When the 30% Club – which backs a voluntary target of 30% of women on corporate boards – launched in the US in April, its major coup was having some of America’s most prominent male US investment figures back it. They include Warren Buffett, Larry Fink, CEO of BlackRock, and Peter Grauer, Chairman of Bloomberg, who will serve as the founding US Chair. For Helena Morrissey, Chief Executive Officer at Newton, the £52bn London-based, investment management subsidiary of The Bank of New York Mellon, and driving force behind the 30% Club, the counter-intuitive and consensual ‘are’ the change process: “This has shifted from being a ‘women’s issue’ to much more of a business issue and the impact has been bigger than I ever dreamed. I think that is edifying as an approach to change. It’s about looking behind an issue and thinking about it differently and more broadly to bring people along. Interestingly, the US perception is that they have ‘done’ gender, but in reality they haven’t achieved much progress on boards or women in senior positions. There are, of course, a few very senior business women and politicians, but progress has been pretty stagnant in the last decade.”
Grauer offered his time when the two met last year, and together they brokered the heavyweight initial signatories for the US launch.
With Buffett, Morrissey went the personal route by writing him a letter: “I thought to myself: what’s there to lose? He gave a really good interview to Fortune magazine about a year ago where he movingly described his background as the only boy in a family with several sisters. He was aware that his parents treated him differently. He said, ‘my floor became my sisters’ ceiling’, and that his opportunities had been his sisters’ limits. I wrote to him because I find that people respond well to handwritten letters. I wasn’t expecting a response, but he wrote back and talked about Berkshire Hathaway’s own board and how they had done a lot of preparing for the future. He pointed out that 6 out of 12 of Berkshire’s board are over 80 years old, while six are under 60, and half of those younger board members are women, which he said was no accident.”
Bringing the ‘Sage of Ohama’ on board made for great US media headlines. Morrissey says it reflects her firmbelief in ‘soft power’: persuading others to work with you for results.
In the UK, the Club’s success has been remarkable. It launched in 2010 with a goal of 30% women on FTSE-100 boards by end 2015. The subsequent UK government appointed, Davies Report, of 2011, set a 25% threshold for women directors by 2015. The figure is currently at 21.6%, up from 12.6% when it started, according to Boardwatch, a website that monitors the figures.
More significantly perhaps, over the same period the FTSE-100 has gone from 21 all-male boards to none, after the appointment last month of Patrice Merrin to the post of independent, non-executive Director at Glencore, which had been the last all-male board on the index.
Morrissey, who started her career in New York with Schroders at age 21 and travels to the US once every six weeks, says the US is “different but similar”. She points to figures produced by The Catalyst, a non-profit organisation for women and business, which does a gender-based board census every year of Fortune 500 companies. In 2013, it found they had 16.9% of women on boards, up a fraction from 16.6% in 2012, and 16.1% the year before: “A decade ago it was nearly 14%, so it isn’t going anywhere. I think it’s because in the US this issue is parked in diversity and inclusion efforts within political correctness and affinity groups; a ‘let’s deal with the women’ kind of thing etc. What we have learnt in the UK is not to get stuck in a special interest ghetto. Its backed as a business and talent management issue and a measure of how companies are modernising themselves, which includes technology, working smartly, and the work environment/balance, etc.” The goals of the US 30% Club are for 30% of women on the board at the country’s top 100 companies by 2020, as well as 30% of women on executive committees and one or two levels below that: “If you focus on the executive committees then the US doesn’t look too bad, although most of the female roles are HR, legal or PR. Once you take those away there are just 70 women in line management roles out of the almost 1200 executive committee positions at Fortune 100 companies,” Morrissey says. “What we are proposing is quite ambitious, but it’s voluntary and not
a stick to beat people up with.” To that end, Morrissey says the 30% Club has been trying to create some cohesion with existing women’s groups in the US to close the gap, as she puts it, between school room and board room and accelerate real change in the education and promotion of women against what she calls: “business-led, collaborative and measurable goals.” The Club announced the same initiative in London at the beginning of this month.
Link to 30% Club US programme
The US 30% Club will not, however, be working, for the moment, with the Thirty Percent Coalition, a US institutional investor group which campaigns for 30% of women on boards, and has been filing related shareholder resolutions at companies since it started in 2011. In 2013, it pitched resolutions at 20 companies across all sectors that have no female directors. The Thirty Percent Coalition’s Institutional Investor Committee * is co-chaired by Janice Hester-Amey, Portfolio Manager of the California State Teachers Retirement System (CalSTRS), and Timothy Smith, Senior Vice President at Walden Asset Management: Link to RI coverage
Morrissey says the 30% Club is collaborative in its approach, but that the two groups were unable to agree on strategy: “When the Thirty Percent Coalition started we were pleased because it’s the goal that counts. However, their first action was to write a pretty hard-hitting, naming and shaming letter to companies from their investor group. They asked me if I would sign, but I thought it was going about it the wrong way because you won’t be able to get business leaders on board if you’ve taken a rather aggressive stance towards them or their best friends. What we need to do is to have business leaders leading the change. I felt at the very least that it was the wrong way around to create buy-in, and we agreed to differ on that. The idea though is not to compete or divide or conquer.”
