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Institutional Investor Efforts to Promote Corporate Diversity

May 05, 2023

Prof. Jill E. Fisch analyzes institutional investor efforts to promote corporate diversity and, in particular, the rationale for these efforts.

Jill E. Fisch, Saul A. Fox Distinguished Professor of Business Law, explores “The Uncertain Role of Institutional Investors in Promoting Corporate Diversity” at the CLS Blue Sky Blog, Columbia Law School’s Blog on Corporations and the Capital Markets.

Fisch is a Co-Director of the Institute for Law & Economics. She is an internationally known scholar whose work focuses on the intersection of business and law, including the role of regulation and litigation in addressing limitations in the disciplinary power of the capital markets. She has written more than 90 scholarly articles that have appeared in top law reviews, including the Harvard Law Review , Yale Law Journal , University of Pennsylvania Law Review, and Georgetown Law Journal .

From the CLS Blue Sky Blog:

On March 7, 2017, the eve of International Women’s Day, State Street Global Advisors initiated its “Fearless Girl” campaign, an effort to increase the number of female directors on the boards of its portfolio companies.[1]According to State Street, at the time the campaign began, approximately a quarter of those companies lacked even a single woman director.[2] State Street followed through on its announcement by voting against the reelection of directors at companies that failed to make meaningful progress in improving the diversity of their boards.

State Street was not alone in its efforts; indeed, major public pension funds had spearheaded the initial effort to increase board diversity. Following State Street’s announcement, BlackRock and Vanguard added their support, demanding greater female leadership at their portfolio companies. Other institutional investors took similar action. These efforts have had a dramatic impact in increasing the diversity of corporate leadership, at least at the board level.[3] One empirical paper reports that engagement by the Big Three asset managers alone “led firms to add 2.5 times as many female directors in 2019 as they did in 2016,” accounting for at least a third to two-thirds of the “percentage of all public company board seats held by women…between 2016 and 2019.”[4]

More recent efforts have extended diversity objectives beyond gender. Institutions have announced that their policies and objectives include greater racial and ethnic diversity, and they have supported proposals for increasing diversity and inclusion throughout the workforce, such as requiring companies to conduct racial equity audits and disclose their results.

In a new essay, I analyze institutional investor efforts to promote corporate diversity and, in particular, the rationale for these efforts… .

Read Fisch’s full piece.