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Asset manager State Street to take voting action against six STI companies with no women on their boards
STATE Street Global Advisors (SSGA), the world's third-largest asset manager with nearly US$3.12 trillion under its care, has identified six companies on the blue-chip Straits Times Index (STI) that do not have female board representation, and is seeking to effect change with its voting power starting this year.
At a media call on Friday, Benjamin Colton, global co-head of asset stewardship at SSGA, said the group has expanded its gender diversity voting guidelines to Singapore as well as Hong Kong, where 11 companies on the Hang Seng Index (HSI) have been identified with no females on board. The voting guideline was introduced in the US, UK and Australia in 2017, and extended to continental Europe, Canada and Japan in 2018.
Speaking from the US, Mr Colton said, "Starting this year, we will be voting against the chair of the nominating committee or, in those companies which don't have a formal nominating committee, the person that is most responsible for the nomination process.
"We have internal guidelines on who those people are, but we will be looking at that one director for companies identified and don't add a woman on their board, or don't have successful engagement with us to commit to adding a woman to the board.
"After three years, if they still haven't added a woman to their board, we will be voting against the full nominating committee, or the equivalent for companies which don't have a nominating committee,'' Mr Colton said, adding that SSGA will not be nominating its own directors.
While he did not identify the six companies on the STI, a rough check showed UOL Group, Jardine Matheson Holdings, Jardine Strategic Holdings, Dairy Farm and Yangzijiang Shipbuilding are among those companies that do not have any female directors.
SSGA, which serves governments, institutions and financial advisers around the globe, will be sending the firms letters to engage them in dialogue, sharing guidance on how to increase gender diversity on board and at executive management levels and build a pipeline of talent.
"From a business perspective and a fiduciary duty perspective of us as an asset manager, we thought it is essential to take action with the companies we invest in to increase the level of gender diversity on their boards,'' Mr Colton explained.
Many studies show that when there is diversity, companies perform better in the long term, generate higher return on equity, have the ability to see in different perspectives, and are more nimble and innovative.
"We are long-term owners and understand that this is a long-term issue. We are doing this not to punish companies, but to help them. That's why we are issuing guidelines and engaging with companies,'' Mr Colton said.
Singapore and Hong Kong have been included because both are developed markets SSGA is investing in, offer healthy engagement with companies, as well as have explicit guidance on gender diversity.
"The gender diversity picture is quite advanced, with many companies having females on boards. So those companies without, are real laggards and outliers,'' Mr Colton said.
As of February 2020, 681 companies out of the 1,384 identified by SSGA responded by adding a female director. In the US, 495 boards of directors added a female member, while 33 and 13 made the change in Canada and the UK, respectively. In Japan, 101 boards added a female director and 30 added a female director in Australia.
Globally, more stewards of investor assets are using their voices and votes to advocate for greater gender diversity on boards. Columbia Threadneedle and RBC Global Asset Management, too, are ramping up efforts to improve gender diversity at listed companies. They have pledged to vote against board directors of businesses that fail to promote women to top jobs.
According to Grant Thornton's Women in Business report 2020, women in senior positions such as human resources director, corporate controller, sales director or partner, hold 31 per cent of the senior leadership positions in both listed and private companies with between 50-500 employees in Singapore.
This is down 2 per cent on year despite businesses putting in place initiatives to drive gender inclusivity like flexible working, an inclusive culture, mentoring and coaching as well as ensuring developmental opportunities.
However, the research showed the number of women in C-suite positions has risen in 2020.
The number of female chief executive officers has grown by 2 per cent; chief operating officers, 4 per cent: and chief financial officers, 9 per cent, compared to 2019.
Also, the number of companies with no women in senior leadership is decreasing. In 2020, only 10 per cent of businesses in Singapore had no women in senior management, compared to 36 per cent in 2017, 22 per cent in 2018 and 13 per cent in 2019.
Francesca Lagerberg, global leader at Grant Thornton International, believes diversity is important.
"It matters because of the sheer value you get from diversity of thinking. If you have a group of people leading a firm who come from a similar background, similar culture, the same gender, you're missing something in the market,'' she said.
Internal culture needs to be both diverse and inclusive. Change will not happen unless conscious action that is both deliberate and followed through is taken.
"Policies that ensure diversity of thought at the decision-making table, that address equal opportunity in career development and bias in recruitment and develop inclusive cultures can't just be a nice to have - they are a must,'' said Ms Lagerberg.
"Once implemented, these policies must be enforced and regularly reassessed to judge their effectiveness.
"When that is combined with real commitment from senior leadership, only then will real transformational change take place," she advised.
Singapore's Council for Board Diversity found that as of June last year, 21 of the top 100 primary listed companies here had no female representation on their boards.
It has set a target for the companies to have women comprise 20 per cent of their boards by this year; 25 per cent by 2025; and 30 per cent by 2030.