Institutional investor proposals call for greater board diversity

February 27, 2015

Practitioner Insights thumbnail 2(Editor’s Note: This post is an excerpt from an article appearing in Practitioner Insights on WestlawNext)

Companies without female directors are facing mounting pressure from a group of institutional investors to increase their boards’ diversity.

These investors have worked with the Thirty Percent Coalition, a group formed in 2011 to address the lack of gender diversity in corporate boardrooms, to file board diversity resolutions at approximately 25 companies this year. Those proposals ask each company to report its plans to increase the representation of women on its board, and to assess the effectiveness of those efforts.

In particular, the proposals request that such report includes a description of how the company’s nominating and corporate governance committee includes women candidates in its pool of director nominees.

These proposals follow the coalition’s third letter-writing campaign, which was launched late last year and urged companies in the S&P 500 and Russell 1000 with no female board representation to “embrace gender diversity.” According to the California State Teachers’ Retirement System, a founding member of the coalition, the letter-writing campaign and follow-up engagement between the coalition’s institutional investors and portfolio companies led 17 companies to appoint women to their boards.

According to the coalition’s recent letter, taking positive action to correct a lack of meaningful gender diversity will contribute to a company’s public image and help generate long-term value for shareholders.

The coalition drew attention to numerous studies that have underscored the nexus between “greater board and management diversity on the one hand, and improved corporate governance and financial performance, on the other.” Despite that evidence, the coalition noted that women held only 16.9 percent of board seats in 2013 — no change from 2012.

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