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Small Firms Under Pressure to Put Women on Boards

(February 13, 2019, Wall Street Journal) The number of large US companies with all-male boards has dwindled in recent years as investors have demanded more boardroom diversity.

Next in line: community banks, regional energy companies and other small and midsize enterprises.

Proxy advisers are urging community banks, regional energy companies and other small and midsize enterprises to increase gender diversity on their boards or risk losing shareholder support.

“Companies that don’t have women on their boards are outliers,” said Courteney Keatinge, senior director of environmental, social and governance research at Glass Lewis. “And we want to make sure those outliers are called out.”

All-Male BoardsThe number of Russell 3000 Index companies with all-male boards has fallen in recent years as investors demand gender diversity.Source: Glass Lewis
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Investors are increasingly viewing lack of diversity on boards as a sign of broader problems with a company’s recruitment process, according to Institutional Shareholder Services Inc., which plans to implement a similar policy in 2020.

Institutional investors, such as State Street Global Advisors and BlackRockInc., have pressured major companies in their portfolios to add women directors, and in some cases have voted against directors on all-male boards.

In September, California became the first state to set a gender quota. By the end of this year, boards of publicly traded companies based in the state will be required to have at least one woman.

Those efforts emboldened proxy advisers to take a stand, Ms. Keatinge said.

Just four companies in the S&P 500 had all-male boards at the end of last year, down from 31 five years earlier, according to Glass Lewis.

There were 509 companies in the Russell 3000 with male-only boards at the end of the year, down from 708 companies at the end of 2014, Glass Lewis said.

Some expect the number of all-male holdouts in the Russell 3000 to decline rapidly as such companies face additional scrutiny in the years ahead.

“It’s like a boulder rolling down a hill,” said Joe Johnson, an attorney at Goodwin Procter LLP, who advises companies on governance issues.

Investors are increasingly viewing lack of diversity on boards as a sign of broader problems with a company’s recruitment process, according to Institutional Shareholder Services Inc., which plans to implement a similar policy in 2020.

Institutional investors, such as State Street Global Advisors and BlackRockInc., have pressured major companies in their

Mid Penn Bancorp, a Russell 3000 company, is among the companies diversifying. The Millersburg, Pa., lender announced in January that it had recruited its first woman director in several decades.

The company wanted to increase “diversity of thought” in its boardroom and, given that most employees at the bank are women, thought it would be wise to have a woman on the board, said Rory Ritrievi, Mid Penn’s chief executive.

Glass Lewis and ISS telegraphed their boardroom-diversity policies months in advance to give companies time to prepare.

In implementing its policy, Glass Lewis will take into consideration existing efforts at companies to recruit women directors, as well as any agreements companies have in place with significant investors.

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