State Street Global Advisors (SSGA) is extending both the range of companies it expects to address women’s representation on boards and the degree to which it wants larger issuers to do so.
SSGA president and CEO Cyrus Taraporevala writes in his 2022 letter to board members that starting this proxy season the asset manager will expect all of its corporate holdings globally to have at least one woman director. Until now, that expectation has applied only to companies in major indices in certain markets around the world.
Taraporevala also gives notice that starting in the 2023 proxy season SSGA will expect boards of companies in major indices in the US, Canada, the UK, Europe and Australia to comprise at least 30 percent female directors. He writes that the firm expects the policy shift to result in boards with, on average, three or four female directors and up to between 3,000 and 4,000 additional female directors overall.
The firm is prepared to vote against the chair of the board’s nominating committee or the board leader if a company does not meet either of these expectations, Taraporevala writes.
SSGA has been encouraging boards to add at least one female director since the launch of its high-profile Fearless Girl campaign in 2017. According to Taraporevala’s letter, 862 – roughly 58 percent – of the 1,486 companies the firm identified as having previously all-male boards have added at least one female director and in 2021 every company in the S&P 500 had at least one woman on its board.
But he adds: ‘While boards have become more gender-diverse, it is clear that this work is not yet complete. As such, we are enhancing our existing gender diversity policy.’
Taraporevala also reminds board members of SSGA’s policy, announced last year, that as of this proxy season it will vote against responsible directors if:
- Companies in the S&P 500 and FTSE 100 do not have a person of color on their board
- Companies in the S&P 500 and FTSE 100 do not disclose the racial and ethnic diversity of their board
- Companies in the S&P 500 do not disclose their Equal Employment Opportunity 1 (EEO1) reports.
Investor pressure for companies to increase disclosure on the makeup of their board and workforces has intensified in recent years in part as a result of the inequitable impact of the Covid-19 pandemic on communities of color and the 2020 protests against racial injustice.
Taraporevala cites figures as showing that since 2020 the number of companies in the S&P 500 that disclose the racial and ethnic makeup of their board has more than doubled and the number of S&P 100 companies disclosing their EEO1 reports has more than tripled.
‘We will continue to encourage boards to have effective oversight of diversity, equity and inclusion more broadly, beyond the board… With human capital management now widely seen as both a risk and opportunity for employers in the wake of the pandemic, we have also published guidance for effective disclosures and practices,’ he adds.
Climate policy
Taraporevala also outlines measures the firm will take on climate change in terms of its engagement with portfolio companies.
First, starting this proxy season SSGA will expect companies in major indices in the US, Canada, the UK, Europe and Australia to align with climate-related disclosures requested by TCFD, including whether the company discloses board oversight of climate-related risks and opportunities, Scope 1 and Scope 2 greenhouse gas (GHG) emissions and targets for reducing GHG emissions.
‘With approximately one third of companies in the S&P 500 still not providing these TCFD disclosures, we will start taking voting action against directors across applicable indices should companies not meet these disclosure expectations,’ Taraporevala writes.
Second, he says SSGA in the coming year will launch a ‘targeted engagement campaign with the most significant emitters in our portfolio to encourage disclosure aligned with our expectations for climate transition plans, which cover 10 areas including decarbonization strategy, capital allocation, climate governance and climate policy. In 2023 we will hold companies and directors accountable for failing to meet these expectations.’
