SHE Index to Promote Gender Diversity

Index to Promote Gender Diversity: From the Press Release

Index to Promote Gender Diversity announced by State Street Global Advisors (SSGA), the asset management business of State Street Corporation (NYSE: STT). Check out the SPDR® SSGA Gender Diversity Index ETF (Ticker: SHE). SHE seeks to track the performance of the SSGA Gender Diversity Index, which comprises listed US large capitalization companies with the highest levels within their sectors of gender diversity on their boards of directors and in their senior leadership.

I view this as a very positive development but also see it as an opportunity to take action by requesting that SSGA also vote its proxies to promote gender diversity.

According to Kristi Mitchem, executive vice president and head of the Americas Institutional Client Group for SSGA:

SHE seeks to help address gender inequality in corporate America by offering investors an opportunity to create change with capital and seek a return on gender diversity. This fund empowers investors to encourage more gender diverse leadership and support better long-term social and economic outcomes in support of gender diversity.

Nice little video clip on this page under commentary. According to a 2015 MSCI study that explored global trends in gender diversity on corporate boards between December 2009 and August 2015, companies with at least three female board members outperformed others in overall return on equity by more than 36 percent. Despite these findings, American women account for an average of just 16 percent of the members of executive teams.

SSGA was inspired to develop the index to promote gender diversity by the California State Teachers’ Retirement System’s (CalSTRS) efforts to move the needle on gender diversity in corporate America, especially for women in leadership positions. (CalSTRS does not endorse SSGA’s product.)

To help strengthen third-party charitable organizations committed to enhancing gender diversity, SSGA will direct a portion of its revenue to nonprofit organizations that help develop girls as leaders in business and science.

Said Alison Quirk, chief global human resources and corporate citizenship officer at State Street:

Closing the gender gap requires strengthening gender diversity and inclusion practices across corporate America. We believe that the root causes of biases that influence women being underrepresented at the most senior levels of executive and board leadership develop at an early age. We want to empower girls to take their place in business leadership, especially in science, technology, engineering and math (STEM) industries that will be in high demand for the next 10 to 20 years. By paying it forward through the charitable contribution, we can build a better future.

Quotes seem to come in threes in press releases. Here’s the third from James Ross, executive vice president and global head of SPDR Exchange Traded Funds at SSGA:

SHE is designed to offer investors an opportunity to access the potential benefits of gender diverse leadership and seek to drive meaningful social change while maintaining core US large cap exposure, As the first SPDR ETF to use a proprietary SSGA Index, SHE highlights a path for future innovative products that improve access to unique solutions for investors.

Select Characteristics of SPDR SSGA Gender Diversity Index ETF (Ticker: SHE):

SHE is comprised of approximately 144 stocks from the largest 1,000 listed companies in the US, based on the presence of women at the CEO, board or senior leadership levels, and seeks to minimize divergent sector weights versus the 1,000 largest listed US companies with the goal of isolating gender diversity as the primary factor exposure. The fund’s expense ratio is a fairly low 0.20%.

Index to Promote Gender Diversity: About State Street Global Advisors

For nearly four decades, State Street Global Advisors has been committed to helping financial professionals and those who rely on them achieve their investment objectives. We partner with institutions and financial professionals to help them reach their goals through a rigorous, research-driven process spanning both active and index disciplines. We take pride in working closely with our clients to develop precise investment strategies, including our pioneering family of SPDR ETFs. With trillions* in assets under management, our scale and global footprint provide unrivaled access to markets and asset classes, and allow us to deliver expert insights and investment solutions.

State Street Global Advisors is the investment management arm of State Street Corporation.

Index to Promote Gender Diversity: Geographic Measure of Need

The table below from Bloomberg shows the gender-based corporate governance by states as measured by: 1. % female employed civilian population age 16+ working as top executives; 2. % female on board of public US companies, with market capitalisation of at least $100M, as of end of 2015. Board representations were market cap-weighted for firms domiciled in each state. States with less than five companies were excluded from this calculation. This is 5 of 5 components of the U.S. Gender Equality Indexes (Leadership Inroads).

