State Street Falls Short in Bid for Women Directors -- WSJ

This article is being republished as part of our daily reproduction of articles that also appeared in the U.S. print edition of The Wall Street Journal (July 27, 2017).

Roughly 400 publicly traded American companies with no women on their board ignored a request to make a bigger effort on gender diversity when approached by one of the largest asset managers in the world.

Index-fund giant State Street Global Advisors, which oversees more than $2.5 trillion in assets, had pledged in March to throw its weight behind the issue this year. The company found 468 companies it owns shares of in the U.S. lacked a single female board member. Of that group, the Boston-based firm said about 400 companies failed to address gender diversity in any meaningful way.

The money manager, a unit of custody bank State Street Corp., then voted against the re-election of directors charged with nominating new board members at each of these companies. Directors faced reelection at those companies' latest annual meetings.

The paucity of women directors has drawn more scrutiny in recent years, emerging as a rallying cry for investors seeking to improve companies' governance practices. Progress has been slow. Nearly a quarter of the companies in the Russell 3000 index lack a female director, according to ISS Analytics, a unit of Institutional Shareholder Services.

"The fact that you have over 400 companies was surprising to me," said Rakhi Kumar, head of asset stewardship as State Street Global Advisors, referencing the almost 470 companies that lacked a female board member.

Boards have been slow to add women for various reasons, including their infrequent turnover and preference for experienced chief executives. But there also has been limited pressure from big institutional investors.

State Street hopes to change that picture.

Primarily a manager of exchange-traded funds and other passive investments, the firm reviewed companies within the Russell 3000 Index in the U.S., the U.K.'s FTSE 350 and S&P/ASX 300 in Australia. State Street, which owns a combined 3,500 stocks in those three indexes, said it contacted a total of 476 companies in those countries.

Health-care companies were the worst performing group, accounting for about a quarter of those with no women on their boards.

2020 Women on Boards, an organization that's working to bring better boardroom gender diversity, praised State Street's action this proxy season.

The votes set an example for "companies that may talk about diversity but don't take action," the group's president, Malli Gero, wrote in an email.

In a report last week, 2020 Women found that nearly half of the 75 biggest initial public offerings of the last three years featured companies that lacked board women when they first sold shares to the public.

State Street is among the largest passive fund managers in the world -- a sector that is amassing significant governance power as investors pour billions into lower-cost index-tracking funds like ETFs. Since those investments are through passive vehicles, it doesn't have the ability to simply sell shares in a company. Instead, the firm has to use its voting power to bring about change.

"There are terrific longitudinal studies that show gender diversity leads to better performance," said Ronald O'Hanley, chief executive of State Street Global Advisors. "If there is clear evidence companies aren't making progress, or not attempting to make progress, we will use our power of vote."

Fellow passive investment giant BlackRock Inc. backed eight shareholder proposals this spring promoting gender diversity. In five of those instances, the money manager voted against the nominating committee chairman's re-election.

"We are an engagement-first company," a BlackRock spokesman said. "We meet with 1,500 companies a year to talk about a variety of issues. We do that because we believe a vote against a director or management is the end of the engagement process."

State Street said some of the boards that failed to address their lack of women directors had reasonable explanations. For instance, several shared that they had been close to naming someone when the candidate changed jobs and could no longer serve. In another case, the company's board lost a female director when it went through a merger.

State Street isn't alone in its efforts to add gender diversity to corporate America. The 30% Club, which started in the U.K. and has since expanded globally, encourages companies to promote more women throughout their ranks and chairmen to put more women on boards. Notably, very few of the companies with no female board members came from the U.K.

Write to Justin Baer at and Joann S. Lublin at

(END) Dow Jones Newswires

July 27, 2017 02:47 ET (06:47 GMT)