Boards more white, more male?

Houston Chronicle Sunday - - VOICES & VIEWS - By Laura Colby

Share­holder ac­tivists say they shake up com­pa­nies by bring­ing in new, bet­ter ideas. What they don’t bring, it turns out, is women. Or peo­ple of color.

Com­pa­nies tar­geted by ac­tivists end up with more white men on their boards, of­ten re­plac­ing women and mi­nori­ties in the process, ac­cord­ing to a study by proxy vot­ing firm ISS. The re­searchers looked at 380 board seats spread across 93 com­pa­nies in the Stan­dard &Po or’ s 1500 In­dex tar­geted by ac­tivists be­tween 2011 and 2015.

The study, which looked at di­rec­tors nom­i­nated by dis­si­dents and by the boards them­selves in re­sponse to ac­tivism, found that women made up 8.4 per­cent of this group, com­pared with 25 per­cent of new di­rec­tors at all S&P 1500 com­pa­nies in 2015. Peo­ple of color ac­counted for fewer than 5 per­cent, com­pared with 13 per­cent of new S&P 1500 di­rec­tors that year.

The de­cline is notable es­pe­cially be­cause it came dur­ing a pe­riod when women and peo­ple of color in­creased their board rep­re­sen­ta­tion over­all.

“It’s a se­ri­ous anom­aly,” said Jon Lukom­nik, ex­ec­u­tive di­rec­tor of the In­vestor Re­spon­si­bil­ity Re­search Cen­ter In­sti­tute, which fi­nanced the re­search. “In an ac­tivist sit­u­a­tion, di­ver­sity seems to be left off the list. Ac­tivists have not been con­sid­er­ing di­ver­sity — and they should.”

Mean­while, in­sti­tu­tional in­vestors are in­creas­ingly de­mand­ing that boards in­clude more women and peo­ple of color, of­ten cit­ing re­search that shows di­verse groups make bet­ter de­ci­sions and lead to greater prof­itabil­ity.

“Some of these things get for­got­ten when ac­tivism en­ters the scene,” said Pa­trick McGurn, one of the study’s au­thors. “It should be of con­cern to in­vestors, and for the board it may be an op­por­tu­nity lost.”

Be­cause many boards have few women or mi­nor­ity mem­bers to start with, ac­tivist cam­paigns leave some com­pa­nies with a group of di­rec­tors that’s en­tirely male, en­tirely white or both. The re­port didn’t spec­u­late as to why ac­tivist ac­tion seems to push out women and mi­nori­ties. But most of the dis­si­dents are white men from the hedge fund in­dus­try, and their net­work of board nom­i­nees may come from “a good old boys net­work,” Lukom­nik said. “Many ac­tivists have re­peat nom­i­nees and they tend­to­benon-di­verse.”

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