Women and Minorities on Corporate Boards

Lack of diversity in senior corporate ranks means that “opportunity for all” remains unfulfilled

Despite the strong demographic shifts we are seeing in the United States and a compelling business case, a peek into corporate boardrooms reveals a stunning lack of diversity in those rarified cocoons.  Women today still make up only 18% of director positions in companies in the S&P 100 Index, and only 8% of the five highest paid positions within that same group of companies. We recognize that this lack of diversity is frustrating and is indicative of the fact that the mantra of “opportunity for all” remains unfulfilled. At Calvert, we have been vocal in our belief that board diversity is an essential measure of sound governance and a critical attribute to a well-functioning board.

We come to the issue of board diversity (diversity inclusive of race, gender, culture, age, and geography) from an investment and business case perspective. We know all too well the research that supports a strong bottom-line argument for diversity, and we too are frustrated that more companies refuse to see what study after study confirms: diversity contributes heavily to the bottom line.  For example, 2010 research from McKinsey & Company found that companies with the highest share of women on executive committees outperformed those with all-male executive committees by 41% in terms of return on equity and 56% in operating results.

Even putting aside the numbers, we strongly believe that corporations should include women and minorities at the highest levels of their company and in strategic business planning, especially because they rely so heavily on them for revenues and as employees. In the increasingly complex global marketplace that exists today, it is critical that companies draw on a wide range of viewpoints, backgrounds, skills, and experience. Corporate diversity helps companies increase the likelihood of making the right strategic and operational decisions, contributes to a more positive public image and reputation, and catalyzes efforts to recruit, retain, and promote the best people, including women and minorities. 

To Calvert, leading companies are those that actively seek diverse candidates for their boardrooms.  We do not want to see companies only appoint a single “token” woman or minority to their board, but rather we strive for a shift towards a boardroom that is more inclusive and reflective of a company’s employees, consumers, and shareholders. In our view, companies combining fair and equitable working conditions, where diversity is not just tolerated but rather recognized as a strategic opportunity, with competitive financial performance, are better positioned to generate long-term value for their shareholders and their communities.

All too often qualified women are overlooked, while the same limited pool of candidates is scoured again and again for these high-powered positions. That is why our engagement process focuses on changing the director selection process. Every year, we file shareholder proposals with companies that we believe lack sufficient diversity. Our proposals ask companies to expand their director selection process and include women as part of the slate of director nominees. To be clear, our objectives are not quotas or mandates, rather what we see as a gentle, but firm, push in the right direction. To date, we have filed such proposals with 55 companies, and 46 have agreed to change their process, resulting in 30 women and/or minorities being added to these corporate boards.

Recently, Calvert identified Apple Inc. as a company that lacked diversity (racial and gender) on their board of directors. As investors that view diversity as good corporate governance, we filed a shareholder proposal with Apple which sought to change their director nomination process. After several discussions with company management where we raised our concerns as shareholders in the company, the Board agreed to change their director selection policies. Today, Apple’s proxy states “The Nominating Committee is also committed to actively seeking out highly qualified women and individuals from minority groups to include in the pool from which Board nominees are chosen.” Also, soon after Calvert filed the proposal, Apple added its first woman to its Board of Directors. While we hope to see Apple continue to add both racial and gender diversity, we are pleased that as investors, we were able to raise our concerns and the Board of Directors directly responded. 

Calvert Investment Management, Inc. 4550 Montgomery Ave. Bethesda, MD 20814

Accounts managed by Calvert Investment Management, Inc. may or may not invest in, and Calvert is not recommending any action on, any companies listed.


11726 (11/11)

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Publication Date: November 15, 2011

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