State Street to Turn Up the Heat on All-Male Boards

State Street Global Advisors said Thursday that it will adopt additional measures to punish companies with all-male leadership.

The asset management firm, which in 2017 began using its heft as the world’s third-largest asset manager to pressure companies on gender diversity at the board level, said it will update new proxy voting guidelines in 2020 for firms that have no women on their boards and have failed to engage in “successful dialogue on State Street Global Advisor’s board diversity program for three consecutive years.” 

As part of the new guidelines, State Street will vote against the entire slate of board members on the nominating committee of any company not meeting its gender diversity criteria. The guidelines will first apply only to companies in the U.S., U.K., and Australia, and then will expand to include Japan, Canada, and continental Europe in 2021.

So far, State Street says that more than 300 companies have added a female board director in response to its demands, and that another 28 have pledged to do so.

State Street’s “Fearless Girl” campaign, named for the statue it installed across from Wall Street’s iconic charging bull sculpture last year, is just one example of how large index providers like State State, BlackRock, and Vanguard Group have become activist investors, using their positions as companies’ biggest shareholders to tackle corporate governance issues.

[II Deep Dive: The New Wave of Activists]

“As the world’s third-largest asset manager, and one of the largest index managers, we are focused on providing our clients with long-term value and investing responsibly to help them achieve their financial goals,” Cyrus Taraporevala, president and chief executive officer of State Street Global Advisors, said in the firm’s statement. “Our commitment to asset stewardship exemplifies that focus as we firmly believe these issues should form part of an integrated investment approach.”

In a separate report Thursday, investment firm Cambridge Associates suggested that gender diverse boards lead to higher financial returns. The firm cited a variety of research, including a 2016 study by the Credit Suisse Research Institute and a 2018 report from Boston Consulting Group, which demonstrated the value of female leadership.

According to the report, companies where women hold at least 50 percent of all leadership positions deliver higher growth in sales and earnings per share, and produce a higher return on assets. Additionally, the consultant said start-ups founded by women generated 10 percent more revenue than male-founded businesses.

“Research has shown time and again that diversity of thought and perspective leads to better investment returns, better business strategies, and stronger organizations as a whole,” said Cambridge managing director Deborah Christie in a statement from the firm.