Greater diversity leads to more perspective, argues asset manager
Investment manager State Street Global Advisors (SSGA) is to send letters promoting gender diversity to the companies it invests in that don’t have any women on their board, warning it will use proxy voting to drive change and create a better gender balance.
‘We strongly believe in the business case that, intuitively, greater diversity leads to more perspective, less groupthink, better decision-making and better financial outcomes,’ says Lynn Blake, chief investment officer of global data equity solutions at SSGA, which invests in more than 3,500 companies representing more than $30 tn in market capitalization.
Before applying the policy, State Street reviewed board gender diversity at companies in the US, the UK and Australia. One in four Russell 3,000 companies have not a single woman on their board, and almost 60 percent of these companies have boards where women account for less than 15 percent of directors, State Street says. Women constitute approximately 21 percent of all S&P 500 directors
SSGA points to research that shows companies with strong female leadership generate better returns than male-dominated firms. The presence of women in leadership positions has indeed been positively correlated with improved performance according to a 2016 report by Washington, DC-based research firm the Peterson Institute for International Economics.
Female board membership is positively correlated with gross revenue, though the correlation becomes insignificant when looking solely at profitable companies, the report finds.
State Street’s support for companies with women in leadership roles is evident through the holdings in its SPDR SSGA Gender Diversity Index ETF. The top five holdings ‒ Pfizer, PepsiCo, Amgen, 3Mand MasterCard ‒ all have at least two women who serve as directors, according to BoardExdata.
‘State Street chose the ETF’s holdings based on its own evaluation of gender diversity across boards, executive management and senior leadership,’ says Blake.
State Street’s own 11-member board has three women.