Written by Jan Jaben-Eilon Tuesday, September 11 2012
When the 80-year-old, exclusively male, prestigious Augusta National Golf Club – home of the famous Masters tournament – announced recently that it would invite its first female members, it wasn’t just women who took notice. As the club opens for its October season, former Secretary of State Condoleeza Rice and South Carolina financier Darla Moore will don the well-known green jackets allowed only to members and make headlines around the world. Martha Burk of the National Council of Women’s Organizations called the move a “milestone for women in business.”
Timothy Smith, senior vice president and director of ESG shareowner engagement at Walden Asset Management, a division of Boston Trust & Investment Management, was quoted as saying that if the Georgia-based golf club could finally invite female members, then the goal of women comprising 30 percent of corporate boards could finally be reached.
Womenetics asked Smith what he thought the significance of women’s leadership is in the corporate world and especially in the investment sector.
Smith joined Walden in 2000 to lead the company’s ongoing shareholder engagement program to promote greater corporate leadership on ESG issues. This includes company dialogues, shareholder proposals, proxy voting and public policy advocacy. In 2007, he was named one of the “Top 100 Most Influential People in Business Ethics” by the Ethisphere Institute. In 2011, he was named one of the most influential people in corporate governance and the boardroom by the National Association of Corporate Directors. Smith earned his B.A. from the University of Toronto and master’s of divinity from Union Theological Seminary.
Womenetics: Why did Walden Asset Management, an investment firm working with investors to encourage greater accountability on environmental, social and governance (ESG) issues, decide to join the Thirty Percent Coalition that advocates for expanding the number of women on corporate boards?
Timothy Smith: Walden Asset Management manages portfolios for individual and institutional investors that seek to integrate important social and environmental factors into investment decisions and to utilize their voice as an investor to promote greater transparency and corporate responsibility. Many describe this approach as “sustainable investing.” Walden clients represent over $2.2 billion in assets under management.
Walden has been involved in sustainable investing work since the 1970s. From our early days, the issues of diversity and non-discrimination in employment have been priority concerns. We believe that a company’s commitment to diversity must start at the top (the board and senior management) and reach all employment levels.
Exclusively white male boards of directors are a relic of the past. The business case is clear that board diversity helps companies make better long-term business decisions. This is one reason that Walden has for more than 20 years voted our proxies against boards of directors that have no women or people of color in annual proxy ballots.
Womenetics: How did you get involved in the Thirty Percent Coalition?
Smith: In 2011 a wide range of women’s organizations and investment firms gathered together to determine how we could work together to advance women’s leadership on corporate boards of directors. Out of that meeting emerged the Thirty Percent Coalition, which set an ambitious goal of 30 percent women board members among S&P 500 companies by 2015, roughly double their participation currently.
Our first major undertaking was to write S&P 500 companies with no women directors and make the business case for board diversity. Working together, a prominent group of women’s organizations and institutional investors with $1.2 trillion in combined assets under management, wrote 41 S&P 500 companies with no women on their boards. Participants included representatives of major pension funds such as the comptrollers of New York State and New York City; the treasurers of the states of California, Connecticut, Maryland, Massachusetts Pennsylvania and Washington, and the head of CalSTRS as well as representatives of CalPERS (respectively California’s teachers’ and public employees’ retirement programs) and the AFL-CIO. Also joining were a number of foundation executives, faith-based investors, women’s organizations and, of course, leaders in sustainable investing such as Calvert Asset Management, Domini Social Investments, PAX World Fund and Walden. The letter was sent to the chair of the board nominating committee and chief executive officer at each company.
Womenetics: Was the rationale to companies for adding women on boards framed as a “social” or a “business” case?
Smith: Of course underlining our call for diversity on boards is the strongly held belief that discrimination is unacceptable. Especially in light of the disproportionately low level of female directors relative to their participation in the workforce, an inclusive board is right and necessary. Yet, the reality is that the percentage of women on boards has stalled at about 16 percent in the last several years (Catalyst and ION studies), and the pace of change has been glacial.
However, the business case, in and of itself, is a compelling argument for companies to expand their pool of candidates for board positions. The Coalition’s open letter (available at www.30percentcoalition.org) reasoned:
“The rationale for doing so is straightforward: Companies that embrace gender diversity are better governed, better managed and have better long-term growth prospects. This is a win-win proposition for both companies and their shareholders.
Numerous studies have underscored the nexus between greater board and management diversity, on the one hand, and improved corporate governance and financial performance, on the other (Catalyst, “The Bottom Line: Connecting Corporate Performance & Women’s Representation on Boards”, 2007). This is particularly true when there is a critical mass of three or more women on a board. When women are at the table, the discussion is richer, the decision-making process is better, management is more innovative and collaborative, and the organization is stronger. Quite simply, gender diversity has positive financial consequences.
In the United States, the Securities and Exchange Commission (SEC) has adopted a new rule on proxy disclosure that includes a requirement that companies disclose whether and, if so, how their nominating committees consider diversity in identifying board nominees. The SEC rule is an acknowledgement that board diversity is now considered by many investors to be a material factor in business strategy and success.”
The letter also highlights international movement on this issue, including legislation in countries such as Belgium, France, Italy and Norway that require a minimum percentage of board seats to be held by women.
Womenetics: Why do you believe it is significant that two women became members of the Augusta National Golf Club, home of the Masters Golf Tournament? How positive is this development given that Virginia Rometty, CEO of IBM and one of the Masters’ corporate sponsors, has still not been invited as a member even though four former IBM CEOs were members?
Smith: The announcement by the Augusta National Golf Club, a historic bastion of male exclusivity, that it was admitting two women has been highlighted as a milestone in golf and a step forward for women. Certainly it marks a significant break in a longstanding barrier and is a tribute to the tireless efforts of Martha Burk, who for years campaigned vigorously against this backward-looking policy. But it is hard to celebrate this long overdue change in policy when it is so obviously so late in coming.
The internal story may never be told. But it is not hard to imagine the debate among the businessmen serving on the Augusta Golf Club Board when IBM, a longtime supporter and Masters advertiser, chose Virginia Rometty as their CEO, and she was not invited to join Augusta. The foolishness of excluding women from club membership became even clearer.
Yet, if Augusta’s historic position of discrimination can crumble, we are optimistic that we can make progress toward the goal of having women comprise 30 percent of directors in major U.S. companies in this decade.
More arguments for including women on boards:
While most of us agree that more women deserve a seat at the boardroom table, not all of us agree on how to best go about achieving that. Maryilyn Nagel, CEO of Watermark, makes a case against quotas.
Charlotte Laurent-Ottomane, former president of ION and current project leader with the Thirty Percent Coalition, doesn't buy the excuse that there simply aren't enough qualified women to join executive boards.
An expert in corporate governance and compliance, Jilaine Hummel Bauer suggests 8 specific steps women can take to make them stronger board candidates.
Jan Jaben-Eilon was a founding staff writer of the Atlanta Business Chronicle. Since then, she has been the international editor of Advertising Age magazine and has written for such publications as The New York Times, International Herald Tribune, Washington Journalism Review, and Consumer Reports. She is the author of soon-to-be-published (There is) Life After Cancer. Jan and her husband have homes in Atlanta and Jerusalem.