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The glacial progress towards Board gender diversity

New year, old issue. Policymakers continue to urge, recommend, guide etc both public and private sectors to embrace positive discrimination for female candidates in the workplace, and repeatedly threaten prosecution or brand-shaming for gender pay gaps, with precious little effect.

Weighty academic studies consistently suggest that corporate Board gender diversity is not a bad thing, and may even be a good thing. Yet almost everywhere, actual progress towards greater representation of women in the ‘C-suite’ remains glacial.

In its latest report, MSCI ESG Research notes it has been monitoring the state of women’s representation on corporate boards globally since 2014, continuing the work begun by GMI Ratings in 2009. It has examined the investment case for gender equality, differences in CEO pay package construction, and gender diversity issues in specific markets (Japan) and industries (Financials).

However, it’s latest report concludes that “overall progress has been slow, even lagging the business-as-usual rate of increase we anticipated in 2015”. It will now be at least 2028, rather than 2027, before 30% of MSCI ACWI Index company board seats are filled by women, if the current rate of increase remains unchanged.

There is progress. Women held 17.3% of all directorships at MSCI ACWI Index companies as of October 16, 2017, up from 15.8% the previous year. Among Developed Market MSCI World Index companies, women held 20.4% of all directorships (up from 19.1%), with women at US companies holding 21.7% of directorships (up from 20.3%). Women held 10.2% of board seats at MSCI Emerging Markets Index companies (up from 9%).

However, over a fifth of the 2,451 MSCI ACWI Index companies still had all male boards, and nearly all still had majority male boards. Seven companies had boards that were majority female, with another 21 divided exactly 50-50.

There is a regional, perhaps cultural bias. The majority of companies whose boards had at least three female directors were based in developed Western markets, MSCI ESG Research said. The majority of those with all male boards were based in Japan, South Korea, Taiwan, Hong Kong, and China. In several but not all European countries there were no MSCI ACWI Index companies with all male boards.

Among sectors, Information Technology was a laggard with 28.5% of companies having no women on their boards, and only 18% had at least three, while over 40% of Utilities and Financials firms had at least three female directors.

While female accession to the CEO’s office continues to be slow, there has been more progress in the CFO position, with a few unexpected bright spots including Thailand, Malaysia, Singapore, and China. Of the 96 firms with a female CEO, 30 were American, with Taiwan and the UK accounting for another nine each. Companies with a female CEO were more than twice as likely to have at least three women on the board as companies with a male CEO.

However, the issue may get a further nudge this year. Gender diversity and equality is now firmly entrenched as a key indicator for ESG (Environmental, Social and Governance) standards against which many corporates are now measured. Investors are asking questions, ranking competitors and choosing to back firms which can demonstrate gender balance in leadership and workforce, equal compensation and work-life balance, all pointers to good governance and therefore lower risk holdings.

Other financial metrics have inevitably followed. Netherlands-based Equileap has just teamed up with UBS to launch a Global Gender Equality Ucits ETF on Switzerland’s SIX exchange. Equileap offers data on gender equality drawn from a proprietary database of some 3,000 companies worldwide. The ETF product is based on its Global Gender Equality 100 Leaders index, part of a family of five gender equality indices calculated by Solactive, another index provider.

Equileap CEO Diana van Maasdijk believes this is just the first of a number of possible ‘engendered’ product launches. It’s another small step to address the issue but it may be yet another generation before the gender gap really closes.

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