Gender and Diversity a Larger Factor in Corporate Boards

Editor's note: This article is part of our Women and Investing special report.

Susan Dziubinski: Hi, I'm Susan Dziubinski for Morningstar.com. There's been increasing attention paid to gender diversity, both on corporate boards generally, and in the fund industry specifically during the past few years. I'm joined today by Madison Sargis. Madison is an associate director on the quantitative research team here at Morningstar, and she's here today to share Morningstar's latest research on the subject.

Madison, thank you for joining us today.

Madison Sargis: Thanks for having me.

Dziubinski: So, there's definitely been an increased interest in gender diversity on corporate boards. So, where do we stand today? What do the numbers look like? And are things improving?

Sargis: Definitely. So, today, we're at about 22% of corporate board directors are women, and that's about a 10% improvement from a decade ago. And really, a lot of that improvement has come in the past four or five years as you said, really, because of this renewed interest in having more-diverse boards. So, for example, in 2018, the state of California passed some legislation requiring companies headquartered in California to have more women on their boards. And so, really in the past couple of years, we've seen that trend increase.

Dziubinski: So, then you've also found in your data that women tend to serve on more corporate boards than their male counterparts. Why do you think that is?

Sargis: Yeah. So, it's really kind of an availability pool issue. So, companies who want to have more women on their boards, really the pool of typical qualified candidates is quite small. So, women only are about 15% of all executives. And so, if you want to be on a corporate board, there's a you know, a typical, you know, job history that you have to have. And so, there's just a lot of fewer women meeting those qualifications. And so, if you are qualified, companies really want to have you. And so, that way, that's the reason why women are on multiple boards more than their male peers.

Dziubinski: That makes sense. Now, let's pivot over to the fund research numbers that you have. What percentage of funds in the U.S. today are managed by women?

Sargis: So, there's about 11% of portfolio managers are women, and that really hasn't moved in the past decade.

Dziubinski: So, not much improvement over time unfortunately?

Sargis: No, and it's actually declined. So, if you looked at two decades ago, it's about 13%. And we really haven't hit that hit that watermark since then.

Dziubinski: So are there--the decline is disappointing to hear--but are there any interesting trends within the data about the types of funds maybe that women tend to manage, or any other trends?

Sargis: Yeah. So, what's interesting, there's about 100 funds that are exclusively run by women and about 75% of them are solo-managed. But typically what we find is that female portfolio managers are typically on team-managed products, which is kind of where the industry is moving towards.

Dziubinski: Now, there are also this new, somewhat new, cohort of funds in the marketplace that are focusing, they're funds that focus on gender and diversity issues. Can you tell us a little bit about these types of funds?

Sargis: Sure. So, actually, in 2018, Morningstar started tracking the issues that funds are investing in. So, one of them is what we call "gender and diversity." So, we now track funds who specifically have gender and diversity criteria. And so, these are not totally new products--you know the Pax Funds have been around since early 1990s. But really, in the past three, three years, we've seen a number of new funds be rolled out, whether that's the YMCA Empowerment ETF, or Glenmede's Women in Leadership, but we start to see that these products are becoming more popular.

Dziubinski: And I know, as you just pointed out, a lot of them are really new and maybe don't have very long performance records. Can you tell us anything about how they kind of have done?

Sargis: Sure. So, the Pax fund has been around for a couple of decades, and that one has consistently performed above average. So, that's great to see. And we also see that some of these new gender diversity funds have hit their three-year mark. And again, we are seeing that these funds are again performing above their category peers.

Dziubinski: Madison, thank you so much for your time today. It's really fascinating to sort of get these insights into women and both in that fund industry and in corporate boards, and sort of just funds that are sort of looking out for women's interest in favoring those types of securities. Thanks for your time today.

Sargis: Thanks for having me.

Dziubinski: I'm Susan Dziubinski. Thanks for tuning in.