Investing to Empower Women
More and more investors recognize the importance of diverse leadership to a company’s overall performance. We are encouraged to see large asset managers join with us in encouraging the representation of women on boards and in senior management. We believe such a step is important to the long-term success of the companies in which we invest. Diversity as a value-driver makes good sense to Boston Common; we were founded as a women- and minority-led firm and have been deliberate in building a team with diverse experiences, skills sets, and backgrounds. Many recent studies support our view. For example, McKinsey found that ‘companies in the top quartile for gender or racial and ethnic diversity are more likely to have financial returns above their national industry medians’.[1]
Diversity as a lens
As part of our Integrated ESG investment approach, we examine women’s representation on company boards and in senior management. We seek to understand whether a company has policies and guidelines to encourage equal opportunities and encourage diversity in the workplace, and how those policies are implemented. We then engage with companies to address any gaps in their policies. As a signatory to the Women’s Empowerment Principles—a set of seven commitments promoted by the United Nations to support gender equality in business, government, and society—we integrate gender equality into our overall sustainability assessments of companies.
The Women’s Empowerment Principles:
Boston Common utilizes the Women’s Empowerment Principles as a framework to encourage gender equality across our investments
1. Establish high-level corporate leadership for gender equality
2. Treat all women and men fairly at work – respect and support human rights and nondiscrimination
3. Ensure the health, safety and well-being of all women and men workers
4. Promote education, training and professional development for women
5. Implement enterprise development, supply chain and marketing practices that empower women
6. Promote equality through community initiatives and advocacy
7. Measure and publicly report on progress to achieve gender equality
Though research suggests that companies with women in leadership positions tend to have better than average approaches on a range of sustainability issues, few companies excel at addressing the pernicious, under-representation of women in leadership. Using our sustained engagement model, we employ three broad approaches to encourage companies to improve their performance on gender equality over the long term.
- Advocate for Gender inclusive board recruitment
We think one of the most critical platforms investors have to communicate their stance on board diversity is through their proxy voting guidelines. Boston Common has historically had a strong stance on gender diversity on boards across all markets. We currently vote against boards in Australia, Canada, Europe and the US if women do not comprise at least 25% of the board post-election. In 2016, 54% of our U.S. proxy votes were against boards that did not meet our gender and minority diversity guidelines. In 2016, we added gender diversity to our proxy voting guidelines in 10 Asian countries and will vote against boards without at least one woman member.
We also file shareholder proposals asking companies to make diversity part of every director search. In 2016, we co-filed resolutions with Cognizant Technologies and Discovery Communications (for the second year) asking them to revise their procedures for directors nominations. We negotiated a withdrawal with Cognizant after they agreed to revise their proxy materials to add explicit reference to diversity and went to a vote with Discovery. Though we failed to get a majority vote, Discovery quietly added a woman board member in November 2016. Our requests, alongside other investors were no doubt part of the matrix of considerations the nominating committee took into account.
- Collaborate with other investors
We regularly work with other investors to raise sustainability concerns in our portfolio companies and across sectors. In 2016, Boston Common joined a group of investors that wrote to the constituents of the S&P 100 asking for information about how the companies are addressing pay equity and requesting that they publicly disclose the results of a company pay analysis. We now participate in regular meetings with a group of investors encouraging gender pay equity in investee firms—sharing research and successful strategies employed in negotiations with companies. We are also an investor-member of the 30% Coalition, a national non-profit dedicated to increasing the gender and racial diversity of boards at publicly listed companies. The Coalition is responsible for a multi-year letter-writing campaign directed to the largest publicly listed companies in the US with no women on their boards. Since the coalition began their ‘Adopt a Company’ campaign in January 2012, 62 US companies have appointed a woman to their board.
- Support Gender-friendly Government Policy & Regulation
Last year, the Government Accountability Office released a study estimating that it would take more than 40 years to achieve gender parity on boards, even if equal numbers of women and men are appointed going forward.[2]
We believe policy levers are an essential tool to help increase the urgency among nominating committees at public companies to address the lack of diverse boards and senior management teams. More disclosure from companies on their recruitment processes can help investors benchmark performance and distinguish leaders from laggards. To help address this issue, last year we submitted letters to both the EEOC (Equal Employment Opportunity Commission) and the SEC (Securities and Exchange Commission) encouraging improved disclosure on diversity indicators.
Closing the Gap
In 2017, we will employ the WEP framework to engage with a wider group of companies in our portfolios—benchmarking them on their current practices and encouraging them to be more systematic in their disclosure of support for equal opportunities strategies and outcomes. By employing dialogue with companies, using our proxy votes, filing shareholder resolutions and working together with other investors, Boston Common will continue to encourage companies to enhance transparency on gender equality within firms and encourage companies to proactively identify and address structural barriers to women’s participation.
[1] See for example ‘Diversity Matters’ McKinsey & Co. http:www.mckinsey.com/Insights/Organization/Why_diversity_matters February 2015 or ‘CS Gender 3000: Women in Senior Management’ Credit Suisse research Institute September 2014 https://publications.credit-suisse.com/tasks/render/file/index.cfm?fileid=8128F3C0-99BC-22E6-838E2A5B1E4366DFhttps://wwwcredit-suisse.com [2] U.S. Government Accountability Office Corporate Boards: ‘Strategies to address Representation of Women include disclosure requirements’ January 2016 http://www.gao.gov/products/GAO-16-30
See for example McKinsey and Co ‘Diversity Matters’
The information in this document should not be considered a recommendation to buy or sell any security. There is no assurance that any securities discussed will remain in an account’s portfolio at the time you receive this document. The securities discussed do not represent an account’s entire portfolio and may represent only a small portion of an account’s holdings. It should not be assumed that any securities transactions we discuss were or will prove to be profitable. Past performance does not guarantee future results. All investments involve risk, including the risk of losing principal.