The 30% Club’s own UK Investor Group, has says Morrissey, focused on what she terms a more ‘constructive engagement’, notably working with the UK’s Financial Reporting Council on narrative reporting aroundemployees and diversity: “I’d rather there was more transparency, even if it looks like self-critical data. If everyone released it then people would focus on improvement.” She says she would have liked to seen more examples of what good practice is expected to be in the FRC’s Guidance on the Strategic Report (Link): “We would like to see this information in the company annual report, not just in the small print, but on the inside back cover for example, maybe under a heading of ‘our people’. Everyone today says professional diversity is good for business, and it’s always there in the Chairman’s opening letter, and then never mentioned again in the report….”
The Investor Group also worked hard to lobby against proposed, mandatory European Union quotas of 40% women on boards by 2020, which was rejected in October 2013, although revised rules look like passing which are based more on numeric targets and diversity programmes: “We averted the major, draconian target, but it continues to get tagged on to any other legislation,” says Morrissey. And the Investor Group has wielded its own proxy stick. Fund managers, including Aviva and Legal & General, say they will vote against chairs of nomination committees or non-execs if there is not enough progress on gender. Morrissey says other managers in the group look at the issue in the round as part of a company’s good corporate governance. She notes, however, that the 30% Club is working on investor activity with the government’s committee for the Davies Report, because “they don’t think investors generally have delivered”.
Reflecting the gender mirror back at the asset management industry, she notes that the sector is itself still very male dominated: “Arguably we should be more involved with the companies we own in terms of their talent management and diversity. I personally feel that because many fund managers are men and because this issue has crept up and is still seen as one of political correctness, that there is quite a transition to make before it gets to a business-as-usual point.”
She says another reason is that asset managers keep “ourselves to ourselves” too much and engage little
on socio political issues: “I’m speculating here, but I think you could sense that the fund management world didn’t want to say too much about executive remuneration this year – two years after the initial Shareholder Spring – because it hasn’t got its own house in order. We have to get over that. It’s a fair cop, but we are trying to sort ourselves out. I run a screen every year on our internal remuneration because I fear there may be an unconscious bias between men and women on equal roles and pay.” She says the issue is analogous to the blockages on responsible investment: “The question, of course, for investors, is whether this is really embedded into mainstream investment analysis. There’s an enlightened few fund managers who see RI/gender issues as part of a company’s ethos: how it treats staff and develops talent, and there is much important research in this area. And it is coming full circle because clients are now asking about this through the optic of better-run companies. But…most companies would say that they only hear about these things in meetings with a fund manager’s corporate governance specialist, not the portfolio manager. It hasn’t been embedded into questions such as: “What’s your profit outlook, or how is your management looking at more diverse succession planning?”
Just looking at risk management, she notes that the UK government’s report on the blow-up at RBS said the homogeneity of the board was a factor in group-think, and that boards behave differently when they are not mixed.So there is a long way to go, although the 30% Club’s internationalisation could be part of the solution, with Morrissey pledging to push forward a global investor group. An Irish branch of the 30% Club launched at the same time as the US, and a Hong Kong office opened a year ago. At the end of June, the Canadian government’s advisory council issued a report recommending that women make up 30% of corporate boards nationally within five years and that a “comply or explain” approach be implemented to incentivize public companies to meet that goal. Morrissey says both Malaysia and Singapore want chapters. Again, the Newton Chief says the counter-intuitive has a role to play: “Grant Thornton just published a review of women in senior roles globally: the four countries that are doing the best are Russia, the Philippines, Indonesia and China. That wouldn’t be necessarily what you would think. My theory is that in emerging markets women and men are actually working it out and building something now for the future, whereas in Europe and the US you are breaking down established systems.”
Nonetheless, Morrissey thinks the UK’s Davies Committee 25% target will be met: “They think it could reach 27% by the end of 2015, but I think we will be very close to our 30% target. Female appointments to the FTSE-100 are now about a third of the total, but there’s likely to be a higher turnover between men and women. There are quite a few directors that have served more than nine years, and so will be rotating off boards. Of course, they were hired a decade ago…and they are almost all men!”
- Clarifies initial line re Hester Amey and Smith’s positions at the Thirty Percent Coalition