What can and should be done to boost the number of women on the boards of investment and wealth management organizations?
There may be a great deal of focus about what “Millennials” want, but equally, and arguably more important is the continued need for the wealth industry to recruit more women and to listen more to women’s concerns. This is not about politics or good public relations, but an essential, hard-nosed business requirement. With women increasingly important holders of wealth, businesses cannot afford to have “glass ceilings” to female advancement.
With such ideas in mind, the editors of this publication are pleased to share these insights from Kathy Freeman Godfrey; she is the president of her eponymous business, Kathy Freeman Company, a national, retained, executive search firm founded in 1992 that specializes in client-facing executive corporate leadership and board roles exclusively within the investment industry.
The editors of this news service are pleased to share this contribution to debate; they don’t necessarily agree with all views of guest contributors and invite readers to respond.
Is it possible that 468 publicly traded companies across America do not have a single woman on their board of directors?
Or that 400 of them failed to address gender diversity in any meaningful way?
In fact, those are the findings from State Street Global Advisors’ recent research on the board makeup of companies they own in their investment portfolios.
As a result of these findings, SSGA initiated a campaign in March to get more women into corporate boardrooms across America. To make the point even further, SSGA voted against the re-election of board directors charged with nominating new directors at 400 companies that it holds. SSGA is also responsible for the installment of the “Fearless Girl” statue directly opposite Wall Street’s iconic bull sculpture.
So why include women in leadership positions?
-- The Peterson Institute for International Economics found that when a company employs women in leadership positions, it can expect to increase profitability.
-- In the companies with the top 20 per cent of financial performance, 27 per cent of leaders are women. Among the bottom 20 per cent of financial performers, only 19 per cent of leaders are women, according to another study.
SSGA should be applauded for its efforts. Similar actions should be taken by the investment industry to accelerate its own momentum in diversifying their boardrooms.
According to the Gender Diversity Index by 2020 Women on Boards, the financial services industry is one of only five in which women make up 20 per cent of the boards.
Of the 115 companies surveyed by the organization in 2016, 21.3 per cent of the boards in these financial services were comprised of women. That’s only up from 20.7 per cent in 2015, when 114 companies were surveyed.
While some progress has been made, female board representation in corporate America remains overwhelmingly male. For comparison purposes, almost 47 per cent of the US workforce is female.
This imbalance needs to change. There needs to be a concerted effort, so we offer the following suggestions to move more women onto corporate boards in the investment industry:
-- Set a mandatory retirement age for board members. Establish retirement guidelines to bring fresh perspectives into the board room. Without a hard-and-fast rule, it’s difficult for one colleague to tell another it is time to retire. A bylaw would eliminate the reluctance to do so. With the aging of boards across the investment industry, now is an opportune time to institute that change.
-- Upgrade the quality of the boards. In the past, many firms, especially mutual fund companies, have seeded their boards with friends and family resulting in a cultural vs. competency bias. The growing complexities across the investment industry, along with increased competitive pressure, mandate that directors are armed with a more sophisticated understanding of regulatory requirements and distribution challenges. Conduct an assessment to determine where the holes are in your board and be pointed about strengthening weaknesses with each new member. It’s imperative that each board member possesses unique and complementary skill sets able to provide effective oversight and to support the success of the underlying business.
-- Fully diversify your board. Board appointments shouldn’t stop with gender diversity. The percentage of minorities on corporate boards has continued to grow slowly. Some groups are making virtually no gains, according to the Alliance for Board Diversity. While a handful of asset management firms have done well in diversifying their boards, there’s ample opportunity for improvement across the industry.
The evidence is clear that diversity is not only the right thing to do, but it is also more profitable in the long run. SSGA and others committed to diversity are absolutely on the right path and deserve our full support.