Boards more white, more male?

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.”