State Street Says It Will Start Voting Against Companies That Don’t Have Women Directors

By Joann S. Lublin and Sarah Krouse, The Wall Street Journal

Index-fund giant State Street Global Advisors on Tuesday March 7 began pushing big companies to put more women on their boards, initially demanding change at those firms without any female directors.

The money manager, which is a unit of State Street Corp., says it will vote against board members charged with nominating new directors if they don’t soon make strides at adding women. Firms won’t have an exact quota to be in compliance with State Street’s mandate, but must prove they attempted to improve a lack of diversity. A firm that doesn’t add women, for example, would have to prove to State Street it attempted to cast a wider net and set diversity goals.

The money manager plans to give most firms in the Russell 3000, U.K.’s FTSE 350 and Australia’s S&P/ASX 300 about a year to enact changes before voting against the reelection of heads of committees that nominate new board members.

“If someone could convince us that the absence of diversity or gender diversity is not a problem, we’re leaving that open. Will they? I doubt it,” said Ronald O’Hanley, chief executive of State Street Global Advisors.

Mr. O’Hanley said the $2.47 trillion asset manager also wants the companies it owns to identify problems with their nominating procedures that may contribute to the dearth of female board members.

As part of its push, the firm is also placing a bronze statue of a young girl leaning toward Wall Street’s iconic bronze bull.

On the eve of International Women’s Day, an asset management company (State Street Global Advisors), placed a statue of a little girl in front of Manhattan’s iconic charging bull sculpture to highlight a lack of gender diversity and equality in the workplace. The statue, by artist Kristen Visbal, is called The Fearless Girl and may remain staring defiantly at the bull for up to a month, if not longer. Reuters

Nearly a quarter of the companies in the Russell 3000 index lack a female director, while 58% of the companies in the index have less than 15% women on their boards, according to Institutional Shareholder Services. American Railcar Industries Inc., Speedway Motorsports, Inc., and Nathan’s Famous, Inc. are among the companies in that index with no female directors, according to ISS, a proxy-advisory firm.

Representatives for those firms did not respond to requests for comment.

State Street is among the largest passive managers in the world — a sector that is amassing significant governance power as investors pour billions into lower-cost index-tracking funds like exchange-traded funds. The firm manages $2.47 trillion in assets, the majority of which are in index-tracking funds.

U.S.-based mutual funds and exchange-traded funds that track indexes owned 11.6% of the S&P 500 at the end of June, up from 4.6% a decade ago, according to a Wall Street Journal analysis of data from Morningstar Inc. and S&P Global Market Intelligence.

Compared with rivals, State Street sometimes has taken more aggressive — and public — stances on certain corporate-governance matters. In recent years, for example, the firm focused on long-tenured board members.

State Street in 2015 voted against or withheld votes during the re-election of one or more board members at 380 companies globally because of tenure concerns. It estimates that 32% of those firms added at least one new director by 2016.

Now, State Street executives say research shows companies with more board women and senior female staffers perform better than rivals without them. A study MSCI released in December typifies such findings. During the past five years, U.S. companies that had at least three female directors in 2011 have financially outperformed those that had no board women in 2011, concluded the investment research firm. Its study looked at return on equity and per-share earnings for 580 such concerns between 2011 and 2016.

State Street wants companies in that U.S. index, the U.K.’s FTSE 350 and Australia’s S&P/ASX 300 to address gender diversity at the board level and throughout their employee ranks, said Rakhi Kumar, the money manager’s head of corporate governance. “It’s all about creating the pipeline to introduce diversity within organizations,” she said.

“Some companies may say you’re wrong and we agree to disagree. In those cases we have no choice but to use our vote,” she said.

Boardrooms at 76 U.S. public companies have had no female directors for the entire past decade, according to an exclusive analysis completed in December for The Wall Street Journal by governance researchers Equilar Inc.

Mr. O’Hanley plans to send letters about gender diversity this week to the heads of the more than 700 Russell 3000, FTSE 350 and S&P/ASX 300 companies with no women on their boards. State Street Global Advisors also plans to place the bronze statue on Wall Street early Tuesday morning.

The firm secured permission from the city to place it in front of the bull for one month, but would agree to leave it longer if it is well received, a spokeswoman said.

Write to Joann S. Lublin at and Sarah Krouse at

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