New York State Fund Snubs All-Male Boards

Joann Lublin

Wall Street Journal

Mar 20, 2018

A major state pension fund intends to oppose the re-election of all directors at hundreds of U.S. corporate boards without a single woman.

The unusual campaign by the New York State Common Retirement Fund, announced early Wednesday, reflects its growing impatience with the pace of progress on gender diversity in the boardroom.

Women held 16.5% of directorships at Russell 3000 companies at year-end, up slightly from 15.1% in 2016, according to governance researchers Equilar Inc. Russell 3000 boards won’t achieve gender parity until 2048, Equilar predicts.

“We need to speed up that time frame,’’ said Thomas DiNapoli, New York state’s comptroller. He manages about $209.1 billion in assets for what is the third-biggest U.S. public pension fund.

Many large investors have long pressed corporate boards to increase their ranks of women, and several studies in recent years have linked increased female representation on boards with improved shareholder returns. But until recently, most investors didn’t specify the number of female members that they believe is appropriate.

The idea of investment managers taking a stand on social issues has faced resistance. This month, a Florida lawmaker proposed that the state’s retirement fund stop investing in gun makers after a deadly high-school shooting. But officials who manage those investments say dropping gun stocks would conflict with the duty of a retirement or pension fund to maximize returns for public workers.

The New York pension fund owned shares in more than 400 U.S. businesses without any female directors last year.

The fund already has opposed or will soon oppose directors up for re-election at companies such as TransDigm Group Inc., Seaboard Corp. and Sonic Automotive Inc.

TransDigm, a maker of aircraft parts, re-elected the 11 male board members at its annual meeting on Tuesday, the company said in a regulatory filing. The manufacturer is one of 45 U.S. companies that hasn’t had a single female director in the past 12 years, according to an Equilar analysis for The Wall Street Journal of the 1,500 biggest Russell 3000 concerns.

Equilar also found that of those 45 businesses, the 12 biggest by market capitalization appointed 67 male board members since 2006. TransDigm added the most, choosing nine men in the period. TransDigm didn’t respond to requests to comment.

Seaboard, an international conglomerate involved in shipping, energy and food products such as Butterball turkeys, also appears on the lineup of companies without a female director since 2006. Seaboard, whose five male directors face re-election April 23, didn’t respond to requests to comment.

For Sonic, a major car dealer, the New York pension fund said it would refuse to support the re-election of nine male directors during its April 25 annual meeting. Sonic didn’t respond to requests to comment.

Several businesses without female directors since 2006 have come under criticism for their governance practices. Skechers USA Inc., a producer of casual shoes, has defeated a shareholder proposal to boost board diversity in each of the past three years.

The New York pension fund sponsored the measure in 2015 and 2016. The fund didn’t resubmit its resolution this year.

Skechers hasn’t released its 2018 proxy. The company declined to comment.

Other institutional investors also are intensifying their push for more women on boards. BlackRock Inc., the world’s largest money manager, last month stated publicly for the first time that companies in which it invests should have at least two female directors.

Starting in 2015, Massachusetts’ state pension fund has voted against directors up for re-election at companies where women or people of color hold less than 25% of directorships—and increased that threshold to less than 30% of directorships in 2017.

Similarly, Rhode Island’s state pension fund last year started casting votes against new and incumbent directors at businesses where women or people of color have less than 30% of board seats.

California State Teachers’ Retirement System changed its board diversity policy in November. As a result, “Calstrs may oppose the re-election of all directors this year at 27 companies with zero women on their boards,’’ said Aeisha Mastagni, a portfolio manager for corporate governance.