Investors question macho boardrooms
sydney/melbourne — All-male boards take note: your biggest investors have run out of patience.
The Australian Council of Superannuation Investors (ACSI) — whose members have over A$1.5 trillion ($1.1 trillion) of funds under management — have pledged to vote down boards that aren’t making sufficient progress on gender diversity.
“Our assessment is that engagement has failed,” ACSI CEO Louise Davidson said. “We’ve spent a lot of time and provided lots of opportunities for companies to really get their act together. That has not happened. So, therefore, we fall back to the next lever we’ve got, which is to start voting.”
Institutional investors globally are increasingly concerned that too many firms are dragging their heels in appointing women — despite the body of evidence that backs diversity. Companies with strong female leadership made an annual return on equity of 10.1 per cent in 2015 versus 7.4 per cent for those without, MSCI research shows. A 2016 Credit Suisse Group survey of over 3,000 firms found more diverse boards achieved superior stock performance.
“Investors holding companies to account for their progress on gender diversity in the boardroom will have a massive impact,” said Allyson Zimmermann, Zurich-based executive director at Catalyst Europe, a global organisation focused on workplace inclusion. “We’re seeing that shareholders and investors are increasingly focused on the risk of not having a gender diverse board.”
In Australia, the pace of change has slowed. While women hold 25 per cent of board positions, up from 8.3 per cent in 2009, three males have been appointed for every female so far this year, according to the 30% Club. The group aims to reach its 30 per cent target next year.
Patricia Cross, head of the Australian chapter of the 30% Club, is “deeply concerned” by the decreased appointment rate: “I think it’s time for these beneficial owners, what I’d call the ‘real’ owners, to begin to flex their muscle in the diversity agenda,” she said.
ACSI is taking up that call. Come this annual general meeting season, the superannuation group will start recommending its members vote against the reelection of incumbent directors — starting with the chairman of ASX 200 companies which still have no women on their boards.
While ACSI members’ ownership of ASX 200 companies isn’t sufficient on its own to unseat a director, its enough to send a “very strong” message, said Davidson. “Hopefully it will set some precedents.”
The action echoes moves in the US, where State Street Corp in March said it would begin voting against boards that are not taking “concrete steps” to improve gender diversity. The Boston-based fund manager also erected the statue of a “fearless girl” staring down Wall Street’s famous charging bull to draw attention to the lack of corporate diversity. — Bloomberg
Investors holding companies to account for their progress on gender diversity in the boardroom will have a massive impact Allyson Zimmermann, executive director at Catalyst Europe