I know Brian Matthews and I don’t think he’s a sexist, but he has landed in the middle of a debate over gender diversity.
Matthews, a St. Louis venture capitalist, chairs the nominating and corporate governance committee at Perficient, a technology consulting firm in Town and Country that has an all-male board.
That has become rare in corporate America, but until recently, being an anachronism had few consequences.
Big investors have begun demanding more diversity. This year, influential proxy adviser Institutional Shareholder Services announced that it would recommend voting against nominating committee chairs on all-male boards. When Matthews stood for reelection last month as a Perficient director, 58% of the shares were voted against him.
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It’s a dramatic change in the way shareholders exercise their voting power.
“A lot of our clients have gotten out ahead of us on this issue,” said Marc Goldstein, ISS’ head of U.S. research. “I would have been surprised five years ago if you had said ISS would be recommending against directors based on gender diversity, but investor attitudes changed fairly quickly.”
As of last year, no company in the Standard & Poor’s 500 index has an all-male board. In the broader Russell 3000, which includes Perficient, 90% of companies have at least one woman director and women hold 20% of all board seats.
Among publicly listed companies based in the St. Louis area, 23% of directors are women, up from 13% in 2014 and 8% in 2008. Four St. Louis companies have all-male boards: FutureFuel, Perficient, Reliv International and Stereotaxis.
Eight of 30 St. Louis boards include just one woman, six have two and 12 have three or more. Caleres, a shoe company based in Clayton, is the only local firm with a majority-female board: Six of its 10 directors are women.
The institutions pushing boardroom diversity, such as BlackRock and State Street Global Advisors, are supposed to be all about shareholder returns. How do they justify emphasizing an issue that doesn’t directly affect the bottom line?
“There’s a sense, and I’ll admit it is not necessarily borne out by the research, that diverse organizations perform better,” Goldstein said. “Perhaps it is a matter of being able to spot trends without having blind spots.”
Radhakrishnan Gopalan, professor of finance at Washington University’s Olin Business School, said some studies purport to find that companies with women directors perform better, but he doesn’t find them convincing.
Nevertheless, Gopalan added, it may be rational for investors to want a diverse board. “There is a point about being aware of the mood of the country and acting accordingly,” he said. “The company has different stakeholders and having diversity on the board might send a signal to employees and customers that the company cares about this issue.”
Institutional investors also care about racial and ethnic diversity, Goldstein said, but it’s hard to write a voting policy based on race. Companies often refer to directors as “he” or “she” but rarely describe them as African American or Hispanic.
If big investors decide to push companies on other dimensions of diversity, they’ll certainly have an impact. Their stance against all-male boards is already bringing about change, including at Perficient.
There, Matthews offered his resignation but the board did not accept it. Perficient said the vote against him didn’t reflect any personal failings on Matthews’ part.
Investors’ message came through loud and clear, however. A company spokesman said that Perficient is committed to naming a woman director within the next year, when a current board member retires.