"Diverse Boards…not only encourage better leadership but also contribute to better all-round performance, engagement and innovation, and ultimately increased corporate performance for both the company and its shareholders."
Sir Winfried Bischoff, Chairman, Financial Reporting Council (30April 2015)
The 30% Club believes that it is important for investors to take into account the proportion of women on boards, when considering company reporting and appointments to the board. The purpose of the Investor group is to help coordinate the investment community’s approach to the issue, in particular to explain the investment case for more diverse boards; to encourage all investors to engage on the issue of board diversity with chairmen and management teams, and to consider the issue when voting on the Report & Accounts and the appointment and re-election of board members. While we are strongly supportive of voluntary targets over quotas, we believe that it is important that investors actively oversee companies’ actions. We encourage investors to engage with companies in the first instance. However, we believe that, over time, this oversight should extend to AGM voting in the event of inadequate board leadership. As a general approach, this could involve voting action against listed companies in two areas: Directors (re)election – Board Chairman and/or Nominations Committee Chairman – the nominations committee should ensure that the board has the appropriate range and balance of skills, experience, independence and knowledge. The chairman of this committee shares a responsibility with the board chairman for ensuring that directors are appointed on merit, against objective criteria and with due regard for the benefits of diversity. Investors could consider not supporting the nominations committee chairman and/or board chairman of those companies that still fall short of expectations. Report & Accounts – Companies should include disclosure on their diversity policy and implementation (or make reference to disclosure elsewhere) in the Report & Accounts. Investors could consider withholding support on Report & Accounts resolutions if the diversity statement is not considered satisfactory (for example, if a statement does not include specific reference to a stated policy and/or actions regarding increasing diversity throughout an organisation) or there is no clear evidence that diversity is being sufficiently considered by the board. For examples of best practice disclosure, please see Women on Boards: Benchmarking early adopters of the Corporate Governance Code 2012 (Cranfield School of Management, November 2012).
While there is no shortage of reasons to support diversity on social and ethical grounds, a growing body of empirical evidence corroborates the intuitive argument that more diverse boards are more effective than ‘identikit’ boards in delivering better decision-making. A compelling outcome of Lord Davies’ review was the economic and business case for addressing the gender imbalance in the current structures of companies’ boards, which moves the debate away from a social issue to an urgent business imperative. This research, as well as common sense, indicates that more diverse boards will be more effective, and it is around the concept of board effectiveness that successful engagement can be undertaken. There are many consequences of a lack of diversity for board effectiveness, including a lack of appropriate representation and understanding of a company’s customers, workforce and geographic footprint, all key to successful delivery of strategy. Importantly, increased diversity on the board is likely to reduce the potential for entrenchment and groupthink, and will further widen the potential talent pool for appointments.
Aberdeen Asset Management, Allianz Global Investors, Aviva Investors, Axa Investment Management, BlackRock Asset Management, BMO Global Asset Management, Church Investors Group, Columbia Threadneedle, EdenTree Investment Management, Goldman Sachs Asset Management, Hermes Fund Managers, Hermes Investment Management, HSBC Bank Pension Trust UK , J P Morgan Asset Management, Jupiter Asset Management, Legal & General Investment Management, Local Authority Pension Fund Forum, London Pensions Fund Authority, Mercer, Newton Investment Management, Old Mutual Wealth/Quilter Cheviot/Old Mutual Global Investors, PIMCO, Royal London Asset Management (CIS) Limited, RPMI Railpen Investments, State Street Global Advisors, Standard Life Investments, Willis Towers Watson