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Activists Reduce Board Diversity, Say Multiple Studies

Shareholder activists and their supporters often tout governance-related benefits that emerge at companies they target. Some of these benefits may be grossly overstated according to two separate studies from proxy advisory firm ISS and Bloomberg News.

The ISS report examined shareholder activist appointments and company appointments made in response to activism from 2011 to 2015. The study found that of 380 board seats at S&P 1500 companies, only 8.4% were female. This compares with 25% for all new appointees to S&P 1500 companies over the same period. Rates for ethnically diverse candidates were equally low at these activism-affected firms with diverse appointments at 5%, compared to a sector average of 13%.

Bloomberg examined 174 activist-related appointees at S&P 500 companies during the same timeframe and found only 7 (or 4%) were women.

In the companies included in the ISS study, the number of all-male boards grew from 13% to 17%, and the number of all-white boards rose from 52% to 56%.

This lack of diversity among activist nominees comes in stark contrast to a growing push for increased gender and ethnic diversity at US public companies. Major institutional investors, including BlackRock, State Street and Vanguard, are demanding that boards include more women and people of color, often citing research that shows diverse groups make better decisions and lead to greater profitability. These, and other major shareholders, have publicly committed to voting against the re-election of board members at companies that fail to adequately address gender and ethnic imbalances.