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                           % Female
                           Employed
                                 as    % Women on
Location             Top Executives         Board
============================================================
Alabama                      0.533%        18.06%
Alaska*                      0.673%             -
Arizona                      0.851%        11.18%
Arkansas                     0.747%        23.27%
California                   0.900%        20.34%
Colorado                     1.120%        11.17%
Connecticut                  0.798%        21.39%
Delaware                     0.799%        21.05%
Washington DC                1.863%        17.93%
Florida                      0.912%        12.58%
Georgia                      0.749%        19.81%
Hawaii                       0.780%        15.99%
Idaho*                       0.572%             -
Illinois                     0.702%        17.82%
Indiana                      0.617%        18.87%
Iowa                         0.433%        24.54%
Kansas                       0.685%         6.11%
Kentucky                     0.650%        17.99%
Louisiana                    0.576%        16.28%
Maine*                       0.656%             -
Maryland                     0.816%        20.87%
Massachusetts                0.749%        17.95%
Michigan                     0.665%        19.16%
Minnesota                    0.796%        21.30%
Mississippi                  0.556%        12.71%
Missouri                     0.624%        14.18%
Montana*                     0.823%             -
Nebraska                     0.494%        19.19%
Nevada                       0.575%        11.70%
New Hampshire                1.067%        13.39%
New Jersey                   0.724%        20.10%
New Mexico*                  0.548%             -
New York                     0.761%        20.94%
North Carolina               0.671%        19.23%
North Dakota*                0.682%             -
Ohio                         0.689%        25.60%
Oklahoma                     0.647%        10.69%
Oregon                       0.870%        18.00%
Pennsylvania                 0.618%        13.66%
Rhode Island                 0.679%        20.15%
South Carolina               0.818%        11.07%
South Dakota                 0.829%        18.33%
Tennessee                    0.635%        17.20%
Texas                        0.777%        14.72%
Utah                         0.701%        10.64%
Vermont*                     0.748%             -
Virginia                     0.773%        16.87%
Washington                   0.782%        21.24%
West Virginia                0.778%         8.89%
Wisconsin                    0.728%        17.96%
Wyoming*                     0.528%             -
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SOURCES: Bloomberg, U.S. Census 1Y ACS Statistics for D.C. are provided for reference.
NOTE: *States with less than five percent

Index to Promote Gender Diversity: My Two Cents as Investment Strategy

An index to promote gender diversity is long overdue. I have been late to this factor as an investment strategy myself, just beginning to overweight my portfolio in California-based companies with higher gender diversity a couple of years ago. See my post Small Gains by Women in California Companies. Evidence demonstrates an index to promote gender diversity should outperform the broader market.

More importantly, the SHE fund will increase visibility for women and the financial benefits that come from diversity. Profit seems to be the only driver in neoliberal America. The Norwegian initiative to require 40% of corporate directors to be women was initiated not for economic reasons but to address societal needs for justice, democracy, participation, equality and human rights. Unfortunately, I don’t see those factors becoming the driver for change in the United States during my lifetime. See Review: Getting Women on to Corporate Boards.

Index to Promote Gender Diversity: SSGA’s Proxy Votes 

One might think a company like SSGA that creates an index to promote gender diversity would also use its proxy votes to do the same. Not so. SSGA makes no reference to diversity in its proxy voting guidelines. I did a very quick look at their votes as recorded by ProxyInsight. SSGA voted against

• 97% of proposals seeking a report on pay disparity.
• 71% of proxy access proposals (shareholders could use to ensure more diverse nominees)
• 56% of proposals to approve or amend a policy/report on board diversity

Index to Promote Gender Diversity: Take Action

I encourage readers to send an e-mail like the following to Rakhi Kumar, Vice President of Corporate Governance at SSGA:

I’m delighted to read that SSGA has created an investment opportunity based on an Index to Promote Gender Diversity, the SHE fund. I hope you will take this opportunity to review the apparent incongruity between SSGA’s proxy voting and the idea of  empowering investors to “encourage more gender diverse leadership and support better long-term social and economic outcomes in support of gender diversity,” as noted by Kristi Mitchem, Executive Vice President and head of the Americas Institutional Client Group for SSGA.

It appears that SSGA voted against

• 97% of proposals seeking a report on pay disparity
• 71% of proxy access proposals (shareholders could use proxy access to ensure more diverse nominees)
• 56% of proposals to approve or amend a policy/report on board diversity

Please help to harmonize SSGA’s voting practices with its investment strategies.