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Big Investors Are Better Than Quotas At Getting More Women On Boards

(Bloomberg) —

The three largest money managers in the US have been more successful in boosting the share of women in S&P 500 boardrooms than quota-like laws, new research finds. 

Campaigns by BlackRock Inc., Vanguard Group Inc. and State Street Corp. drove American corporations to add at least 2.5 times as many female directors in 2019 as they had in 2016, a working paper released this week by the National Bureau of Economic Research found. Firms with more of their shares held by these big funds were more likely to add women to their boards. 

“They had a very sizeable impact and were quite important to that shift,” said Todd Gormley, a co-author of the paper and a researcher at the Olin Business School at Washington University in St. Louis. The working paper was accepted for publication in the Journal of Financial Economics, he said. 

Since 2017, institutional investors have pressured companies to improve board diversity. State Street launched the “Fearless Girl” effort that year encouraging its holdings to have at least one female director. Similar initiatives by Vanguard and BlackRock followed not long after. In 2018, California also passed a law requiring companies based in the state to have at least one woman on their boards by 2019, and three by 2021. 

The study found that female directors grew by 50% between 2017 and 2019, with investor campaigns driving the bulk of the change. In addition to pressuring companies through their voting power, investors also helped firms identify new pools of potential candidates. 

“If it’s a quota, it’s one thing,” Gormley said. “But if it’s coming from your own investors, telling you this is the right thing to do and it’s going to improve firm values, companies respond in a more serious fashion.” 

The research also found that investors helped women nab powerful committee chair positions. 

“The pressure from the big three not only increases representation — which one might argue quotas also do — but increases it in a meaningful way,” said Vishal Gupta, a researcher at the Culverhouse College of Business at the University of Alabama and co-author of the working paper said. 

These initiatives by BlackRock, Vanguard, and State Street are the kind of ESG campaigns that have come under attack by conservative critics who believe they amount to corporate overreach. The three funds’ holdings, which are equal to close to half the market capitalization of the entire US stock market, gives them significant influence when they take an adversarial voting position.

Read more: Onetime Trump Appointee Helps Spark Sweeping ESG Backlash

California’s rule also drove an uptick in women on boards, other research has found. But the law has since been struck down as unconstitutional.

Even with increased pressure, women still only hold about a third of all seats on big public company boards. 

“I would love to see it become and equal world where this is self-driven,” said Sandra Mortal, another one of the study’s co-authors who teaches at the Culverhouse College of Business. “But I don’t think we are anywhere close to that.

To contact the author of this story:
Jeff Green in Southfield at

© 2022 Bloomberg L.P.


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