The news that the last all-male S&P 500 company board — Copart, a Dallas-based used car seller — just added a woman to its ranks also shines a light on the financial advisor business. The move to add female board members may be due to studies finding that diversified boards are more creative and make better decisions, but it also can be a tokenism move — especially with just one female board member.
“One female director per company is a good starting place, but at that level there is still a risk of tokenism,” said Meggin Thwing Eastman, ESG research executive director at MSCI, in a statement. “In fact, globally we have seen the rate of women being added to boards with open seats slowing over the last few years. We hypothesize that this phenomenon may be caused in part by some companies feeling they have done what they need to do — and reduced the external pressure — once they have a single female director.”
For perspective on the glacier speed of this movement, she cited a Stanford University study that found the first female board member of a large U.S. company was Clara Abbott of Abbott Laboratories in 1900, while Coca-Cola had its first female board member in 1934.
State Street, which recently moved the Fearless Girl statue across the street from the New York Stock Exchange, recently took further action to signal the firm’s move toward gender diversity, according to Ali Weiner, State Street’s ESG investment strategist.
In a recent webinar, Weiner said that State Street sent letters to all the companies in their global portfolios — numbering in the thousands — asking them to nominate one woman for their boards to push gender diversity.
“The campaign was successful with 35% of the companies nominating a woman or promised to do so,” she said. She added it was a good step but more work is needed. As shareholders, State Street votes for female board members. “We use all the tools at our disposal; voice and vote.”
More specifically for the advisory business, at a recent Pershing RIA Symposium, Mark Tibergien, CEO of BNY Mellon’s Pershing Advisor Solutions, said that his firm is working with the CFP Board Center for Financial Planning to push for more diversity in the business. He pointed out that “only 23% of financial professionals are women, and only 8% are people of color,” adding that this doesn’t jibe with the makeup of the American population. According to the 2010 U.S. Census, 51% of Americans are female, and about 40% are people of color, including African Americans, American Indians, Latinos, Asians and others.
Further, he noted in a recent column in Investment Advisor, “We see that a human capital strategy that consciously recruits and promotes women and minorities brings fresh energy, great ideas and access to new communities of wealth and innovation.”
MSCI’s Eastman says of gender diversity, “Our research suggests that differences in company performance are much more likely to be observed at companies that have a critical mass of female directors — at least three. Academic research has found that this number is where tokenism tends to fall aside and members of underrepresented groups have more equal influence and participation. … There is also a talent utilization angle — when whole groups are underrepresented, by definition companies are probably missing out on some top talent. Beyond this, our own studies also suggest that a critical mass of women on the board has been associated with differences in culture and attitudes at companies.”
Trillium Asset Management Senior Vice President Jonas Kron agrees that this is a start.
“The research tells us that to really achieve the benefits of a gender diverse board, you need a critical mass of at least three women on the board. An S&P 500 with no all-male boards is certainly an important milestone, but there is still a long way to go. This is the end of the beginning.”
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