Boards Are Ignoring Risks of Sexual Harassment: Q&A
Corporate Boards Are Ignoring Risks of Sexual Harassment: Q&A
(Bloomberg) -- Companies and corporate boards that focus on closing the gender pay gap, appointing female board members and executives and creating a culture that prevents sexual harassment are set to outperform those who don’t, according to Joe Keefe, CEO of Pax World Management LLC.
Betting on more gender-diverse firms already has helped Pax find better-performing companies and avoid laggards, he said. Its Pax Ellevate Global Women’s Index Fund is up 21.5% this year, outpacing the 20.1% gain for the MSCI World benchmark.
Pax recently agreed to be purchased by Impax Asset Management in a deal expected to be completed next year. The acquisition will create one of the largest responsible investment managers with more than $13 billion of assets.
Keefe spoke to Emily Chasan on Dec. 1. Comments have been edited and condensed.
How are you trying to invest in gender diversity?
Our whole focus in Pax Ellevate Global Women’s Index Fund is investing in companies that have more women on the board and in senior management. When you have gender diverse leadership teams, then you have cultural and governance changes that will help mitigate issues like sexual harassment and assault. We’ve been working on getting more women on boards through proxy voting, dialogue, shareholder resolutions, and industry groups like the 30% Coalition.
In our proxy voting, we will not support a board slate unless it has at least two women on it. In the fund, 99% of the companies have two or more women on their boards and 91% have three or more. Research suggests you really see change when you reach a critical mass of women on boards or in senior management, usually around 30%.
Some see diversity as one woman on a board. Is that enough?
Most boards are about 10 people, so when you have three or more women on the board, that is when the discussion becomes richer, the decision making process improves, where the old-boy get-along network starts to break down. Tokenism doesn’t work. The companies that are really seeing the benefits of gender diversity are embracing it in a more robust way.
Are boards paying enough attention to sexual harassment?
No. One of the reasons this is happening is that boards have not been focused enough on this. A board should be very concerned about whether employees in a company are being discriminated against, harassed or bullied. All of those things detract from corporate performance. Boards should ensure their companies embrace diversity, equal gender pay and create a culture that empowers their employees because that will result in better performance.
All the stories we’re seeing now are about individuals — Harvey Weinstein, Matt Lauer, Al Franken — but they are really stories about organizations that have failed because this has been able to happen. Organizations have to build stronger cultures and have better governance, more accountability and better oversight. Those will all be improved if more women are at the table. When women are well represented in leadership that sets a different tone.
Why are sustainable investors focusing more on gender issues?
On some level, people are concerned the public sector isn’t working like it used to. Since the U.S. election, we’ve seen more investors — particularly women and millennials — saying it might be harder to get social change through politics, public policy and our vote, but another way to do that is with our dollars and with our consumption and investment choices.
Sustainable investing isn’t just a fad. We’re in a moment where it’s going to increasingly affect industries and markets. We’re going to have to solve climate change over the next 20 years, and the fight for gender equality isn’t going away next year. These are long-term secular trends that are going to drive businesses, consumers and investors for the foreseeable future.
How could this show up in shareholder proposals this year?
Several years ago, there was a lot of ’check-the-box’ thinking about diversity. Now there’s a much more robust approach. The benefits of gender equality are felt in many ways and you have to tackle all aspects of it. We’ve been increasingly focused on gender pay equity, which makes companies better at attracting and retaining human capital, which is the most important asset in the world right now.
Pax filed a shareholder resolution at Oracle Corp. this year asking them to collect and report on their gender pay ratio. It got 38% of the vote at the annual general meeting a few weeks ago — and keep in mind Larry Ellison owns 27% of the shares and he voted against it, so the majority of shareholders other than Ellison supported it. Investors sending that message shows they believe this affects business outcomes.
We’re reaching a richer and more robust understanding of what performance means. It’s not just share price. A company’s environmental performance, gender diversity and culture are important. Increasingly, you’re going to see companies disclose more about parental leave and work-life balance policies, because it’s going to help them attract and keep good people.
To contact the reporter on this story: Emily Chasan in New York at echasan1@bloomberg.net.
To contact the editors responsible for this story: Alicia Ritcey at aritcey@bloomberg.net, Ainslie Chandler, Peter Eichenbaum
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