On the occasion of International Women’s Day and the OECD Conference on Gender Equality in Business, OECD’s Mathilde Mesnard and Bill Below highlight the importance of gender diversity in corporate leadership.

From 6-9 March 2018, the OECD is host to ‘Fearless Girl’, a casting of the diminutive and plucky bronze statue that’s been staring down the 3-ton ‘Charging Bull’ on Wall Street since International Women’s Day last March. Fearless Girl was conceived by asset manager State Street Global Advisors and its advertising agency McCann to ignite a conversation on women in corporate leadership—and to signal the launch of State Street’s index fund based on gender-diverse companies (trading symbol: SHE).

Fearless Girl looks to be about eight or nine years old. What kind of world can she expect to find when she enters the job market some years from now?

Abundant determination and the ability to face down her own fears will be important qualities as she heads out into the competitive world. Statistically, she will find herself outperforming many of her male peers all the way through university, if life conditions and her own choices take her in that direction.

Fearless-Girl-Poster.JPGThe creators of Fearless Girl also say that she is Latina. As such, if Fearless Girl were entering the job market today, she would be confronted with one of the largest gender wage gaps among all women, based on the US job market. While her white, non-Hispanic female peers working full time will make around 79% of the annual earnings of white males working full time and year-round, Latinas will only make 54% of that amount. Statistically, Fearless Girl will face formidable structural barriers to entry and success in the labour market.

But Fearless Girl isn’t entering today’s market. If she goes on to higher education, her career will start sometime after 2030. How different will things be?

Even in the far-off 2030s, she may notice that the young men that she was accustomed to outperforming scholastically are favoured by an environment in which competitive advantage is also determined by gender. Some of her natural fearlessness may be shaken as she begins to confront the ways in which her new work environment is seemingly rigged against her.

While progress is slow, her chances in 2030 will be better than they are today, where only 5.8% of CEOs in S&P 500 companies are women; only 19.9% of board seats are occupied by women and only 25% of executive and senior level staff are women. The World Economic Forum calculates that at the present rate of change, global wage equality will occur about one hundred years after Fearless Girl enters the job market. That’s 2130, not 2030.

Some think change can come much faster. A growing number of institutional investors and investment funds are working to combine share performance with improvements in board- and C-suite-level diversity. State Street, in addition to launching its SHE ETF last year, issued a demand to the more than 3,500 companies it invests in to increase gender diversity on corporate boards and within management. It went on to vote against the re-election of directors at 400 companies which didn’t take steps to add women to boards.

BlackRock, the world’s largest asset manager (USD 6.26 trillion of assets under management), sent a letter at the start of this year to CEOs of the companies it invests in calling on them to combine performance and social responsibility. In 2017, BlackRock supported eight out of nine shareholder proposals on board diversity at annual meetings in the United States (shareholder proposals are the formal, documented process by which shareholders request that a publicly traded company take a specific course of action). When an investor with the impact of a BlackRock speaks up, corporations listen.

Many institutional investors are also pushing hard. CalPERS, the California Public Employee Retirement System (and the world’s seventh largest pension fund), applies a Focus List to its underperforming assets and presses for organisational change. Foremost on its list of demands is the quality and diversity of a company’s board. Its sister organisation, CalSTRS, managing California teacher retirement funds and ranked 11th globally, provided the initial seed money for State Street’s SHE ETF of USD 250 million. The New York State Common Retirement Fund has submitted twenty proposals since 2012 requesting portfolio corporations to amend their nominating committee charters to include diversity criteria in identifying director candidates. Last March, technology company GoPro agreed to implement a formal policy extending its diversity policy following a shareholder proposal from the fund.

Diversity isn’t considered a nice-to-have ethical add-on by these fund managers and investors. A board that reflects the diversity of a customer base is less likely to be out of touch. Research shows that organisations able to draw on a deep pool of talent, backgrounds, ideas and experience outperform others. A global study of publicly traded companies has shown a 36.4% higher Return on Equity for companies with strong female leadership compared to companies without a critical mass of women at the top.

The regions where our Fearless Girl goes to work will make a difference on how hard she finds it to move into a top leadership role, as will the industry sector she enters (the raw materials sector has the lowest diversity, consumer staples the highest), according to the Gender 3000 study. The greatest strides in boardroom diversity have been in Europe, where quotas and targets have contributed to an 80% increase of women in boardrooms between 2010 and 2015, with women accounting for one in four board seats. Canada and the United States, where no legal targets or quotas exist, have achieved 33% growth since 2010 and are presently at about 17%. For the EMEA region, growth is flat at about 11%, while both emerging Asia and developed Asia follow similar growth paths, with one in ten boardroom seats occupied by women. Latin America comes in at the bottom, with only 7% of boardroom seats going to women.

This said, with the average age of male board members in Europe and the United States at 62, Fearless Girl will have the benefit of a half century of progress in diversity before it becomes an issue, assuming this age tradition holds.

In the meantime, as she begins climbing the ranks of power, Fearless Girl will benefit from some of the workforce’s more recent developments: male colleagues less influenced by gender biases; more female role models to inspire and mentor her; plenty of examples that women can achieve leadership roles; laws and policies that protect her career progression, particularly if and when she chooses to raise children; and a growing sense that all stakeholders with the power to change the playing field are striving to make it its level best.

So, remain fearless, Fearless Girl, and know that with increasing pressure for corporate diversity coming from investors, little by little you may be able to let down your guard.

Documents and links

CalPERS Focus List Program
Credit Suisse Gender 3000: Women in Senior Management
New York State Comptroller (2017),  Pension Fund Makes Progress on Board Diversity
MSCI ESG Research (2017), The tipping point: Women on boards and financial performance
OECD Conference on gender equality in business
OECD Recommendation on Gender Equality in Education and Employment
OECD Recommendation on Gender Equality in Public Life
G20/OECD Principles of Corporate Governance
OECD work on private pensions and retirement savings
OECD work on gender equality
State Street Global Advisors (2017), Better Together: Gender Diversity Index ETF (SHE)
US Bureau of Labour Statistics
World Economic Forum (2017), The Global Gender Gap Report