Betty Moy Huber is counsel and Paula H. Simpkins is an associate at Davis Polk & Wardwell LLP. This post is based on their Davis Polk memorandum. Related research from the Program on Corporate Governance includes The Agency Problems of Institutional Investors by Lucian Bebchuk, Alma Cohen, and Scott Hirst (discussed on the Forum here); Index Funds and the Future of Corporate Governance: Theory, Evidence, and Policy by Lucian Bebchuk and Scott Hirst (discussed on the forum here); and Social Responsibility Resolutions by Scott Hirst (discussed on the Forum here).
Women now occupy more than 20% of Russell 3000 board seats, according to a recently released Equilar report. Equilar states that this is the first time Russell 3000 boards have achieved this milestone. In addition, Equilar found that women constituted over 40% of new directors during the first half of 2019, compared to 17.8% of new directors in 2014.
As discussed in a September 11 WSJ article, companies may be responding to a number of factors including existing or anticipated state legislative pressure. California made headlines in 2018 by being the first state to require exchange-listed companies with principal offices within its borders to have at least one female board member or potentially face a monetary fine. While New Jersey is looking to follow California, other states are also considering a variety of initiatives.
Another driving factor is pressure from some of the largest institutional investors, who warned over a year ago that they would start holding boards more accountable. The big-three index fund managers, BlackRock, Vanguard and State Street Global Advisors (State Street), recently released their annual stewardship reports, and some report their voting record against directors on boards that fail to meet certain standards.