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Perspective

Where Women Rule

Rakhi Kumar | State Street Global Advisors

August 30,2018

Corporate governance is one of the few areas in finance where women hold a majority of the leadership roles. How have women come to dominate this arena and what are we doing with our power there?

Corporate governance used to be considered boring. It was a so-called compliance function that played second (or third or fourth) fiddle to the "sexier" specialties in finance, like managing the trading desk. These days, of course, corporate governance is anything but dull, as institutional investors and their corporate governance teams increasingly exercise their influence in more and more ways. One of the most notable examples comes from us here at State Street Global Advisors: Last year, we voted against re-electing directors at 400 public companies who failed to improve gender diversity at the board level. The impact that corporate governance work like this has had on publicly traded companies is only part of the reason the field today is so exciting.

Another reason? Take a look at who's leading the charge: Corporate governance teams are often led by women. Last year, a New York Times headline referred to corporate governance as "A Rare Corner of Finance Where Women Dominate," with its accompanying article noting that women were headed Corporate Governance functions at seven of the 10 largest institutional investors.

I am one of those women. As head of corporate governance and Environmental, Social and Governance (ESG) investments at State Street Global Advisors, it is my job to oversee all of our proxy voting and integrate ESG factors into our investment process. A focus on active stewardship is vital in today’s complex and rapidly changing world where our clients are looking for more transparency, analysis and measurement around non-traditional investment factors. Our approach to this kind of engagement is underpinned by our focus on creating long-term value and sustainable, shared prosperity.

Corporate governance allowed many women a foot in the door of financial firms and, as it turned out, a very bright future.

But how exactly did corporate governance (and related ESG work) emerge as the exception to the male-leaning gender imbalance in finance? In my experience, women tend to gravitate toward corporate governance because they may be more issues-oriented than some — although clearly not all — of their male peers. My colleagues are passionate about gender diversity, environmental sustainability, social justice and other ESG factors. Our passion has become an increasingly visible asset as companies realize that ESG can have a profound impact on results and growth. There is another part of the women-in-governance equation that is a bit more uncomfortable to talk about it, but it's worth noting: In the past, when corporate governance wasn't nearly as highly regarded, it was a more accessible career path for women in finance who found themselves hitting the glass ceiling elsewhere. Corporate governance allowed many of us a foot in the door of the C-suite and, as it turned out, a very bright future.

As we have all seen, corporate governance and its leaders have stepped into the spotlight in recent years. Precipitating the change was the Dodd-Frank Wall Street Reform and Consumer Protection Act, which required shareholders to vote on executive compensation plans. The result? Corporate governance teams like mine started having discussions with companies' boards of directors to understand how they determined and justified a chief executive's compensation package. Often, they cited the CEO's performance, which led us to ask additional questions about their strategy and metrics for success.

With all this new information and more interactions with companies' directors, proxy votes became much more meaningful. At the same time, the duties of the board members themselves were evolving. Where they were once limited to hiring and firing CEOs and overseeing auditing, since the financial crisis boards have begun to play a more strategic role. Not only did they become responsible for compensation decisions, they looked at risk, environmental and social impacts, and more. Corporate governance teams like mine demanded nothing less.

It is important to note that much of our work takes place behind the scenes. Although we may make the news when we vote against directors, that is often our last resort. Rather, we meet frequently with company leaders and boards long before proxy votes, negotiating solutions that both sides can feel good about. Here too, women, often known for our "soft" people skills, can shine as we deftly work to negotiate a middle ground.

Boards of publicly traded companies are taking note of the value that corporate governance experts provide. I know at least a couple of colleagues — both women — with corporate governance expertise  who were invited to join boards because they can help those boards shape their strategies to work better with their ESG-minded investors, or perhaps even get ahead of the curve in addressing ESG issues. I believe this is the start of a trend, with more and more female corporate governance leaders ascending to board directorships. That's a wonderful thing. Corporate governance may be a "rare corner" of female leadership right now, but it's well past time that other corners caught up.

1. Stevenson, A. & Picker, L. (2017, January 16). A Rare Corner of Finance Where Women Dominate. The New York Times. Retrieved June 29, 2018, from https://www.nytimes.com/2017/01/16/business/dealbook/women-corporate-governance-shareholders.html

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Topics: Regulation , Corporate Responsibility


Rakhi Kumar | State Street Global Advisors

Rakhi Kumar is a Senior Managing Director and Head of ESG Investments and Asset Stewardship at State Street Global Advisors. She leads SSGA's efforts to strengthen integration of environmental, social and governance (ESG) factors into the investment process and is responsible for developing the firm's ESG investment philosophy and global business strategy.