Over the past several months, we have witnessed a parade of famous names linked to sexual harassment and assault scandals – Harvey Weinstein, Matt Lauer, Charlie Rose, Mark Halperin, Louis C.K., Mario Batali, Democratic Senator Al Franken, Republican Representative Trent Franks – and there are likely more to come.
We have also witnessed brave women coming forward and the meteoric rise of the #MeToo movement, Time Magazine bestowing “Person of the Year” honors for such bravery, and women in the entertainment industry launching “Time’s Up” to clean up showbiz.
This has all the markings of a turning point in the fight for gender equality. If so, we should be careful not to focus exclusively on individual behavior – be it individual misconduct or individual bravery – such that we miss a larger lesson about organizational behavior and how institutions can build positive cultures where sexual harassment and violence are no longer tolerated.
There can be no doubt that male predatory behavior against women needs to be confronted and stopped. However, while changing individual behavior is certainly part of the answer, it is not a sufficient answer because women will continue to be at risk unless and until we usher in larger changes. These changes must take place at the organizational level so that workplaces – be they movie studios, network news rooms, corporate C-suites, factory floors or the Halls of Congress – are made safe.
By focusing on organizational behavior, I also think we can help people feel empowered to be part of the solution.
As the President of a financial services company, I am particularly optimistic that investors can be part of the solution, and that if we apply a gender lens when we invest, we can change organizational behavior and advance gender equality in the workplace.
How do we do this? How do we change workplaces so that all employees, particularly women, are safe and secure, respected and listened to, empowered and advanced?
First, we need to understand that workplaces plagued by harassment and violence generally have two fundamental flaws: (1) poor cultures, and (2) poor governance. Second, we need to understand that one key to building stronger cultures and better governance is embracing greater gender diversity in corporate leadership.
First, culture: A company’s culture encompasses its mission and values and includes not only the way employees are treated but the way they treat each other. A culture that fosters mutual respect, tolerance, teamwork, diversity and inclusion, collaboration, innovation, and an abiding commitment not only to employees but to the larger community is a culture where sexual predation, harassment and violence are not tolerated. Conversely, a culture where predation, harassment and violence do occur is a culture that is failing in fundamental ways.
Many things can be done to improve a company’s culture but one critical building block is a gender diverse leadership team – more women on the board and in senior management. Numerous studies have shown that more women in corporate leadership is correlated with improved financial performance.1 But other good things happen too: greater transparency, collaboration and innovation; more robust dialogue, greater due diligence and improved decision making; better talent cultivation and retention; more effective risk mitigation and crisis management; improved ethical orientation and corporate social responsibility; and yes, positive changes in the behavior of men and better protection against sexual harassment.2
Simply put, ending sexual harassment requires a stronger, more positive workplace culture and the key to a better workplace culture is more women in leadership.
Second, governance: A company’s governance is essentially the system of rules, norms, policies and processes through which it operates, including effective oversight and accountability. Where governance is strong, and oversight and accountability are taken seriously, sexual harassment and violence are less likely to occur. Again, research suggests that governance is stronger where women are better represented on corporate boards, on key board committees, and in senior management. Studies have shown that female directors have better attendance records than male directors, make board and committee monitoring more careful and exacting, and that boards with a critical mass of three or more women score higher on a range of organizational issues including leadership, accountability, innovation, motivation and work environment.3 When women are at the table the discussion is richer, the decision making process is better, management is more innovative and collaborative and the organization is stronger.
Eliminating sexual harassment and violence in the workplace requires strong cultures and strong governance, and these in turn are boosted by more women in the boardroom and more women in senior management. Gender diversity may not be the only answer to eliminating workplace harassment and violence, but in my view it is the key answer.
Does anyone really believe that companies with all-male boards and male-dominated management teams will make the elimination of sexual harassment and violence top priorities? The question answers itself.
Yet women only hold 24% of corporate board seats and 17% of senior management positions in the Year 2018!4
This needs to change – and this we CAN change.
Investors need to be the key constituency for promoting greater gender diversity on corporate boards and in the corporate C-suite. After all, it is shareholders who own these companies, and corporate boards are supposed to represent the shareholders’ interests. If diverse leadership teams perform better than non-diverse leadership teams, as the research suggests, then it is in the shareholders’ interest and it is the board’s duty to embrace greater gender diversity.
So, who are these shareholders/investors I am talking about?
Well, you and me: together, we probably own shares in most major U.S. corporations, either through mutual funds, or our 401(k) Plan at work, or through our financial advisor.
And how can we, as investors, convince companies to embrace change?
It’s simple: By investing with a gender lens.
Gender lens investing, a fast-growing sector within the financial services industry, integrates gender concerns into investment decisions to yield positive financial returns and positive social outcomes for women.
My company has been part of the gender lens landscape from the beginning, and in 2014 we launched the Pax Ellevate Global Women’s Leadership Fund (PXWEX), the first mutual fund to invest in the highest-rated companies in the world for advancing women through gender diversity on their boards and in executive management. Of the companies in the Fund, 99% have two or more women on their board and 91% have three or more women on their board. Women hold 35% of board seats and 29% of senior management positions among companies in the Fund, vs. global averages of 24% and 17%, respectively.5 In other words, the Fund provides the opportunity to invest in companies that are global leaders in advancing women, and on the front lines of battling harassment, violence and inequality.
