The Legacy of "Fearless Girl" One Year Later

A year ago, State Street Global Advisors issued a mandate for increased female representation on corporate boards, and erected its “Fearless Girl” statue near the Charging Bull of Wall Street as a visual representation of this directive. Fearless Girl attracted countless tourists and responses, as it came to symbolize the call for gender equality in the workplace. In its original statement, SSGA said that it would give companies in the Russell 3000, FTSE 350, and S&P/ASX 300 one year to address their overall lack of female directors or as an advisor to many of them, would vote down initiatives brought by nominating and/or governance committees. As we approach that one-year mark and International Women’s Day 2018, how much has changed?

Was SSGA’s Campaign Successful?

When SSGA issued its mandate last year, 23% of companies in the Russell 3000 had zero female board members and 58% had boards composed of less than 15% female members. There were also only five companies with female-majority boards: Tootsie Roll, American Water Works Company, Connecticut Water Service, Hologic, and Navient.

As of today, the number of companies with female-majority boards has doubled, though that number is still only .33% of the Russell 3000. In contrast, approximately 50% of index constituents still have less than 15% female board members and approximately 20% have none. Therefore, year over year, there has been increased gender diversity, though the improvement has been minimal. We can also examine the companies that went public since SSGA released its notice last March and are on the targeted indices to see how they fared when compared to the old guard.

Relevant IPO Market: How Diverse Were the Boards for New Issuers?

Since March 9, 2017, there have been 82 IPOs across the three indices SSGA specifically referenced. Of those IPOs, 34 (41.5%) have zero female board members. 

How do these 34 IPOs compare to those with gender-balanced boards? It is difficult to compare the performance of these subsets, because there are only two (of the 82) IPOs with women comprising more than 40% of their corporate boards. That said, those two companies, Mersana Therapeutics, Inc. and Akcea Therapeutics, Inc., stack up well in comparison to the 41.5% of IPOs that lack female directors. 

*Values shown are medians.

While the median opening price was lower for companies with diverse boards than for companies with all-male boards, the companies with diverse boards (>40%) boasted greater appreciation during their first day, three months, and six months of trading. For companies with females comprising between 0 and 40% of their boards, they saw greater stock price appreciation for the first day and after three months. The data suggests that higher female representation could correlate with better stock performance; however, it is difficult to draw an accurate conclusion with such a small sample of companies.

Is the IPO Market Reflective of Index Constituent Diversity?

Now that we’ve looked exclusively at the IPO market for the three indices impacted by SSGA’s push for gender equality, let’s look at the index constituents overall to evaluate whether these IPOs suggest a trend towards more board diversity.

 
This table shows how much more pronounced the lack of female representation is in North America relative to comparable countries, with its percent of companies with gender-balanced boards hovering around 2%.  At the same time, we can analyze a larger sample size than we had when just considering the Russell 3000. Across all three indices, 102 companies have boards with more than 40% women and 617 companies without female board members. How does the performance of these groups compare longer term?

While SSGA’s campaign to involve more women on the boards led to only a small number of seats gained, it’s important to take a step back and look at their goal. Are there any benefits from gender diversity from an investment perspective?

*Values shown are medians

The table above illustrates that companies with gender-balanced boards tend to generate higher price returns, return on equity, and return on invested capital and experience lower volatility. This data is consistent with our findings from the previous year and the differences are sharpest when comparing companies without female board members and with more than 40% female board members. We also discovered that companies with gender diverse boards pay more dividends than our other buckets.

Since SSGA’s initial campaign, there has been a significant cultural shift in the conversation surrounding women’s rights in the workplace. At a time when many high-profile men in various industries are facing accusations of sexual harassment and more companies are investing in sexual harassment insurance, companies and shareholders may see additional benefits to having more gender-balanced leadership.