It’s proxy season. As America’s public companies send out their annual reports, and ask you to vote your shares in the way they recommend, you get a chance to voice your opinions. Individually, you might not have much of a voice in corporate governance. But collectively, shareholders can and do make a difference when they vote their proxies.
It’s tempting to just review the pictures in the company annual report, and perhaps read the letter to shareholders from the CEO. Or to skim the materials online, if you’ve opted to go paperless. (Shares held inside mutual funds are voted by the fund management company).
The complex financial tables and footnotes can be overwhelming for the ordinary investor. But don’t throw out the proxy card, on which you get to vote for some mundane items (re-hiring the company auditors) and some important choices.
The biggest issue on 2018 proxies is diversity. Shareholders are increasingly letting companies know they expect more inclusion in corporate America – everywhere from the boardroom to the management team. Having more diverse voices to guide business has been clearly demonstrated to improve business returns.
This year the powerful New York State Common Fund (the state’s pension fund with nearly $210 billion in assets), has announced it will vote its proxy against the re-election of all directors at U. S. corporations that do not have at least one woman on the board.
There are 45 companies in the Russell 1500 stock index that have not had a female board member since 2006. They range from broadcaster, Sinclair, to industrial companies like RBC Bearings, to –surprisingly – Sketchers! (If all women gave up wearing Sketchers they’d get the message – but my feet would hurt!)
There is plenty of evidence that having a diverse representation of occupants in both the boardroom and the executive conference room is not only good as a “governance principle” – it is good for business, for profits, and for strategic growth of a company.
While directors do not “run” the company, their role is to help set strategic direction for the business and to choose the chief executive officer (CEO) to lead the company to profitable returns for shareholders.
And that is the argument for diversity. I don’t know of one company in America that sells to, employs, or impacts <<only>> middle-aged white males! How can you best serve your customer, grow revenues, and profits, and be a good citizen in your community if you don’t even “see” all those constituents around you during the decision- making process of governance?
A new study from McKinsey & Company found that companies with the most ethnic and cultural diversity in the boardroom were 43 percent more likely to experience higher profits. The 2020 Women on Boards Report shows that women have made great progress in recent years, but still hold only 20 percent of the board seats of Fortune 1000 companies. Minorities have less than 20 percent representation.
Aside from voting your proxy, you can vote with your investment dollars. An interesting place to start is the Pax Ellevate Global Women’s Leadership Fund, which invests in a proprietary index of global companies that are leaders in gender diversity. Company founder and chair, Sallie Krawcheck, is a respected Wall Street leader.
This no-load fund invests only in companies that have at least two women on the corporate board. In fact, their holdings average 35 percent women in board seats, and 29 percent of executive management positions. They include companies like Gap, Inc., Accenture, Target, and Kellogg where women make up more than a third of board seats. The fund also advocates to place pay-equity resolutions on corporate proxies. Their pressure has made a difference.
The fund demonstrates clearly that good governance is good investment. It has outperformed the MSCI World Index for the past one and three years. For more information go to https://paxworld.com/pax-ellevate/.
In 2020, we will mark 100 years since women first won the right to VOTE – as the 19th amendment was ratified on August 18, 1920. Using the right to vote your investments, as well as your politics, makes financial sense. And that’s the Savage Truth.