State Street Global Advisors launched its “fearless girl” campaign in the US, in which it voted against the nominating committee of companies that did not add at least one woman on their board.
The nominating committee is in charge of appointing the chairman of the board and its members.
After the US, SSGA launched the campaign in Canada, Europe, Japan and Australia. This month, the firm will be expanding its gender diversity voting guidelines to Hong Kong and Singapore, according to Benjamin Colton, the firm’s Boston-based co-head of global asset stewardship.
“We have identified six companies in Singapore and 11 companies in Hong Kong that we’ve seen as not having a woman on their board,” he said during a conference call today.
Colton declined to name the companies and would only say that they are constituents of the Straits Times Index in Singapore and the Hang Seng Index in Hong Kong.
“We will start engaging with those companies and will be sending letters. We’ve also issued guidance to those companies on how they can increase the level of diversity on their boards,” he added.
Colton explained that the firm chose Hong Kong and Singapore because most companies operating in both markets have started adding women into their boards. In Hong Kong, board diversity has been driven by the regulator.
“Those companies that we have identified that didn’t have a woman on the board are really becoming laggards and outliers among the top players of those indexes,” he said.
SSGA said it plans to start voting against the chairman of the nomination committee if a company does not take appropriate action. After three years, if a company has not yet taken any action, the firm will be voting against the full nomination committee, Colton said.
Challenges of the campaign
Since the campaign began, 681 of the 1,384 companies identified by SSGA have responded by adding a female director, according to Colton, adding that other institutions and asset managers have also added gender diversity voting guidelines to companies. Other firms that have gender diversity voting guidelines include Impax Asset management, BMO Global Asset Management and 18 Asset Management, according to their websites.
Colton acknowledged that he may face challenges when engaging with Hong Kong- and Singapore-based companies and expects the same experiences he had in Japan.
“Japan had a very low level of gender diversity even at the executive management level. So, the biggest challenge is finding candidates. We’ve laid out guidance for the different ways that companies can enhance their pipeline, such as developing key performance indicators (KPIs) and targets.”
Another challenge is changing the mentality of companies. For example, a Japanese company that SSGA engaged with previously nominated a woman as a statutory auditor instead of adding her to the board.
The Japanese company said that an auditor would have the same responsibilities of a board member, adding that the board “is just for CEOs”.
“I think companies need to start thinking outside the box in terms of their nomination and think about what other expertise they can have in their board.”
Impact on portfolios?
However, Colton would not directly answer whether engagement activities will have an impact on its actively-managed funds, such as whether a strategy will divest a company that does not satisfy the diversity demands.
“We have different strategies, so I won’t be able to comment specifically on changes to any of them,” he said.
The bulk of SSGA’s $3.12trn AUM is in passive strategies.
“As index managers, we will be holding these companies for a very long period of time. That enhances the case for voting against them. It is important for us to push these issues and to challenge them to have more diversity on their board.”
Colton added that he believes having a diverse board should enhance a company’s performance over the long-term.
