For a second successive year BNP Paribas Asset Management (‘BNPP AM’) has published the results of its global study on female board membership, ahead of the 2023 AGM season. Board diversity is a source of financial outperformance and helps to create sustainable value1. For this reason, improving gender diversity is a major focus of BNPP AM's voting and engagement policy, which is being strengthened further this year.
The study compares more than 3,000 companies in which BNPP AM invests with around 17,800 listed companies included in the Institutional Shareholder Services2 (‘ISS’) database. Data is as at the end of December 2022.
- Women hold, on average, 27% of board seats at companies in which BNPP AM invests, an increase of two percentage points from 2021 (25%).
- This compares with an average of 20% for companies in the ISS database, also two percentage points higher than in 2021 (18%).
- Geographic differences remain marked: Europe, South Africa and Australia are the most advanced in terms of board parity, although all regions are improving.
- This year, BNPP AM is again enhancing its voting policy and increasing its minimum threshold for women on boards by 5%.
Ongoing increase in female board membership
Between 2021 and 2022, female board membership has increased overall, quite markedly in some regions, with a two percentage point increase for both the ISS universe and BNPP AM investee companies, demonstrating positive progress.
Within BNPP AM’s portfolios, the most notable changes were in Asia and Latin America, both rising from 12% to 14%, as well as in North America (up from 28% to 30%) and in Europe (up from 34% to 36%)3. There were similar trends within the broader ISS universe, where the most significant increases were in South Africa (up from 28% to 32%) and Australia & New Zealand (up from 26% to 30%).
Nonetheless, national disparities remain. Within Europe, the trend is positive in France, with an average of 44% of board members being women at investee companies, compared to 40% for the ISS universe. Norway (40%) and Italy (41%) also stand out, compared to ISS averages of 40% and 38% respectively. In North America, investee company female representation levels in both Canada (33%) and the United States (30%) are substantially higher than for the ISS universe (27% and 23% respectively), notably due to BNPP AM’s strict voting policy. In contrast, investee company rates in Asia are generally lower, although Malaysia (28%), Singapore and India (both 19%) compare favourably with Hong Kong (16%), Japan (13%) and Indonesia (8%).
Michael Herskovich, Global Head of Stewardship at BNP Paribas Asset Management, comments:
“Geographic differences should be viewed in the context of economic, socio-cultural and regulatory factors. Companies with large market capitalisations tend to integrate diversity issues more easily than smaller companies. Similarly, the existence - or absence - of legally-imposed quotas, as we have recently seen in Europe, also impacts the growth of female board membership.”
The European Union directive adopted in November 20224 requires all large companies listed on EU stock exchanges to take measures to increase the presence of women in leadership roles and at board level by July 2026.
BNPP AM further strengthens its voting policy
Since 2019, BNPP AM has applied specific voting criteria on gender diversity regarding the election of directors at AGMs. The requirements have gradually been strengthened, using a regional approach, depending on the degree of maturity of the different countries on diversity issues. This year, BNPP AM is once again enhancing its voting policy and increasing its minimum threshold for women on boards by 5%.
- In Europe, North America, Australia, South Africa and New Zealand, BNPP AM now requires a minimum level of female board membership of 35% (up from 30% in 2022). Currently 43% of investee companies meet this requirement.
- In Latin America, Asia, the Middle East and Africa (excluding South Africa), BNPP AM now requires a minimum level of 20% (up from 15% in 2022). Currently 27% of investee companies meet this requirement.
BNPP AM’s voting policy requires it to oppose the election of all male directors at AGMs in all markets in 2023 if these requirements are not met. Exceptions may apply if the percentage of female directors is slightly lower than required (respectively 20-35% and 10-20%) and the company has made significant recent efforts to improve diversity, or has a small board, has had a recent IPO or has a satisfactory ethnic diversity of the board[5], is committed to reaching the required threshold in a short period of time, or has a female Chief Executive Officer or President.
This significant strengthening of BNPP AM’s voting policy supports its objective of setting a threshold of 40% female board membership at all investee companies by 2025.
In addition to voting at AGMs, BNPP AM also conducts ongoing engagement with investee companies. Last year, BNPP AM engaged in direct dialogue with 40 companies that were encouraged to align with its diversity requirements. Of these, 20 increased their ratio of female to male directors, demonstrating the effectiveness of BNPP AM’s voting policy and engagement.
Rachel Crossley, Head of Stewardship for Europe at BNP Paribas Asset Mangement, comments:
“Investors have a crucial role to play in increasing female board representation, by both expressing their position through voting and intensifying dialogue with issuers. Although regional differences remain, we are nonetheless very pleased with the progress that has been made, demonstrating greater consideration of diversity issues globally.”
Summary by region
2022 2021
Region BNPP AM ISS BNPP AM ISS
portfolios database portfolios database
Europe 36% 29% 34% 28%
North America 30% 23% 28% 20%
Aus & NZ 35% 30% 35% 26%
South Africa 31% 32% 33% 28%
Africa ex SA 36% 24% 29% 22%
Asia 14% 12% 12% 10%
LATAM 14% 13% 12% 10%
Middle East 17% 12% 16% 12%
TOTAL 27% 20% 25% 18%
Footnotes
- McKinsey & Company study, ‘Diversity wins: How inclusion matters’, May 2020. Leadership teams with at least 30% women are more likely to outperform than those with women underrepresented or absent.
- Institutional Shareholder Services Inc. (ISS) is a company specialising in corporate governance solutions serving the international financial community, whose services are used by BNPP AM.
- Africa, where female board membership rose from 29% to 36%, was not counted as a significant progression due to the low number of companies covered. Similarly, the evolution of South Africa was not suitably representative.
- Directive to promote board director equality: https://www.europarl.europa.eu/news/en/press-room/20221118IPR55706/parliament-approves-landmark-rules-to-boost-gender-equality-on-corporate-boards
- ^[5] For North America, the UK and Ireland
