State Street Global Advisors won praise in March 2017, when it unveiled a bronze sculpture on Wall Street called Fearless Girl, whose defiant pose was meant to represent the fight for gender equity in the American workplace.
But according to a study released Monday by investment research firm Morningstar, State Street’s gender diversity fund has voted for only 20% of shareholder resolutions put before it addressing gender and diversity, a record that “seems at odds with the investment objective stated in the fund’s prospectus,” according to Madison Sargis, associate director of quantitative research at Morningstar.
State Street says that looking at proxy votes alone can produce an incomplete measure of an investment manager’s dedication to gender equality.
When State Street rolled out its Gender Diversity Index exchange-traded fund SHE, +0.96% SHE, +0.96% in 2016 SHE, +0.96% the company said it would seek “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.”
Sargis studied the three U.S. funds that have a multiyear record on shareholder proxy votes and which are specifically focused on gender diversity. The study found that Glenmede’s Women’s Leadership Fund GWILX, +1.44% and Pax’s Ellevate Fund PXWEX, +1.09% voted for every gender equity resolution put before them, while State Street voted for just two of the ten resolutions put before it, while abstaining from two more.
Examples of such resolutions include requests for boards of directors to publish reports on efforts to bring more diversity to corporate boards, requests for companies to monitor gender pay equity and disclose any gender pay gap, and appeals for boards to include workplace diversity metrics in determining CEO pay.
“We do not simply consider the topic being addressed in a shareholder proposal when deciding how to vote,” said Olivia Offner, a State Street spokeswoman, “rather we vote on a case-by-case basis, taking into account each company’s unique circumstances and the level of disclosure relative to our expectations.”
In addition, the company emphasizes engagement with company leadership itself as a more effective way to change behavior than proxy votes. “In the past couple of years we have engaged with hundreds of companies on the importance of diversity, voted against directors over 1,000 times for lack of board gender diversity, and been a vocal proponent of the value of diversity in writing and speech — examining our voting record on a set of shareholder proposals that have significant variations in language year over year does not tell the whole story of how we approach this issue,” she said.
Sargis argued that engagement is not a substitute for voting against management in a proxy vote. “Engagement and proxy voting aren’t mutually exclusive. If you are trying to make an impact you should use all levers available,” she told MarketWatch.
Corporate boardrooms are becoming more diverse, with women and minorities occupying 34% of board seats among Fortune 500 companies, up from 30.8% in 2016, according to Deloitte. But smaller companies are less diverse — Morningstar data shows that board gender diversity for small cap companies are 8% below those in the S&P 500 SPX, +1.16%
Meanwhile, the trend in the percentage of women on corporate executive teams has been stagnant, Morningstar data shows.
“This should be a concern to those filling board director seats, because executives feed the pool of potential directors, Sargis wrote in a February report on gender diversity. “Companies must be actively supporting women throughout their careers, so they can advance into senior roles. Boards cannot become more gender-diverse unless the available talent pool does too.”