Illinois Treasurer Michael W. Frerichs is leading an investor initiative asking that all companies within the Russell 3000 Index disclose the makeup of their boards of directors – inclusive of gender, race and ethnicity – given the correlation between board diversity and long-term performance.
Launched in October 2020, the initiative includes 26 investor organizations representing over $3 trillion in assets under management and advisement.
Treasurer Frerichs has been working to increase corporate board diversity since 2016, utilizing an array of strategies – including direct shareholder-company engagement, proxy voting, and public advocacy – to counter the unacceptably slow pace of change and ensure diversity is a corporate governance priority. The push for increased and standardized disclosure, at the center of this initiative, has been a focus of the Illinois Treasurer since 2019.
- Illinois State Treasurer Michael Frerichs (Chair)
- Connecticut State Treasurer Shawn Wooden (Co-Chair)
- Ariel Investments
- Boston Trust Walden
- Chicago City Treasurer
- Delaware State Treasurer
- Illinois State Board of Investment
- Impax Asset Management
- JLens Investor Network
- JUST Capital
- Legal & General Investment Management America
- Marquette Associates
- Meketa Investment Group
- Minnesota State Board of Investment
- New York City Comptroller
- Oregon State Treasurer
- Seattle City Employees’ Retirement System
- Segal Marco Advisors
- SEIU Master Trust
- SOC Investment Group
- Trillium Asset Management
- UAW Retiree Medical Benefits Trust
- Vermont Pension Investment Commission
- Vermont State Treasurer
- Wespath Benefits and Investments
- Wisconsin State Treasurer
About the Initiative
Members of the initiative share a concern about the relatively low number of women and persons of color on corporate boards, as well as the paucity of data on racial/ethnic diversity at the board level. Members also share the goal that leading American companies voluntarily disclose the racial/ethnic composition of their boards of directors given the correlation between diversity and long-term outperformance.1
Many institutional investors, including the Illinois Treasurer, have advocated for gender diversity on corporate boards through proxy voting policies and through direct shareholder-company engagement. These actions, now broadly adopted by institutional investors across the world, have helped generate an increase in gender diversity on corporate boards. The lack of data on racial/ethnic composition, however, makes it difficult to apply the same tools and creates unnecessary barriers to investment analysis and academic study.
The Black Lives Matter movement and the widespread outrage sparked by the murder of George Floyd have prompted a national conversation on issues of racial equity and inclusion. Many companies have issued statements in support of racial justice, and in some cases announced responsive efforts at their operations. This initiative urges companies to harness this national movement and the momentum on gender diversity to consider publicly reporting the racial/ethnic and gender composition of the Board of Directors in their annual proxy statement.
In October 2020, Frerichs and fellow investors sent an initial letter to Russell 3000 companies, asking each to report the racial, ethnic and gender composition of the board of directors in their 2021 annual proxy statement. In 2021, Frerichs partnered with ISS to analyze the board diversity disclosures of Russell 3000 companies. Using data as of June 30, 2021, they grouped companies in the following three categories:
- 117 companies (4 percent), including those listed in the October 2021 press release, provide exemplary disclosure, reporting the race, ethnicity and gender of individual board directors, often via a “Board Matrix;”
- 926 companies (31 percent) provide partial disclosure, such as reporting the race, ethnicity and gender of board directors in aggregate or for only certain members; and
- 1,847 firms (62 percent), neglect to disclose the race, ethnicity and gender of board directors in public filings.
In October 2021, the initiative's letter to companies was customized for the three aforementioned groups. Those with exemplary disclosure were commended, those with partial disclosure were recognized and encouraged to enhance their reporting, and those with no disclosure were urged to begin reporting.
This initiative aligns with the work of The Thirty Percent Coalition, a national organization that, in addition to advocating for board diversity, has called on companies to publicly disclose their board composition, inclusive of gender, race and ethnicity. This initiative builds on the Coalition’s work by expanding this call to action to Russell 3000 companies. It also builds on the momentum of the Midwest Investors Diversity Initiative and the Northeast Investors Diversity Initiative.
Members of the initiative either have or are examining policies to vote against nominating committees with no reported racial/ethnic diversity in their proxy statements and expanding more direct shareholder engagement. We find voluntary corporate reporting in the proxy statement the most reliable data source.
Should you have any questions or inquiries, please contact the Office of the Illinois State Treasurer at (217) 843-0132 or MWVD@illinoistreasurer.gov.
 “Diversity Wins,” McKinsey & Company, 2020, available at: www.mckinsey.com/~/media/McKinsey/Featured%20Insights/Diversity%20and%20Inclusion/Diversity%20wins%20How%20inclusion%20matters/Diversity-wins-How-inclusion-matters-vF.pdf; “Why Diversity Matters,” McKinsey & Company, 2015, available at: https://www.mckinsey.com/business-functions/organization/our-insights/why-diversity-matters#; David Rock and Heidi Grant, “Why Diverse Teams are Smarter,” Harvard Business Review, Nov. 4, 2016, available at: https://hbr.org/2016/11/why-diverse-teams-are-smarter.