Gender Equality: With or Without the Federal Government

Apr 24, 2018 9:15 AM ET
Julie Gorte, Impax Asset Mgmt and Pax World Funds

Gender Equality: With or Without the Federal Government

by Julie Gorte, SVP, Impax Asset Mgmt/Pax World Funds 

“The reputation of a thousand years may be determined by the conduct of one hour.” – Japanese Proverb

There was a time in human history when size and strength were defining characteristics of a person’s value and of the jobs on which the clan’s survival depended. Today, that is largely no longer the case, but cultural patterns that developed over hundreds of thousands of years are not easily undone. Gender-based inequalities in pay, prestige and power persist, and undoing the bias at the heart of them can’t be done with the stroke of a pen.

If it were, we might not have a pay gap now. The Lilly Ledbetter Fair Pay Act was signed into law in 2009, strengthening civil rights laws aimed at non-discrimination in hiring and pay. But since the current administration took office, there has been a significant rollback in regulations and laws that were helpful in ending gender-based discrimination. The Center for American Progress catalogued 100 actions that it said were harmful to women and families in the first 100 days of the Trump administration. The current Cabinet is about 19 percent female, compared with the U.S.’s 22 percent women/men ratio in boards among large companies, and less gender-diverse than the past five cabinets. Would we expect progress in diversity from such a group? Possibly, but it’s not likely. An article in Foreign Policy magazine put it this way: “A leadership cadre with fewer women (not to mention socially conservative men) is less likely to approve legislation or implement policies that support and empower women at home or abroad, and a society in which women are discriminated against is less likely to promote women to positions of power.” But for those of us who believe in gender equality, despair is not warranted.

Policy, especially federal policy, is a powerful tool for shaping behavior. Luckily, it’s not the only one. We have often looked to federal policy to curb corporate actions that resulted in harm, but we sometimes forget that corporate action can be a powerful antidote to policy feebleness. There is ample evidence that corporations—even if they wanted to—probably aren’t thinking, “oh, good, now we can keep saving money by paying women less.” Why? Reputation is a powerful thing, and a corporation that depends on women at any level—as employees, stockholders, customers, investors—is understandably wary about alienating half of any of those stakeholder groups.

Reputation is even more of a powerful tool now than it was historically. Among the S&P 500, 84 percent of companies’ market value consisted of intangible assets in 2015.What that means, among other things, is that a loss of value inspired by a loss of investor confidence doesn’t have much of a safety net, which we customarily think of as the value of the bricks and mortar assets that make up the company’s value in the case of a fire sale. 

2017 was a remarkable year in many ways, not the least of which was the cultural sea change on the topic of gender harassment. Before last year, sexual harassment was something that rarely made headlines, and most of the time was probably unreported by victims, because the risk of retaliation was significantly greater than the possibility of justice. We’re not done solving the problem, and perhaps we never will be, but we’re also clear on the idea that we can make a lot of progress without getting an assist from Washington DC. 

Investors are more interested in gender than they ever have been before, judging by things like proxy voting and engagement. BlackRock, the world’s largest asset manager, recently has signaled in its proxy voting guidelines that all-male boards are not acceptable, and noted that boards should have at least two women on them. Pax has been voting like that for years, and we know our impact will be multiplied if other investors vote similarly. Another large investor, State Street, reportedly voted against directors of 400 companies whose boards were all-male. Moves like these show that mainstream, as well as sustainable investors, are aware of the research that links women in leadership to superior financial performance, and are prepared to act on that knowledge with proxy votes. There is rich literature showing that more women in leadership positions—senior executives as well as boards—is correlated with financial outperformance, as well as several other characteristics of high-performing companies, such as better accounting, innovation, and more careful board monitoring. 

Gender equality is also an economic stimulus. McKinsey reports that the global economy could be $12 trillion to $28 trillion larger by 2025...

Read Julie's full article with footnotes and her complete bio here -