Seek And You Shall Find

Author:Ms Clare Payn

The movement to improve board diversity crosses states and international borders

In 2016, the California State Teachers Retirement System, Ohio Public Employees Retirement System, Netherlands-based APG Group and UK-based Legal & General Investment Management began working together to engage 58 S&P 500 companies in discussions around board diversity, evaluation and refreshment.

At the time the total assets under management for this coalition of global investors was $2.5 trillion. This article is designed to share the experience from this dialogue, with the aim of helping both companies and investors build their understanding of these important topics.

The coalition began by sending a letter to each of the 58 US listed companies sharing examples of good practice around nomination committee charter and proxy statement disclosure, board refreshment processes and milestones for change. Many of the 58 companies responded to the letter, often by proposing a discussion with an independent director.

The coalition's immediate engagement focus of understanding the board composition, nomination and refreshment processes was conducted in an open discussion format. By using this format, companies experienced a comfort level that steered them to initiate conversations on barriers, challenges, and their perceived difficulties related to overall board governance. The breadth of these conversations helped the coalition to better understand company perspectives. Significantly, companies held a near-unanimous view that they want to see improvement in board diversity.

The coalition shared that investors value proxy statements with specific information on their board skill-set matrices, succession planning and refreshment - even expanding to their employee diversification efforts. As of 1 January 2019, 44 of the 58 companies have appointed women to their boards and many of these companies also updated their nominating committee charters or Corporate Governance Principles to include specific best practices; for instance, using an external search firm to expand the pool of board candidates considered.

Common Governance Values and Empirical Evidence

The combination of US-based and global institutional investors sharing common governance questions, while unique, is not startling. Diversity as a strategic enabler is a priority shared by all members of the coalition. The decision to engage companies in the S&P 500 was itself strategic; companies with no women on their...

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