CalPERS, CalSTRS champion for diversity

The Californian pension funds, CalPERS and CalSTRS, have taken a leadership role in promoting corporate board diversity, demonstrated in the launch at the NYSE this week of 3D with GMI Ratings, and membership in the Thirty Percent Coalition.

3D, which stands for Diverse Director DataSource, is a databank of pre-approved board candidates with an emphasis on highlighting people with fresh ideas and new perspectives.

The initiative is consistent with the funds’ focus on long-term shareowner value.

Anne Sheehan, director of corporate governance at the $150-billion CalSTRS, says 3D is a market solution to a supply-and-demand problem.

“As promoters of long-term shareowner value, we’ve been demanding greater diversity on the corporate boards of our portfolio companies for some time. Now we’re prepared to provide a tool to supply corporate-search firms and nominating committees with a deep breadth of quality board candidates. These professionals can not only do the job, but approach issues from diverse perspectives forged by a wide variety of backgrounds and experience, as well as by gender or ethnicity.”

Anne Simpson, CalPERS senior portfolio manager and director of global governance, says 3D is an innovative resource that opens the door to finding candidates whose fresh ideas and new perspectives can help companies generate lasting value and provide a check against the kind of ‘group think’ that played a significant role in the financial crisis.

Chair of GMI Ratings, Richard Bennett, says corporate boards work best when they reflect a diversity of perspective and experience.

“With 3D, we created an accessible resource to help companies and recruiting firms identify and recruit candidates sometimes overlooked under traditional search processes. We encourage candidates to continue submitting their credentials for review.”

GMI Ratings is an independent provider of global corporate-governance ratings and research.

It makes business sense to embrace more women

Separately the funds, as part of the Thirty Percent Coalition, sent a letter urging change to the 41 S&P500 companies that do not have any women on their boards.

The Thirty Percent Coalition is a group of pension funds, state officials, fund managers and women’s groups that is pressing for gender diversity on corporate boards.

According to reports by Catalyst, ION and Governance Metrics International, women only hold between 12 and 16 per cent of corporate board seats.

Studies have shown there is a correlation between greater gender diversity among corporate boards and management, good corporate governance and long-term financial performance.

The Thirty Percent Coalition project leader, Charlotte Laurent-Ottomane, says substantial research underscores the correlation between gender diversity, good governance and positive long-term corporate performance.

“We are urging the business community to embrace this elemental truth.”

The letter references quotas being adopted in numerous countries around the world to increase the number of women on corporate boards but proposes instead that companies in the US voluntarily embrace more ambitious diversity goals because it makes business sense.

The group has set a three-year time line by which it would like to see 30 per cent of corporate board seats held by women.

CalSTRS’ Sheehan says the group intends to follow up and engage with each of the 41 companies, asking them to “welcome women to their boards”.

“Whether it’s in dialogue with management, through shareholder resolutions or related strategies, we intend to press for change. And then we’ll move beyond the S&P500 to other companies as well. Our goal is to continue engaging companies until women hold at least 30 per cent of corporate board seats across the United States.”

Of nine board members at CalSTRS, women hold three positions, including the chair, Dana Dillon.

At CalPERS there are only two women on the board.