PROVIDENCE, R.I. (AP) — Rhode Island’s $7.5 billion pension fund will vote “no” any time a company in which it invests nominates a slate of corporate board nominees that would cause fewer than 30 percent of directors to be women or racial minorities, the state’s treasurer said Wednesday.
General Treasurer Seth Magaziner said it will be just the second state pension fund using its power as an institutional shareholder to press for more gender and racial diversity on corporate boards.
“Even if little Rhode Island isn’t necessarily going to tip the scales in a lot of these votes, I think by being a thought leader and by being a vocal advocate, we can make a difference,” he said at a news conference at the Rhode Island State House.
The Democrat’s announcement was timed ahead of the upcoming proxy season when many publicly traded companies hold investor meetings asking shareholders to vote on board members and other decisions.
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Magaziner said the Fortune 500 companies it will soon target include ConocoPhillips, Phillips 66, Hess Corp., EMC Corp. and The Hershey Co. The Rhode Island pension fund invests in about 1,420 companies.
The Massachusetts pension board adopted a similar practice last spring with a 25 percent threshold for how many board members should be women or racial minorities. Two-thirds of its proxy votes on potential corporate board members from May to December were cast against management’s wishes because of inadequate diversity, said spokesman Eric Convey. He said the state pension board also had an earlier “zero tolerance for zero diversity” policy adopted in 2012 requiring a vote against management if the board was entirely white men.
Magaziner said research shows diverse leadership helps companies perform better and that will improve returns for the state pension system.
He was joined at the conference by Daria Kreher, chairwoman of the Women’s Fund of Rhode Island, who said activist investing is an important tool since U.S. businesses would resist the gender diversity mandates imposed on some corporate boards in European countries such as Germany.
The state’s investment commission unanimously approved the new policy at its most recent meeting.