By Charlotte Laurent-Ottomane
From the Summer 2013 Edition of Values
In November 2011, a group of 27 industry leaders, including senior business executives, national women’s organizations, institutional investors, corporate governance experts, and board members, gathered for a high-level summit to address the lack of gender diversity in corporate boardrooms. Prompted by what participants called “glacial progress” on increasing the number of women on U.S. corporate boards—a number that has essentially remained stagnant over the past five years at approximately 14 percent of board seats of S&P 1500 companies—the leaders formed the Thirty Percent Coalition. The Coalition has set a goal of women holding 30 percent of board seats across public companies by the end of 2015. Today, with more than 60 members, the Coalition continues to expand its membership base and push forward its mission.
The flagship initiative of the Thirty Percent Coalition has been driven by members of the Coalition who are institutional investors and are utilizing investment leverage to push for change in boardrooms across the country. With Investor Committee co-chairs from CalSTERS and Walden Asset Management, this group is composed of prominent mutual funds, investment management firms, and pension funds including eight state and city treasurers (representing CalSTERS, Connecticut, Maryland, Massachusetts, New York City, Pennsylvania, Rhode Island, and Washington). Their advocacy is driven by the premise, based on academic research, of a positive correlation between gender diversity, good governance, and long-term corporate performance.
The Coalition has been successful in rallying support in the U.S. investment community. Institutional investors representing $1.2 trillion in assets under management joined with Coalition members, in addition to prominent women’s groups, in sending a letter to 170 public companies asking that they consider incorporating gender diversity as an explicit factor in their director nominating policies and processes and to take tangible steps to place women on their boards. The letter provided model language for nominating charters and identified resources to help recruit qualified women candidates.
“We must do better,” say the signatories in their letter, which asks companies to work with them to bring the number of women on corporate boards from where it is today—with women holding one out of every six to seven board seats—to a point where women will hold 30 percent of board seats by the end of 2015. The Thirty Percent Coalition represents the first time that large institutional investors and national women’s groups have joined forces to press companies to improve their governance by adding gender diversity to their boards.
It makes a powerful statement when investors and women’s organizations together call for action on this issue at leading U.S. companies lacking diversity at the board level. Moreover, the significance of this initiative is magnified when investors follow up with shareholder resolutions for votes at stockholder meetings.
During the 2013 proxy season, Coalition members and supporters filed numerous shareholder resolutions, urging companies to adopt charter language supporting board diversity and to disclose concrete steps to increase representation of women and minority candidates on their boards. Of the 24 shareholder resolutions filed, 16 have been withdrawn, which is an important mark of progress in the Coalition’s initiative. As a result, constructive and cooperative discussions are underway at a number of these companies. For example, one firm amended its disclosure on director nominees as follows: “The board believes that a diverse membership... is an important attribute of a well-functioning board that will enhance the quality of the board’s deliberations and decisions. As a result, the board will seek diversity of background, experience, gender, race, and skills among its members.”
While 30 percent female representation across public company boards by December 2015 is the objective, the Thirty Percent Coalition is not advocating for quotas. Companies are simply being urged to demonstrate their commitment to improve performance on board diversity. Thirty percent is a modest, reasonable goal considering that women comprise about half of the workforce, a majority of college graduates and graduate students, 40 percent of American business owners, and two-thirds of the breadwinners or co-breadwinners in American households.
Meaningful progress on increasing the representation of women among corporate directors is long overdue. Now, the Thirty Percent Coalition is a new force for action.