We believe that better diversity brings economic as well as cultural benefits. The World Economic Forum reports that economic gender parity could add a further US$250bn to the UK’s GDP.
This is why in 2017 we voted against more board chairs than ever at UK companies on the basis of poor diversity.
Indeed, during that year we voted against 37 board chairs or chairs of nomination committees of UK boards due to poor diversity—the highest number since we established this voting policy in 2015.
We continue to vote against the chairs of the boards at FTSE 350 companies that show a lack of diversity. In 2013, we wrote a collaborative letter alongside other investors to 11 FTSE 350 companies to ask for a discussion on gender diversity at the board level. Four of these had all-male boards; today, none of them do.
Since 2011, we have seen great improvements in the share of women on the boards of UK companies, with 29% female representation on the boards of FTSE 100 and 23% on FTSE 250 companies in 2018.
Having evolved and strengthened our policy over the years, from 2018 we are voting against the chairs of the boards of FTSE 350 companies if they have not already reached 25% of women at board level.
We will also vote against management if we notice ill-conceived or poorly implemented diversity policies. This is where our participation in cooperative bodies can have a significant impact, allowing us to highlight and implement best practices on the issue.
As part of our membership of the 30% Club Investor Group in the UK, we have committed to engage collaboratively with UK companies where board-level diversity is poor and policies need to be strengthened. This collaboration strengthens our voice, and the Investor Group meets regularly. We sit as co-chair of the group in order to formulate objectives.
The group has selected some target companies in the property sector and we have recently chaired a meeting with a property company along with 11 other investors, composed of both institutional investors and asset owners.
We had a constructive meeting with the chair of this company to discuss and explore the commitment to diversity both at a board and employee level. The chair assured us during the meeting that an additional female board member would be put forward for election in 2018; we will monitor progress on this matter.
Our voting reflects not just board composition, but also the quality of diversity policies. We understand this is not an easy issue, but some companies still present generic “boilerplate” policies that do not give any insight into how they really view diversity or what they are doing to address the issue at board, executive committee and employee level.
We consider a company’s workforce as important as its financial assets and expect that better policies and disclosures regarding diversity should be developed.
In 2017, we started to vote for the first time against all-male boards of S&P 500 companies in the US. We co-founded a coalition to engage on the issue of board diversity and refreshment at US companies.
Along with US pension funds CalSTRS and OPERS, and Dutch asset manager APG, we wrote to 58 US companies which had poor board diversity and refreshment. We offered to meet with them to better understand their processes and commitments to these issues.
Engagement meetings are currently underway with the CEOs and chairs of nomination committees at those companies, during which we discuss commitment, process and disclosure.
We have had 27 meetings with our target companies. Eight of these companies have made changes to the make-up of the board or to their diversity policy and nomination charter documents, to include a commitment to broader diversity issues. We plan to publish a paper and will continue working on this issue in 2018.
We believe that greater diversity through a broader range of views, backgrounds and values leads to better group decision-making. Closing the gender gap will have real-world economic benefits, and we are determined to make a difference to ensure that happens.
Clare Payn is Legal and General Investment Management’s head of corporate governance North America.