Investors Prepare to Flex Muscle in Support of Women on Boards

(Bloomberg) -- Emboldened by last year’s successful campaigns against excessive executive pay, some of the world’s biggest investors are shifting their focus to women -- or the lack thereof -- on corporate boards.

Legal & General Investment Management is the latest institution to say it will vote against boards that are not at least 25 percent female. Standard Life Aberdeen Plc, one of Britain’s largest fund management groups, has said it will vote against boards where men hold more than 80 percent of seats.

Standard Life voted Thursday against the Herald Investment Trust because its board has no women, a spokesman said. Among the FTSE 250, Herald has one of 11 all-male boards, a group that’s grown from eight earlier this year.

Investor action has been a long time coming, says Denise Wilson White, chief executive of the Hampton-Alexander Review, which has campaigned for greater diversity on Britain’s boards since 2011. “Investors have been terribly slow in this regard but they can really make a difference,” she said.

Board diversity has moved up on the list of priorities for long-term investors in the U.S. as well. BlackRock Inc., the world’s largest asset manager, has said it now expects companies to have at least two women on their boards in the U.S. “We are likely to vote against directors that don’t make progress on diversity without a specific and credible explanation,” representatives said in an emailed statement.

State Street Corp. last year also led an unprecedented campaign to vote against hundreds of U.S., U.K. and Australian directors on the nominating committee at boards that lacked women. This year, its campaign extends to Canada and Japan.

Hermes, another large institutional investor, says it believes boards should already have achieved a minimum of 30 percent female representation. Last year it openly opposed the then-chairman of the mining group Rio Tinto Plc because of a lack of diversity on its board.

But the Hermes vote was not supported by many others and the chairman was voted through with a resounding majority. “It’s clear from the Rio Tinto vote that not enough investors lend their votes to back up their public stance,” says Hans-Christoph Hirt, head of Hermes EOS at Hermes Investment Management.

The publication of every big company’s gender pay gap figures in the U.K. has become a powerful catalyst for action. In the first year of mandatory reporting, some companies reported a difference of as much as 50 percent in what male and female employees earn, far bigger than the national average of 18 percent.

“It’s beyond persuading now,” Hampton-Alexander’s White said. “It’s all about voting.”

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