latamen
US makes great progress on boardroom diversity

US makes great progress on boardroom diversity

02-03-2018 | Column

Maybe it is because I am a woman in an industry dominated by men, and because I chose to focus on sustainability at an early stage, that I have always been interested in the topic of diversity. Not only from the gender perspective, but also because of the validated belief that different backgrounds and opinions make for better-informed decisions.

  • Masja Zandbergen - Albers
    Masja
    Zandbergen - Albers
    Head of sustainability integration
  • Laura Bosch Ferreté
    Laura
    Bosch Ferreté
    Engagement analyst

While the Netherlands is making hardly any progress on this topic, the US is making great strides. I was positively surprised to read that a Spencer Stuart survey found that in 2017, half of the incoming directors on S&P 500 boards were women or from minorities. Female representation among new directors rose from 26% in 2012 to 36% in 2017, while 20% of new independent directors were male and female minorities.

The board gender diversity discussion was strengthened last year when several of the world’s largest institutional investors took a stand on this matter. The actions undertaken ranged from the installation of State Street Global Advisors’ Fearless Girl statue on Wall street, to BlackRock’s support for eight shareholder proposals on board diversity in North America.

Gender diversity on boards has improved prominently in recent years across several market capitalizations and markets. Government intervention in this area has increased, as several countries (e.g. India, France) adopted legislative measures to promote gender diversity at board level through mandatory gender quotas. However, the debate around the topic moved from a discussion around equality and fairness, to a matter of superior corporate performance, evidenced by a wide range of literature.

Stay informed on Sustainable Investing with monthly mail updates
Stay informed on Sustainable Investing with monthly mail updates
Subscribe

Promoting success

So what do these people do? Corporate boardrooms provide management and risk oversight while supervising the company’s strategy on behalf of the shareholders. Diversity becomes a crucial factor to promote success at the boardroom when understood from a broader perspective, moving beyond solely gender equality and including diverse representation of tenures, ages, nationalities and professional backgrounds.

It’s simple – diversity at the boardroom reflects the real world in which the company operates. An appropriate variety of director profiles allows for a better understanding of the company’s customer base, ensuring better adaptability to shifting consumer and market trends at an ever increasing pace. A wide range of perspectives in the boardroom is critical to effective corporate governance and potential disruptive discussions.

Well-diversified boards add value to a company since people from different backgrounds are more likely to approach issues from differing perspectives, leading to more effective decision-making and efficient supervision. Therefore, institutional investors have been praising board diversity as a key to sound corporate governance practices.

Using Active Ownership

As part of Robeco’s Active Ownership approach, we have been addressing diversity in the boardrooms of our investee companies through our engagement and voting activities. In several markets, it is common to find director nominations to serve on the board included on the shareholder meeting’s agenda. A thorough assessment of the overall board diversity in terms of tenure, skills, gender and external commitments is conducted and compared to local best practices. Our voting guidelines have been recently updated to reflect this assessment criteria.

During our engagement with companies in the financial sector around the quality of their boards, a special focus was adopted to see how diversity affects their nomination policy, and which factors the company tries to diversify. Another example of our work in this field is a recent collaborative engagement conducted with RobecoSAM, through which we have been engaging on a wide range of gender equality and diversity measures of our investee companies.

In recent years, much of the focus on board diversity has focused solely on gender. However, if the argument for increased diversity is that it adds value to the board, then boards must strive to achieve diversity in the broadest sense in order to enhance business performance.

Assisted this month by engagement analyst Laura Bosch Ferreté.

This is our monthly column on sustainable investing by Head of ESG integration Masja Zandbergen.

Important information

The Robeco Capital Growth Funds have not been registered under the United States Investment Company Act of 1940, as amended, nor or the United States Securities Act of 1933, as amended. None of the shares may be offered or sold, directly or indirectly in the United States or to any U.S. Person (within the meaning of Regulation S promulgated under the Securities Act of 1933, as amended (the “Securities Act”)). Furthermore, Robeco Institutional Asset Management B.V. (Robeco) does not provide investment advisory services, or hold itself out as providing investment advisory services, in the United States or to any U.S. Person (within the meaning of Regulation S promulgated under the Securities Act).

This website is intended for use only by non-U.S. Persons outside of the United States (within the meaning of Regulation S promulgated under the Securities Act who are professional investors, or professional fiduciaries representing such non-U.S. Person investors. By clicking “I Agree” on our website disclaimer and accessing the information on this website, including any subdomain thereof, you are certifying and agreeing to the following: (i) you have read, understood and agree to this disclaimer, (ii) you have informed yourself of any applicable legal restrictions and represent that by accessing the information contained on this website, you are not in violation of, and will not be causing Robeco or any of its affiliated entities or issuers to violate, any applicable laws and, as a result, you are legally authorized to access such information on behalf of yourself and any underlying investment advisory client, (iii) you understand and acknowledge that certain information presented herein relates to securities that have not been registered under the Securities Act, and may be offered or sold only outside the United States and only to, or for the account or benefit of, non-U.S. Persons (within the meaning of Regulation S under the Securities Act), (iv) you are, or are a discretionary investment adviser representing, a non-U.S. Person (within the meaning of Regulation S under the Securities Act) located outside of the United States and (v) you are, or are a discretionary investment adviser representing, a professional non-retail investor. Access to this website has been limited so that it shall not constitute directed selling efforts (as defined in Regulation S under the Securities Act) in the United States and so that it shall not be deemed to constitute Robeco holding itself out generally to the public in the U.S. as an investment adviser. Nothing contained herein constitutes an offer to sell securities or solicitation of an offer to purchase any securities in any jurisdiction. We reserve the right to deny access to any visitor, including, but not limited to, those visitors with IP addresses residing in the United States.

This website has been carefully prepared by Robeco. The information contained in this publication is based upon sources of information believed to be reliable. Robeco is not answerable for the accuracy or completeness of the facts, opinions, expectations and results referred to therein. Whilst every care has been taken in the preparation of this website, we do not accept any responsibility for damage of any kind resulting from incorrect or incomplete information. This website is subject to change without notice. The value of the investments may fluctuate. Past performance is no guarantee of future results. If the currency in which the past performance is displayed differs from the currency of the country in which you reside, then you should be aware that due to exchange rate fluctuations the performance shown may increase or decrease if converted into your local currency. For investment professional use only. Not for use by the general public.

I Disagree