“What was really surprising was there was a focus on diversity and more pronounced conversation in the market in the U.K. and Australia on gender particularly,” but the firm was still surprised to see boards with no women at all, said Ms. Kumar. “There is actual research that shows having more gender-diverse boards helps long-term performance. That was the genesis of the thinking,” she added.
In the past the firm had engaged with companies, and this year “we have come up with a screening mechanism to identify the companies with low gender diversity — i.e. zero — starting with the outlier companies,” she said. A company might not have women on the board but have a good reason for that, she said; therefore, SSGA executives will examine the information on a case-by-case basis.
SSGA launched an exchange-traded fund last year focused on gender diversity in the workplace, which was seeded with $250 million by the $178.7 billion California State Teachers' Retirement System, West Sacramento.
The case for gender diversity is supported by data. A study by MSCI Inc. showed companies with strong female leadership generated a return on equity of 10.1% per year vs. 7.4% for those without a critical mass of women at the top. The data were as of September 2015. A study the same year by the McKinsey Global Institute showed an additional 26%, or $28 trillion, could be added to global gross domestic product by 2025 if women were to participate in the economy in an identical way to men.
But separate data also show there is still an issue. SSGA said one in four Russell 3000 firms do not have one woman on the board, and in almost 60% of the companies in the index, female representation amounts to less than 15% on their boards.
Further data were presented at the Pensions and Lifetime Savings Association's annual investment conference, held in Edinburgh March 8-10. “What our research shows us is that 82% of (pension fund trustees) are male,” said Lesley Titcomb, CEO at The Pensions Regulator, which oversees workplace pension schemes, speaking on a panel to discuss diversity.
Also on the panel, Chris Hitchen, CEO of RPMI, which runs the assets of the £25 billion Railways Pension Scheme, London, said: “We are only a work in progress in that regard, but we are taking the steps we think we can do to ensure we are conscious about our behavior.” One example is ensuring resumes are “de-genderized — at least you have more chance of getting a diverse list of candidates.”
Also at the conference Martin Gilbert, CEO of Aberdeen Asset Management PLC, said he did not understand why investment management isn't attracting more female candidates.
He said the push for more women in the sector needs to start at the graduate level, and the £302.7 billion ($372 billion) money manager tries to be “50-50 on that. But on the applications it's still about 70-30. We have got to get more women to apply. And we need to get more women into the executive committees as well. The boards are fine oddly enough — there seems a lot of capable women who can go on PLC boards and that sort of thing. It's really at that executive level that we're still struggling.”
He said Aberdeen executives are “trying very hard on that, to move women up the management ladder,” not just in terms of running assets but also in running the company.
But it is not just about gender diversity. Panelists and other executives said diversity also encompasses age, religion, race and other issues. Said Ms. Titcomb: “Only 8% of trustees are 40 or under. And only one in 10 chairs of trustees are female. I think what strikes me therefore, and I've worked in the financial services industry as a regulator for over 20 years now, is that the trustee board sector is a little bit behind the game here and is going to face an increasing challenge obviously from a diversity and inclusion perspective in terms of what that means in decision-making, but there's actually just a demographic challenge there as well about an aging population of trustees.”