Other companies are beginning to offer gender lens strategies as well. Recent papers by Veris Wealth Partners and the Wharton School Social Impact Initiative describe the landscape of gender lens investing, including various funds available to invest in as well as how these strategies can potentially improve the lives of women.6 A recent book, Gender Lens Investing, provides a smart summation of what is happening in the field. 7
As investors, we now have the opportunity – and a range of choices – if we want to invest in companies that support women and promote gender diversity. By seizing this opportunity, we can not only support companies that are supporting women; we can also promote better cultures and better governance in corporate America, and make a genuine difference when it comes to sexual harassment and violence.
In fact, we can not only invest in companies that are advancing women, we can also put pressure on companies that aren’t doing enough. A key element of gender lens investing is engaging with companies, encouraging them to do better. For example, since 2010 my firm has voted its proxies against or withheld support from more than 1,100 corporate board slates due to insufficient gender diversity, and we then register our concerns by writing letters to the companies explaining why we opposed their board slates. We also file shareholder resolutions asking companies to add more women to their boards. As a founding member of the Thirty Percent Coalition, we have worked with other institutional investors to convince over 150 companies to add women to their boards.
We have also filed shareholder resolutions asking companies to conduct pay audits to determine if disparities exist between male and female employees. We convinced Apple – the biggest company in the world – to take such steps and a shareholder resolution we filed with Oracle received a majority of votes from outside shareholders.
We even petitioned the Securities and Exchange Commission to require companies to disclose pay ratios between male and female employees. While I don’t expect action on this petition under the current administration in Washington, I do believe that more disclosure and transparency will eventually incentivize companies to do more to close the wage gap.
The point is this: our investments can make a profound difference when it comes to promoting gender equality.
So, would you rather be invested with companies that care about women’s issues and are working to advance women or do you invest through financial advisors or mutual funds that pay no heed to the urgent call for gender equality that is rippling across our nation and across the globe? The choice is yours: you can be part of the problem or you can be part of the solution.
And if Hollywood wants to be part of the solution, and Hollywood stars really want to say, “Time’s Up” when it comes to gender discrimination and violence, they can put their money where their mouth is – and where their values are – by changing the way they invest. Believe me, their money, if invested with a gender lens, could make an enormous difference.
The choice is ours. When it comes to ending discrimination against women and promoting gender equality, each of us – through our investments – really can become part of the solution. It’s high time we did. Time’s Up!
1 Credit Suisse, The CS Gender 3000: The Reward for Change, September 2016; Morgan Stanley, Putting Gender Diversity to Work: Better Fundamentals, Less Volatility, May 2016; Marcus Noland, Tyler Moran and Barbara Kotschwar, Peterson Institute, Is Gender Diversity Profitable? Evidence from a Global Survey, February 2016; RobecoSAM, Does corporate gender equality lead to outperformance?, September, 2015; Colin P. Green and Swarnodeep Homroy, “Female directors, board committees and firm performance,” European Economic Review, Volume 102, February 2018. https://www.sciencedirect.com/science/article/pii/S0014292117302234 ; Ming-Tsung Lin and Ser-Huang Poon, “Gender Diverse Portfolios as New Asset Class,” Social Science Research Network, 25 April 2017. https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2958134 ; Manconi, Alberto, Emanuele Rizzo, Emanuele and Spalt, Oliver “Diversity Investing,” Social Science Research Network, 17 August 2017; https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2706550; Eastman, Meggin Thwing, Rallis, Damion and Mazzucchielli, Gaia “The Tipping Point: Women on Boards and Financial Performance,” Women on Boards Report 2016, MSCI, December 2016. https://www.msci.com/www/research-paper/the-tipping-point-women-on/0538947986.
2 See, e.g., Smith, Genevieve, “The Business Case for Gender Diversity,” summarizing research including “Building a Business Case for Gender Diversity,” Centre for Ethical Leadership, University of Melbourne 2014, and CEW CEO Tollkit, www.cew.org.au/resources/toolkits/ceo-toolkit; “Women on Boards: Building the Female Talent Pipeline,” International Labour Organization, www.ilo.org/ged; Liswood, Laura, “Women Directors Change How Boards Work,” www.hbr.org/2015/02/women-directors-change-how-boards-work; http://anitaborg.org/wp-content/uploads/2014/03/The-Case-for-Investing-in-Women-314.pdf;
3 Ibid; See also, “Women Matter: Women at the top of corporations: making it happen,” McKinsey & Co., 2010; Larelle Chapple, Pamela Kent and James Routledge, “Board Gender Diversity and Going Concern Audit Opinions,” SSRN Electronic Journal, January 2012, www.researchgate.net; Post, Corinne and Byron, Chris “Women on Boards and Firm Financial Performance: A Meta-Analysis,” Academy of Management Journal, Oct. 1, 2015. http://amj.aom.org/content/58/5/1546.abstract.
4 Source: MSCI World Index, Pax Gender Analytics, 2017.
5 Source: MSCI World Index, Pax Gender Analytics, 2017.
6 See, “Women, Wealth and Impact: Investing With a Gender lens 2.0,” Veris Wealth Partners, March 2015, www.veriswp.com/investing/research; Klein, Katherine, Kuhlman, Sherryl, Hunt, Sandra, “Can Investing in Public Equities Improve the Lives of Women,” Knowledge@Wharton, knowledge.wharton.upenn.edu.
7 Quinlan, Joseph, VanderBrug, Jackie, Gender Lens Investing: Uncovering Opportunities for Growth, Returns, and Impact, John Wiley & Sons, Inc., 2017.
Effective February 26, 2018, the name of the Pax Ellevate Global Women’s Index Fund changed to the Pax Ellevate Global Women’s Leadership Fund.
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