Shareholder muscle lends its weight to board diversity

It is not the first time that the diversity debate has moved from the executive to the owners of the UK’s largest companies, but this week’s launch of an investor action group adds muscle to that discussion.

Led by Jupiter’s head of sustainable investment and governance, Emma Howard Boyd, initial members of the action group include some of the UK’s biggest institutional investors, together representing over £1,000bn ($1,600bn) in assets. Aviva Investors, the Co-operative Asset Management, F&C Investments, Jupiter Asset Management, Legal & General Asset Management, Newton Investment Management and Railpen are the group’s initial members, but another nine individual asset managers will be announced shortly, and more are expected.

The 30% Club, the lobby group established a year ago to help raise women’s participation on boards beyond Lord Davies’ recommended 25 per cent by 2015, is behind this new initiative. The club now has the support of 30 chairmen of FTSE companies including Lloyds Banking Group, Centrica, RBS, KPMG and Deloitte, and has been a key mover in supporting voluntary but dynamic change to the composition of UK company boards.

Helena Morrissey, founder of the 30% club and chief executive of Newton Asset Management, said in a statement:

“Only by holding these firms to account will we see the changes we have set out to achieve. This is one of the primary functions of our newly launched investor group and we look forward to working with members of this group to tackle these boards and encourage change at the very heart of the issue.”

In September, Penny Shepherd, chief executive of UK Sustainable Investment and Finance, galvanised seven institutional investors to ask the chairmen of all FTSE 350 companies to make public their diversity goals and plans. She said:

“Responsible investors are keen to hear company plans and support progress on benefiting from gender diversity at board level. In the light of the European Commission’s recent corporate governance green paper, Lord Davies’ recommendations also offer a significant opportunity for UK companies to demonstrate the effectiveness of a ‘comply or explain’ approach compared with the use of gender quotas.”

 

The UK is not alone in seeking to harness the influence of investors on recalcitrant boards. A few months ago, America’s two largest pension funds, Calpers and Calstrs, launched a database of suitable candidates for new corporate seats called the Diverse Director DataSource (3D), as reported in the FT.

So far only 33 per cent of FTSE 100 companies have responded to Lord Davies’ recommendation that they should set specific goals for raising the percentage of women on their boards, and of those companies who have set goals only 10 have set targets beyond 10 per cent.

Now it remains to be seen whether this new investor action group can improve the record.

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