article, State Street found that 476 companies in its portfolio “lacked a single female board member. Of that group, the Boston-based firm said 400 companies failed to make any significant effort to address the issue.” As a result, State Street voted against members of the nominating committees of those companies’ boards. Of the 476 companies, the firm reported that “it had productive discussions with 42 that had zero female directors. In 34 instances, neither the chairman of the board’s nominating and governance committee nor the panel’s senior member came up for reelection this year.” (See this PubCo post.) Vanguard also recently announced, in its Investment Stewardship Report for 2017, that it too has been taking a more active role in advocating effective corporate governance at its portfolio investments, including advocating for independent and diverse boards. (See this PubCo post.)

And, in 2017, NYC Comptroller Scott Stringer, who oversees the NYC pension funds, announced the Boardroom Accountability Project 2.0, focused on, among other things, corporate board diversity. To launch the new campaign, Comptroller Stringer called on the boards of 151 U.S. companies—80% of which are in the S&P 500—“to disclose the race and gender of their directors, along with board members’ skills, in a standardized ‘matrix’ format—and to enter into a dialogue regarding their board’s ‘refreshment’ process.” Stringer attributed the current “persistent lack of diversity on corporate boards” to a “nomination and ‘election’ process that is effectively controlled by the existing board—and as a result, more akin to a coronation. This absence of board diversity can be traced to boards’ failure to cast a wide net when looking for new members. According to PwC’s 2016 Annual Corporate Directors Survey, 87% of directors said they rely on board member recommendations to recruit new directors, while only 18% said they consider investor recommendations.”