A $750 billion Midwest fund group pushes for corporate board diversity

For the last five years, the national conversation about the lack of women or people of color on U.S. corporate boards has focused on the world's biggest companies, with tangible results: Last month, for the first time, every company in the S&P 500 had at least one female director.

Richfield-based Best Buy has a majority female board.

At the other end of the spectrum, progress has been slower. In the Russell 3000 index of the 3,000 largest U.S. companies, there are still more than 300 all-male boards.

A group of 11 pension and union funds with a collective $750 billion in assets has picked up the mantle. Called the Midwest Investor Diversity Initiative, the group, which includes the United Auto Workers Retiree Medical Benefits Trust, the Illinois State Treasurer's Office and the Ohio Public Employees Retirement System, is calling on small and midsize companies across six Midwest states to add women and people of color to their boards.

The initiative covers companies based in Michigan, Ohio, Illinois, Indiana, Minnesota and Wisconsin.

So far, the group has persuaded two dozen companies to adopt a version of the NFL's Rooney Rule to ensure women and people of color are considered for open directorships. Ten boards have added new members as part of the process, according to data released last week.

"We're really one of the first investor coalitions in the country to include race and ethnicity in the push for companies to increase and enhance board diversity," said Meredith Miller, chief corporate governance officer for the $61 billion UAW fund.

The Midwest fund consortium focused on the companies where member investors could leverage direct and often long-standing relationships. Auto-parts company American Axle, mall developer Taubman Centers Inc. and pharmaceutical company Assertio Therapeutics Inc., for example, added directors and changed recruiting processes as a result. So far the group has engaged with about 40 companies and hasn't yet had to force the issue with a proxy vote, Miller said.

The UAW fund started pushing all-male boards in Michigan to add women five years ago, then worked to develop the broader regional focus on gender, race and ethnicity, Miller said. This fall, the Illinois treasurer and investment consultancy Segal Marco Advisors will take over leadership of the Midwest group. The UAW fund will target a new U.S. region, Miller said.

Green writes for Bloomberg News.