States Use Pension Clout to Push for More Women on U.S. Boards

Treasurers in Massachusetts and Pennsylvania said the combined clout of states with almost a trillion dollars in pension funds may force more U.S. companies to add women on their boards after progress stalled.

Both states added new powers to proxy voting policies in the last year to allow targeting of companies that have few or no female directors. At least a dozen states, with about $940 billion in pension investments, now have such policies in place, according to a survey by Calvert Investments, a $12.5 billion fund that promotes diversity and sustainability causes.

“We essentially own corporate America, and not the other way around,” Massachusetts State Treasurer Steven Grossman said in an interview. “We cannot go hat in hand to corporate CEOs and suggest that it would be a ‘nice’ thing if they would increase the number of women. It’s not about being nice.”

The percentage of women on boards of S&P 1500 companies has barely changed since 2009, from 12.1 percent to 12.6 percent, according to corporate governance adviser GMI. The U.S. now lags behind countries such as Norway, Canada, Australia and France, according GMI’s 2012 Women on Boards Survey released this month.

The February disclosure by social-networking company Facebook Inc. that the inaugural board for its initial public offering had no woman has added attention to the matter, said Aditi Mohapatra, senior sustainability analyst at Calvert.

19 Female Directors

Calvert has targeted companies more than 60 times since 2004 and the added heft of state treasurers is expected to increase compliance, Mohapatra said. Among those firms, including Apple Inc. and Netflix Inc., 19 women were added to boards since 2004, she said. This year the company is singling out six companies, including Discovery Communications Inc., co-owner of Oprah Winfrey’s OWN cable channel, and retailer Urban Outfitters Inc., Mohapatra said.

“When you get one state continuously whining about an issue it can be positioned as an outlier,” Pennsylvania Treasurer Rob McCord said in an interview. “When you start to get multiple states, responsible people managing boards start to ask the question, ‘Do we really need this brain damage?’ It’s sort of a comparative hassle analysis.”

Michigan, California and Connecticut are also among active states in encouraging women’s presence on corporate board, he said.

McCord said some of his motivation stems from being raised by a single mother from ages 4 through 14, and seeing her experience lower pay and other discrimination as a university professor.

Penetration Stalled

Grossman said he’s galvanized by the slow response of the 100 largest Massachusetts companies to add women to their boards, with the penetration stalled at about 11 percent for the past six years. About 40 percent of the state’s publicly traded companies have no woman on their boards, he said.

The state, which invests in about 8,000 companies, is also working with Bentley University in Waltham, Massachusetts, to publicly recognize companies that have several female directors, he said.

The group 2020 Women on Boards, which is pushing for 20 percent female directors by 2020, has identified 200 companies that lack a single woman on their board -- from Discovery and Urban Outfitters to Jarden Corp., owner of the Sunbeam, Oster and Crock-Pot brands.

Michelle Russo, a spokeswoman at Silver Spring, Maryland-based Discovery, had no comment. Oona McCullough, director of investor relations at Philadelphia-based Urban Outfitters, didn’t return a phone call seeking comment. Alecia Pulman, spokeswoman for Rye, New York-based Jarden, didn’t have an immediate comment.

Letter to Facebook

Nutrisystem Inc. added Laura Lang, now chief executive officer of Time Inc., to its board in 2010 following pressure from shareholders including state pension funds, said Aeisha Mastagni, an investment officer at the California State Teachers’ Retirement System. CALSTRS also sent a letter to Facebook CEO Mark Zuckerberg last month urging him to rethink the all-male composition of the new board.

At least ten European countries, including Norway, France and Spain, have approved quotas or corporate-governance codes for female representation on boards, or are considering them. Norway, which requires 40 percent of directors to be women, led all nations in the GMI survey with 36.3 percent. The U.S. was 11th among industrialized markets, GMI data show.

U.K. Voluntary Goal

In the U.K., Mervyn Davies, the former CEO of Standard Chartered Plc, is promoting a voluntary goal for companies to have 25 percent female board membership by 2015. The initiative helped increase women on FTSE 100 companies to 15.6 percent from 12.5 percent over the past year, Davies wrote in a report released this month.

The Conference Board in New York, which advises companies on social issues and improving operations, convened a meeting of representatives of some of the largest corporate recruiters on Feb. 13 to explore whether a U.K.-style voluntary quota might work in the U.S., said Toni Riccardi, chief of the conference board’s diversity office.

The group will meet again at the end of the month to decide whether there is enough support to proceed with an initiative similar to that in the U.K., Riccardi said.

Genuine influence comes once there are three female directors on a board, said Anne Lim O’Brien, a vice chairman with recruiting company Heidrick & Struggles who attended the Conference Board meeting. One woman is seen as just a token and two seats aren’t sufficient, while three give a “voice” to their concerns, she said.

Companies often cite a lack of qualified candidates to explain the paucity of female directors, she said. Last year, the S&P 500 had 16 female CEOs. As smaller companies give opportunities to more women directors, bigger companies will have more options, O’Brien said.

“Any smart person who looks at these boards is going to realize that corporate boards are too stale, too pale and too male,” Pennsylvania’s McCord said. “The data has been around for a decade and it’s time to get moving.”

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