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Franchot, Kopp join call for corporate board diversity

Bryan P. Sears//June 1, 2016

Franchot, Kopp join call for corporate board diversity

By Bryan P. Sears

//June 1, 2016

Two Maryland officials are joining the call for more diversity on corporate boards of directors and are hoping to use the state’s pension system as leverage to get it.

Comptroller Peter V.R. Franchot and Treasurer Nancy K. Kopp joined a dozen other state and local comptrollers, treasurers and controllers calling for more racial, gender and LGBT diversity on corporate boards. Those officials represent a combined six million public retirement system participants with $1 trillion in total managed assets.

“The world is changing, and corporate board rooms need to catch up with that change,” Franchot said in a statement. “More corporations must decide that board diversity is a priority – corporate boards need the right skills and perspectives to effectively communicate with their stakeholders.”

The three-page joint statement issued Wednesday called on companies held within their state’s respective retirement system portfolios to diversify their boards of directors, saying “boards should cast wide nets in their search for the best talent and include nominees who are diverse in terms of race, gender and LGBT status.”

The group said the current efforts to diversify boards “remain unacceptably slow.”

Currently, white directors hold 85 percent of the board seats of the largest 200 of the S&P 500 companies. Men occupy four of every five S & P company board seats. Fewer than 10 openly lesbian, gay, bisexual or transgender directors are on Fortune 500 boards.

“Many of the pension funds where we serve as fiduciaries have assumed significant leadership on this topic for years; others hare giving it new consideration,” the group wrote in its letter. “But as fiduciaries, we are unified in the belief that the lack of diversity on corporate boards is a significant risk factor for investors and that a broader group of investors must act to match the scale of the problem.”

Just how much diversity improves corporate performance is a question still up for debate, according to professors at Stanford University.

In an article, the professors note that research on the subject is limited and has yielded sometimes conflicting results.

“Given the competing findings and methodological limitations of these studies, the potential benefits of board diversity on firm performance should not be overstated,” the article states. “But neither should boards understate other justifications for diversity, including values such as fairness, justice, and equal opportunity, as well as the symbolic message it sends to corporate stakeholders. A diverse board signals that women’s and minorities’ perspectives are important to the organization, and that the organization is committed to inclusion not only in principle but also in practice. Further, corporations with a commitment to diversity have access to a wider pool of talent and a broader mix of leadership skills than corporations that lack such a commitment.”


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