Efforts by the investment staff of the $352.2 billion California Public Employees’ Retirement System (CalPERS) to increase corporate board diversity are beginning to have an effect, with almost one in five targeted companies adding or in the process of adding women or minority board members, shows a report to be presented to the retirement system’s investment committee on Monday.
The June 18 report finds that 18%, or 93 of 500 companies that CalPERS targeted from the Russell 3000 stock index beginning in July 2017, now have women or minority members on their board or are in the process of selecting such boards members.
The CalPERS campaign began with letters to the selected companies, all based in the United States, that did not have diverse boards.
Another 155 companies, or 31% of the corporations, wrote back to CalPERS that they are in the process of enhancing efforts to increase board diversity. The CalPERS report does not detail just how specific those board diversity efforts are and CalPERS spokesman John Osburn was not able to provide CIO with any specifics.
Still, the majority of companies without diverse boards, 249—50%—did not respond to the survey, the reports shows.
Another seven companies, or 1%, responded, but their explanations to how they were going to enhance board diversity was inadequate, the report says.
CalPERS, as part of its corporate engagement plan, plans to withhold votes against existing corporate members who sit on US company boards without diverse board members. The retirement plans to target nominating and governance committee board members as well as long-serving board members.
CalPERS bases its board diversity efforts on the thesis that more diverse boards lead to better investment returns.
The CalPERS report cites a Credit Suisse study that found excess investment returns of 3.5% per year between 2005 and 2015 for companies with at least one woman on their board.
The CalPERS report said that public companies that CalPERS invests in should “have a level of board diversity that reflects each company’s business, workforce, customer base, and society in general.”
CalPERS invests in thousands of companies through its more than $176 billion global equity portfolio.