Making change happen: Calvert at the forefront: how Calvert is using its voice as an investor to advocate for increased diversity on corporate boards.

• Author: Krumsiek, Barbara J.
• Position: INVESTOR ACTIVISM

TODAY, despite mounting evidence that a diverse board enhances the financial results of a company, extends a company's reach into diverse markets, and improves corporate governance, many companies continue to deny its importance. There's an almost "Alice in Wonderland" quality to the way that companies pay lip service to inclusive-ness. To paraphrase the Red Queen, they insist on "diversity yesterday, diversity tomorrow, but never diversity today."

Board diversity is not a social imperative but rather a strategic one. It is key to long-term economic growth and progress for the organization. Integrating women and people of color into every level of business, from the boardroom down through the management chain may, in fact, be critical to reversing declining growth in aging economies. One study, sponsored by Goldman Sachs Group Inc., found that closing the gap between male and female employment would boost U.S. GDP by as much as 9%, Eurozone GDP by 13%, and Japanese GDP by 16%.

Unfortunately, as long as board inclusiveness is seen as a purely soft issue, progress in getting more women and people of color on boards will continue to stall.

A strong case

At Calvert, we have long believed that there is a strong business case for board diversity. Our sustainability investment research process includes diversity as a key factor in selecting the companies that are included in our SRI portfolios. Further, as shareholders, we use our voice to engage companies on this issue.

Why? The answer is simple. We believe board diversity contributes to good governance. Diverse boards promote better understanding of the marketplace, which can lead to increased revenues and profitability. A diverse board can help cultivate more effective global relationships. Finally, to compete successfully in an increasingly complex and diverse global economy, companies and boards must be prepared to select the best qualified people regardless of race or gender.

Calvert is committed to board diversity, both at the corporate level and for our mutual funds. However, we began to advocate for board diversity outside of our own firm in 2002, with the passage of the Sarbanes-Oxley Act. One of Sarbanes-Oxley's most important provisions placed new emphasis on the number and role of independent directors on corporate boards. We thought: why not use this as an opportunity to open doors for qualified female and minority candidates? Why not encourage companies to fill these slots with more...