The big money on Wall Street is finally throwing its weight behind boardroom diversity.
After years of fits and starts, mutual-fund giants including BlackRock Inc., Vanguard Group Inc. and State Street Corp. are embracing shareholder proposals to add more women and minorities as directors. This may signal a tipping point for the decades-long struggle for greater representation.
The shift heartens long-time activists such as Joe Keefe, chief executive officer of mutual-fund firm Pax World Management, which filed its first diversity proposal in 2012. “It can have an enormous impact,” he said. “We will get gender parity on boards at a much quicker pace.”
The moves reflect both a change in thinking and a cool business calculus. Yes, many experts agree, broader representation tends to improve corporate performance. It also happens to resonate with young people, a crucial target market for the investment industry.
Whatever the catalyst, major fund companies — including those that tout their diversity bona fides — see reason for optimism in the years ahead, despite the often-slow progress within their own ranks and recent scandals in Hollywood and beyond.
“Five years ago, people thought we were mildly eccentric and tree huggers,” said Saker Nusseibeh, CEO of London-based Hermes Investment Management, a long-time supporter of diversity. “It’s started to shift now.”
That point was driven home recently when BlackRock and Vanguard, twin giants of stock index funds, backed a shareholder proposal at Hudson Pacific Properties Inc., siding against management on a measure to add women and minorities to its all-male board. Three months later, the California property company named Andrea Wong, a woman of color and former Sony executive, as a director. (Hudson Pacific said it was already committed to diversity.)
This year marked the first time the three giant investors wielded their considerable voting clout in favor such proposals.
“In some cases, you get the feeling that nothing is going to change unless you vote against management,” said Michelle Edkins, global head of BlackRock’s investment-stewardship team, with about 30 members.
The pressure may increase in 2019, when proxy-voting service Glass Lewis plans to recommend that its 1,200-plus investor clients — who manage more than $35 trillion in assets — reject nominations for committee chairs at companies with all-male boards.