114 women and people of color were appointed to board positions in response to investor outreach
SPRINGFIELD, IL – The Midwest Investors Diversity Initiativea 16-member alliance of institutional investors with more than $1 trillion in assets under management and advice reported progress in its efforts to increase board diversity at companies based in the Midwest.
During the 2022-2023 season, MIDI members recruited eight companies, specifically related to the diversity of their board. From these commitments, we are pleased to report the following results to date:
- 4 companies that appointed or undertook to appoint a different director.
- 8 companies have adopted a different search policy (one of which fully aligns with the Rooney rule).
- 7 companies revealed their board diversity. and
- 1 company disclosed its EEO-1 report.
“Research clearly shows that diversity is good for business,” said Illinois State Treasurer Michael Frerichs, whose office co-leads MIDI. “We've come a long way since MIDI launched in 2016. The percentage of female board members in the Russell 3000, for example, has grown from 15 percent in 2016[1] to 29% in 2023[2]. However, there is still a need for continued significant improvement. That's why MIDI remains focused on working with companies to identify best practices, provide recommendations and improve board diversity.”
For example, one company MIDI did business with in 2023 was Illinois-based Alight Solutions. Alight has made significant improvements to the diversity of its board since the beginning of its involvement with MIDI, including the addition of two diverse directors in 2023. This type of progress is exactly what MIDI strives to achieve through productive dialogue with corporate leadership .
Since 2016, when the group was created, MIDI has engaged 78 companies on board diversity. Among MIDI-engaged companies that appointed new board directors, 58 percent were women or people of color (114 of 197 new board members).
Of those 114 directors who received board appointments, 86 were women and 60 were people of color, including 32 women of color. Additionally, among all MIDI-affiliated companies since the alliance's inception, 58 (74 percent) now publicly release board diversity data. 66 (85 percent) have a policy of including diverse candidates in the search process. and nine (12 percent) publicly disclose their EEO-1 report.
“A board seeking to foster multiple strategic perspectives must prioritize diversity early in the hiring process. MIDI seeks to partner with companies and help navigate the changes that are needed,” said Rosa Limas, Vice President of Segal Marco Advisors, who co-leads MIDI with the Illinois Treasurer.
MIDI is among the first investment initiatives to focus efforts on enhancing progress on racial, ethnic and ethnic diversity within corporate boards. In doing so, MIDI offers guidance and tools to help corporate nominating and governance committees:
- Adopt a policy to seek and include board candidates who are women or people of color.
- Require that women and people of color be interviewed for every open board position (“The Rooney Rule”).
- Instruct third-party search firms to include diverse candidates in the hiring process.
- Disclose annually the gender, race and ethnicity of individual board directors as separate reporting items through a board matrix or other proxy disclosure. and
- Expand the candidate pool for board members to include people from non-traditional backgrounds.
Numbers Snapshot: Results from MIDI Engagements since 2016
78
Companies based in the Midwest are involved in diversity
114
A variety of directors were appointed at companies involved in MIDI, including 86 women, 60 men of color and 32 women of color
58
MIDI companies now revealing board diversity
66
Companies dealing with MIDI have adopted a different search policy (40 of which fully align with the Rooney Rule)
This work will remain a key priority for institutional investors in MIDI, as there continues to be broad consensus among academics, analysts and industry practitioners that diverse boards enhance performance and shareholder value. A 2020 McKinsey report found that companies with higher levels of diverse representation on executive teams are more likely to outperform peers by up to 36 percent in terms of profitability, reinforcing results found in similar studies from 2018 and 2015.[1] Additionally, a recent study of more than 4,000 North American companies found that gender diversity on boards increases board effectiveness and is associated with better financial performance.
Given the correlation between diversity and long-term financial outperformance, MIDI aims to offer tailored guidance to help companies take steps to diversify their boards and improve disclosure practices. MIDI's website provides resources that can be used to help corporate boards identify best practices and resources related to different search policies, board composition strategies, succession planning, and skills boards.
Additional MIDI members include: Segal Marco Advisors (Illinois), Illinois State Investment Board, Minnesota State Investment Board, School Employees Retirement System of Ohio, SEIU Master Trust (Illinois), Wespath Benefits and Investments ( Illinois), Ariel Investments (Illinois), Seventh Generation Interfaith Coalition for Responsible Investment (Wisconsin), Treasurer of the City of Chicago (Illinois), Trinity Health (Michigan), the Saint Paul & Minnesota Foundation, Legal & General Investment Management America (Illinois), UAW Retiree Medical Benefits Trust (Michigan) and YWCA Metropolitan Chicago. click here to learn more.
[1] Board Practices in the Russell 3000, S&P 500, and S&P Mid-Cap 400 (harvard.edu)
[4] Ouni, Z.; Ben Mansour, J.; Arfaoui, S. “Corporate Governance and Financial Performance: The Interaction of Board Gender Diversity and Intellectual Capital.” Sustainability 2022, 14, 15232.
About the post author
