“Gender-balanced leadership affects a company’s abilities to prepare, adapt, and excel.”
– Regina Curry
Many current outlooks for investors and industry regulators include gender-balancing leadership and boardrooms. Skeptics question whether ensuring gender-balanced leadership detracts from company performance, however, much academic and industry research determined that it does not.1 Moreover, opportunities for long-term company performance result with board compositions of at least 30% women:2,3
- Chief investment officers (CIOs) of leading institutional investment firms said if choosing between two comparable firms, they would allocate twice as much capital to the more gender-diverse private equity firm. These CIOs focus diversity, equity and inclusion (DEI) requests on asset managers to advance their DEI goals and public commitments.4,5
- California State Teachers’ Retirement System, a pension with assets over $300 billion, will escalate proxy votes to achieve board diversity by increasing voting against:6
1) the entire board of directors of companies that do not have at least one woman on the board,
2) directors on a board’s nominating committee if the company does not have at least 30% women board members, and
3) nominating and governance committee members of companies in the Russell 1000 Index that do not disclose the skills and diversity characteristics of their board members.
- Nasdaq Inc. now requires US companies to meet board diversity objectives by annually disclosing publicly the diversity of their boards and setting minimum targets of at least two gender-diverse board members: one female plus a member of an underrepresented minority group or someone who identifies as LGBTQ+.7 By 2026, this requirement will increase to at least two diverse directors, including one from each diversity group.8
- The European Central Bank (ECB) engaged banks lacking diversity policies or internal targets for gender diversity at board level in 2022. A third of the banks under ECB supervision did not meet their 2021 targets for gender representation at board level.9
- Over 400 financial services firms globally now commit to monitoring their gender balance progress with targets, creating benchmarks for company differentiation.10
Gender-balanced leadership affects a company’s abilities to prepare, adapt, and excel. Furthermore, it addresses both investors’ and regulators’ demands for gender equity and progress while delivering more business opportunities and growth.
WHAT ARE THE RISKS?
All investments involve risks, including possible loss of principal. The value of investments can go down as well as up, and investors may not get back the full amount invested.
IMPORTANT LEGAL INFORMATION
This material is intended to be of general interest only and should not be construed as individual investment advice or a recommendation or solicitation to buy, sell or hold any security or to adopt any investment strategy. It does not constitute legal or tax advice. This material may not be reproduced, distributed or published without prior written permission from Franklin Templeton.
The views expressed are those of the investment manager and the comments, opinions and analyses are rendered as at publication date and may change without notice. The underlying assumptions and these views are subject to change based on market and other conditions and may differ from other portfolio managers or of the firm as a whole. The information provided in this material is not intended as a complete analysis of every material fact regarding any country, region or market. There is no assurance that any prediction, projection or forecast on the economy, stock market, bond market or the economic trends of the markets will be realized. The value of investments and the income from them can go down as well as up and you may not get back the full amount that you invested. Past performance is not necessarily indicative nor a guarantee of future performance. All investments involve risks, including possible loss of principal.
Any research and analysis contained in this material has been procured by Franklin Templeton for its own purposes and may be acted upon in that connection and, as such, is provided to you incidentally. Data from third party sources may have been used in the preparation of this material and Franklin Templeton (“FT”) has not independently verified, validated or audited such data. Although information has been obtained from sources that Franklin Templeton believes to be reliable, no guarantee can be given as to its accuracy and such information may be incomplete or condensed and may be subject to change at any time without notice. The mention of any individual securities should neither constitute nor be construed as a recommendation to purchase, hold or sell any securities, and the information provided regarding such individual securities (if any) is not a sufficient basis upon which to make an investment decision. FT accepts no liability whatsoever for any loss arising from use of this information and reliance upon the comments, opinions and analyses in the material is at the sole discretion of the user.
Products, services and information may not be available in all jurisdictions and are offered outside the U.S. by other FT affiliates and/or their distributors as local laws and regulation permits. Please consult your own financial professional or Franklin Templeton institutional contact for further information on availability of products and services in your jurisdiction.
1. Source: “Does Gender Diversity on Boards Really Boost Company Performance?” Knowledge at Wharton, School of the University of Pennsylvania, May 18, 2017.
2. Source: “Diversity in the Management of Investments,” California State Teachers Retirement System, 2021 Annual Report, page 12.
3. Source: Undiversified: The Big Gender Short and Investment Management by Ellen Carr and Katrina Dudley, Columbia Business School Publishing, August 2021.
4. Source: “The state of diversity in global private markets: 2022,” McKinsey & Company, November 1, 2022.
5. Source: “Tracking diversity, equity, and inclusion data in private markets,” McKinsey & Company, October 31, 2022.
6. Source: “CalSTRS will escalate proxy votes to achieve board diversity, net zero progress and climate change action,” California State Teachers Retirement System, March 30, 2022.
7. Smaller reporting companies, non-domestic issuers, and companies with five or less directors have comparable gender diversity objectives. All companies that do not meet a board diversity objective must explain why. Source: “Nasdaq’s Board Diversity Rule, What Nasdaq-Listed Companies Should Know,” February 18, 2022.
8. Source: “Nasdaq’s New Board Diversity Rules: What’s the Impact?” MSCI, February 1, 2022.
9. Source: “Supervising banks’ governance: structure, behavior and culture,” Keynote speech by Frank Elderson, Member of the Executive Board of the ECB and Vice-Chair of the Supervisory Board of the ECB, June 11, 2022.
10. Source: Women in Finance Charter list of signatories (June 2022), HM Treasury, United Kingdom.