Blomberg reports that:
Corporate boards’ makeup is top of mind for institutional investors this year, according to an Ernst & Young LLP survey released Jan. 30.
More than 80 percent of asset managers, public pension funds, and other investors managing a collective $32 trillion in assets told EY that making sure boards have the right mix of members, including women and experts in areas such as cybersecurity, should be a focus for directors in 2018. That's up from about 70 percent of investors the year before.
And Bloomberg also reports that:
BlackRock Inc., the world's biggest asset manager, is asking companies with few or no women on their boards to explain themselves, saying that diverse groups make better decisions.
“Irrespective of a company's industry, location or size, we believe that a lack of diversity on the board undermines its ability to make effective strategic decisions,” BlackRock said in the letter signed by Michelle Edkins, global head of investment stewardship at the New York-based asset manager. The firm said a diverse board helps companies attract and retain employees.
In both reports, the investors in question are explicitly relying on the so-called "business case" for boardroom diversity. As the first report put it:
Research by McKinsey & Co., the Boston Consulting Group, and others has shown that companies with more diverse management teams and boards perform better financially.
Big asset managers such as State Street Corp. and BlackRock Inc. have cited that kind of research in their push for more women on boards.
The difficulty with this argument is that the business case, in fact, has not been made: "the empirical research on the effect of board diversity on firm performance is inconclusive, and the results are highly dependent on methodology." Deborah L. Rhode, Amanda K. Packel, Diversity on Corporate Boards: How Much Difference Does Difference Make?, 39 Del. J. Corp. L. 377, 390 (2014). Or, as another scholar put it, "the value added by board diversity is hard to prove with any rigor, as the indeterminate findings in the extensive empirical literature on the subject." Donald C. Langevoort, Commentary: Puzzles About Corporate Boards and Board Diversity, 89 N.C. L. Rev. 841 (2011).
It may well be that, as my friend Lisa Fairfax argues, that there are important "moral and social rationales for diversity" to which we should give credence even if the business case has not been made. Lisa M. Fairfax, The Bottom Line on Board Diversity: A Cost-Benefit Analysis of the Business Rationales for Diversity on Corporate Boards, 2005 Wis. L. Rev. 795, 850 (2005).
But that is NOT the argument Blackrock et al. are making. It would be very interesting to see what happens if these big institutional investor were to be open about the normative/political basis for the initiatives rather than hiding behind the business case fig leaf.