In recent years, there have been a series of initiatives to increase the diversity of corporate boards. The Nasdaq Stock Exchange now requires listed companies to make progress on that front or explain why they haven’t. Additionally, while several states have enacted laws with similar requirements, California’s board diversity mandate was repealed this year as unconstitutional.
But a new working paper from the National Bureau of Economic Research shows that pressure from big investors may have had a significant impact on gender diversity on boards.
BlackRock, Vanguard and State Street are known as the big three in the investment world. Together, they manage trillions of dollars in assets for large investors and wield tremendous leverage as shareholders.
Starting around 2017, all three went independent and began using their influence to pressure companies to add women to their boards.
“They said, ‘If we don’t think you’re taking serious action, we’re going to vote against your existing board,'” said Todd, a finance professor and co-author at Washington University in St. Louis. Gormley said. – Author of the NBER paper.
The campaign went well, he said. “Companies with more Big 3 ownership added women to boards at a faster rate than companies with less Big 3 ownership.”
Helped increase the number of female directors on S&P 500 companies by 50% between 2016 and 2019.
According to Alison Elias, a business professor at the University of Virginia, this is not always the case when companies add women or people of color to meet quotas.
“Just being on a board is one thing, but I still hear women say, ‘Yeah, I was asked to take notes at a meeting,’ or about certain administrative tasks,” Elias says. Told.
Women still make up only about one-third of large company boards, and racial and ethnic diversity has lagged even further behind changes in gender composition. But Elias said research shows that investors can have a powerful influence.
“We hope that pressure from the business community will normalize this a bit more.”
Whether that momentum will continue in a recession is another matter, she said, and shareholders will be more focused on bottom line profits.
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