On International Women’s Day, we spoke to Kimberley Lewis (KL), Head of Active Ownership, and Katie Frame (KF), Active Ownership Manager, about gender equality in the corporate world and how investors can push for change on this key societal issue.
Left to right: Kimberley Lewis and Katie Frame
How much progress have we made on gender equality in the workplace over the last few years?
KF: “Gender equality in the workplace is something the corporate world has been talking about for ages, but progress has been disappointingly slow. A report recently released by Deloitte describes progress as having been made “at a snail’s pace” and points out that the worldwide average of women on boards is only 2.8% higher than it was in 2019. At this rate, we’ll reach gender parity by 2045, according to the report. The good news is that this is seven years earlier than the 2019 report predicted.
“The reality is that the scale of the challenge is huge and there are still significant global disparities. In Japan, for example, there are even greater gender imbalances in the workforce and it will take time for change to happen.”
How helpful is regulation?
KL: “We prefer investee companies set challenging targets on their own, rather than do so as a result of legislation. But where encouraging companies to change policy is challenged, policy can be useful as a final resort. For example, in 2020, California brought in a new law that requires publicly-held companies headquartered in the state to include board members from underrepresented communities. This will make a huge difference to corporate diversity in this particular state.”
What are the benefits of gender quality for investee companies?
KF: “Ultimately, we believe that diversity across multiple dimensions brings a valuable range of outlooks and opinions. When diversity is paired with an inclusive culture, this can lead to higher-quality work, better decision-making and greater team satisfaction. Having a more representative leadership and workforce may also lead to increased consideration for products and services available for differing diverse needs, product design considerations, marketing communications to women and underserved communities. One of my favourite books is Invisible Women, which really emphasises why representation is important. For example, it highlights that because cars are often designed around the male body, women involved in collisions are nearly 50% more likely to be seriously hurt than men."
Are companies typically receptive to gender equality changes?
KL: “Many companies are very receptive to engaging on the topic of diversity and inclusion, and we have seen successes through our engagement. However, we do also receive a number of pushbacks from companies. We seek to have a constructive dialogue to understand and challenge these pushbacks in our engagements.
The number one pushback is the “pipeline problem” whereby companies cite their pipeline as the main cause behind a lack of gender diversity in their workforce.
There are two main ways to challenge the “pipeline problem”:
1 – Address what the pipeline problem actually is
2 – Demonstrate that companies in a similar sector/geography have been able to achieve greater gender diversity
“Using a data-based approach to communicate and engage with companies is a key tool to challenge their pushback. Having robust data-based rebuttals gives Schroders leverage to challenge pushback.
“To tackle this issue in the boardroom, Schroders points out that hiring ex-CEO or CFOs for board positions is not the only route. Instead, non-traditional backgrounds should be considered – why not hire an ex Head of an NGO or ex military sergeant. Cast your net further and do not just fish in the immediate pool.”
What are the main diversity and inclusion sub-topics Schroders engages on with investee companies
KL: “We have recently launched our
What does good data on gender equality at investee companies look like?
KL: “Gender, whilst recognising potential nuances and sensitivities around gender identity, should be the easiest data point to get and generally it is the area where we have the most transparent and accurate data. Of course there are still challenges, including local policy, around disclosing such information.
KF: “We like to see companies report specific and nuanced gender data, as high-level averages often hide the full story. In particular, we encourage companies to look beyond just boards and executives and into the overall workforce, breaking down their data by function and seniority, considering promotion velocity, turnover data (male vs female) and exit interview information. Both long-term and short-term targets should be aligned throughout the hierarchy of a business to uncover and manage internal disparities of representation.
“It is important we set stretching goals for our investee companies, but these need to be specific to the individual company and mindful of their challenges.”
Looking ahead to the 2022 AGM season, is there anything in particular you are looking out for or have planned for your voting and engagement in terms of diversity and or gender targets?
KL: “The Chair of the Nominations and Governance Committee is responsible at the board level for diversity and inclusion. So the Active Ownership team will vote against this individual’s re-election if we are unsatisfied with the progress or commitments being made under their tenure.
“We do not just stop after companies have met our targets, instead we regularly reassess what good looks like in terms of diversity. In 2022, and in the absence of exceptional circumstances, we are focusing on voting against the following:
- <33% gender diversity on the board of the largest companies in: UK, North America, Europe, Australia, Malaysia, South Africa
- <20% gender diversity on the board of smaller and mid cap companies in the above regions + LATAM
- No women on the board in Asia
- No women directors on the exec committee in the UK for the largest companies
- No non-white directors on the board in UK and US (FTSE 100 and S&P 500 only)
What other, broader considerations do you need to take into account when tackling diversity issues at investee companies?
KF: “There is not a one size fits all regarding gender equality experiences and challenges. We need to consider intersectionality. Intersectionality recognises the interconnected nature of an individual’s social and political identities. Without considering the nuances of intersectionality, we will fail to tackle diversity issues sustainably.
KL: “Cultural considerations are important too; for example, in some cultures individuals may opt not to take maternity leave and instead take up greater childcare responsibilities. Prioritising our asks of investee companies based on the context of the country, company and sector is important.”
What is Schroders doing to support gender balance?
Schroders signed up to the Women in Finance Charter in May 2016, a pledge for gender balance across financial services in the UK. The business originally set a target of 30% female representation in senior management roles by the end of 2019, up from 25% at the end of 2015. Schroders achieved its initial target of 30% females within senior management positions during the first quarter of 2017 and in March 2020 reached 33% female representation. A new goal of 35% female representation at senior management by 2023 has been set.
Our Gender Equality Network helps raise awareness of gender equality in the workplace and ensures that there are more visible role models at different levels of the organisation.
What are the goals of The Diversity Project on gender?
The Diversity Project is a group of leaders in the investment and savings profession that decided to take action to accelerate progress towards an inclusive culture within our industry.
Schroders is proud to support The Diversity Project, which celebrated its fifth anniversary last year and has set out ambitious new targets to accelerate progress towards a more inclusive investment industry over the next five years.
On gender these targets include reaching 20% female fund managers by 2026, gender pay gaps being reduced by a third from 2019, 50:50 male: female graduate and school-leaver recruitment and equal take up of stocks and shares ISAs by female and male customers.
This month The Diversity Project is launching the Futures Female Fund Managers Programme with the aim of encouraging more females into fund management.
Schroders’ chief executive Peter Harrison, who is on the advisory board of The Diversity Project, says: “Schroders is delighted to be a founding supporter of this great initiative to tackle the obstinate problem of a scarcity of female fund managers. We look forward to working with the Diversity Project and seeing more women become fund managers as a result of the targeted programme.”
>> For more about inclusion and diversity at Schroders, visit the working here section of our website.
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