Light backing from State Street weighs on U.S. diversity drives

BOSTON (Reuters) - State Street Corp has drawn praise for its efforts to put more women on corporate boards, notably the “Fearless Girl” statue it placed near Wall Street. But new records show the company did not throw its full weigh behind boardroom diversity initiatives this year - complicating activists’ plans for 2018.

FILE PHOTO: The logo and trading symbol of financial services company State Street are displayed on a screen on the floor of the New York Stock Exchange (NYSE) in New York, U.S., March 8, 2017. REUTERS/Brendan McDermid

Of eight shareholder resolutions on board diversity 2017 at Russell 3000 companies, funds run by the Boston-based custody bank’s asset-management arm backed one, opposed four and abstained on three others, according to a recent analysis for Reuters News by researcher Proxy Insight.

State Street STT.N says it engages with companies in many ways and voted against directors when necessary. To be sure several of the measures received low support overall.

But State Street's outspoken public stance on diversity has brought criticism from investor activists who had hoped for more backing from the company, whose $2.6 trillion under management gives it a powerful voice on corporate affairs. Among other influential asset managers, rivals BlackRock Inc BLK.N and Vanguard Group backed five and six of the eight resolutions, respectively.

“If State Street wants to fully implement its commitment to gender equity investing, it should look for more ways to use its shareholder voice for women,” said Pat Tomaino, an associate director at Zevin Asset Management.

For instance, State Street opposed a resolution from the Boston firm calling for Apple Inc AAPL.O to accelerate efforts to diversify its senior management and board. It received 4.9 percent support at Apple's meeting in February, under the 6 percent threshold needed to be refiled.

Stymied, Zevin has submitted a different resolution for Apple’s 2018 meeting to include diversity measures in setting executive pay. Apple has sought regulatory approval to omit the resolution. Apple spokespeople did not respond to questions.

Separately, State Street abstained on a measure asking Discovery Communications DISCA.O to include qualified women and minority candidates in board searches, supported by 35 percent of votes cast. Laura Campos, director at resolution sponsor Nathan Cummings Foundation, said it may change the wording if it re-files the resolution for 2018.

“To see they’re abstaining is disappointing, especially given their push on gender diversity,” Campos said of State Street.

A Discovery spokesman declined to comment.


U.S. corporate boards and executive suites remain overwhelmingly male and white, with 23 percent of Russell 3000 companies having no women directors, according to a 2016 study by Equilar. Advocates including State Street argue greater gender diversity would make boards more effective and improve performance.

State Street leaders declined to discuss votes at specific companies. Representatives noted how including abstentions, State Street did not support management in half of the eight cases, and that its funds often voted against directors as well.

Rakhi Kumar, a State Street executive overseeing stewardship efforts, said via e-mail that while proposals can help start conversations, “they do not always take into account progress already being made on a particular issue, and can also be too limited in scope, which can in turn limit their effectiveness.”

She also said that State Street can influence companies through means other than proxy votes, like talks.

State Street drew notice in March when it placed a 50-inch (127 cm) bronze statue of a defiant girl with fists on hips opposite Wall Street’s iconic “Charging Bull” statue, meant to highlight its boardroom activism. State Street later said it voted against directors at 400 companies with no female board members, and gave 42 others a pass based on their plans to bring in women.

In a settlement made public earlier this month, State Street agreed to pay $5 million to resolve U.S. Labor Department allegations it underpaid female and black executives at its Boston headquarters.

State Street denied discriminating and says it is committed to equal pay practices. Spokeswoman Julie Kane said the regulator’s analysis was based on data at one State Street building from 2010 and 2011 and that the bank decided to bring the “matter to resolution and move forward.”

Reporting by Ross Kerber; Editing by Nick Zieminski