Stepping Up Diversity: Why Inclusive Corporate Leadership is an Asset

Representation matters. Whether they are identifying community specific issues or inputting a variety of viewpoints, corporate leadership teams inclusive of race, ethnicity, and gender can drive positive change for business and society. That is why it is vital for companies, who influence millions of people, to address the diversity of their leadership.

Investors are demanding that companies play a more active role in combatting racial injustice and striving for gender equality. Increasing the diversity of their senior management and boards is a crucial step toward that end. Boards of directors are responsible for overseeing the company and its long-term strategy; they are legally bound to represent the interests of shareholders in executing those responsibilities. Investors have the power to elect directors every year through the proxy voting process.

Although there have been efforts to address the diversity of corporate boards, the gap in demographic representation is staggering. White individuals, who account for roughly 60% of the population, held 84% of Fortune 500 board seats in 2018.1 In 2019, white individuals made up 76% of the new director seats,2 indicating advancement toward greater board diversity but at a slow rate.

Women fared better in 2019 with 44% of new director seats being occupied by women and overall representation improving to 27% of Fortune 500 board seats, compared to 22.5% in 2018.3

Despite this progress, women of color continue to be significantly underrepresented. Women of color represented approximately 18% of the U.S. population in 2018 but made up only 4.6% of the board seats in the Fortune 500 that year.4

Board diversity is critical for success. Research shows board diversity that is inclusive of gender, race and ethnicity is correlated to stronger financial performance.5 Studies have also shown that three or more female directors establish the “critical mass” necessary to maximize the benefits of a diverse board.6 Boards that include a variety of perspectives are less prone to groupthink, more innovative,7 show improved “cultural intelligence” and are thus better positioned to address emerging and future risks and opportunities.8

At Domini, we use our voice and our vote to push for better representation on boards. We vote against some or all directors when there’s less than 40% representation of women and when there’s less than 40% representation of historically underrepresented groups when that data is available.9

We engage companies across our portfolios about the importance of diversity. And we work with organizations like The Thirty Percent Coalition and push our peers to be more ambitious in their expectations of companies.

When we engage with companies about this topic, we encourage them to:

  • Make a visible commitment to diversity and report progress.
  • Adopt the “Rooney Rule”10
  • Cultivate an active pipeline with internal training and mentorship.
  • Broaden search criteria when nominating new directors.

We have seen meaningful improvement in the companies we engage, a consistent uptick in board diversity. For example, at the 42 Japanese portfolio companies we engaged, average gender diversity improved from 9.3% to 12.6% in 2020. We have also seen continued improvement in representation in the non-Japanese companies we have engaged on diversity on boards and senior leadership. We know there is much more work to do on this front, and we are committed to driving progress.

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1 Deloitte and the Alliance for Board Diveristy, Missing Pieces Report: The 2018 Board Diversity Census of Women and Minorities on Fortune 500 Boards, (Deloitte, 2019), Figure 8. Fortune 500 total board seats by race/ethnicity, Page 19. https://www2.deloitte.com/us/e...

2 Heidrick & Struggles, Board Monitor US 2020, (Heidrick & Struggles, 2020) Page 6. https://www.heidrick.com/Knowl...

3 Heidrick & Struggles, Board Monitor US 2020, Page 9

4 Catalyst, Too Few Women of Color on Boards: Statistics and Solutions, (Catalyst, 2020) https://www.catalyst.org/resea...

5 Mckinsey & Company, Diversity wins: How inclusion matters, (Mckinsey & Company, 2020), Page 13. https://www.mckinsey.com/featured-insights/diversity-and-inclusion/diversity-wins-how-inclusion-matters#

6 Vicki W. Kramer, Alison M. Konrad, Sumru Erkut, Critical Mass on Corporate Boards: Why Three or More Women Enhance Governance, (Kramer, V. W., Konrad, A. M., Erkut, S, 2006). https://www.wcwonline.org/pdf/...

7 Juliet Bourke, Which Two Heads Are Better Than One? How Diverse Teams Create Breakthrough Ideas and Make Smarter Decisions (Sydney: Australian Institute of Company Directors, 2016). http://aicd.companydirectors.c...

8 Terri Cooper and Mike Fucci, The Inclusion Imperative for Boards (Deloitte Insights, 2019) Deloitte Diversity & Inclusion Client Service Center of Excellence, www2.deloitte.com/insights/us/en/topics/value-of-diversity-and-inclusion/redefining-board-responsibilities-to-support-organizational-inclusion.html.

9 https://www.domini.com/investi...

10 Adopted in 2003, the Rooney Rule is an NFL league policy that requires teams to interview ethnic-minority candidates for head coaching jobs. Since then, the Rooney Rule has been expanded to include general manager jobs. https://www.si.com/nfl/2018/12/31/rooney-rule-explained-nfl-diversity-policy

Before investing, consider each Fund's investment objectives, risks, charges and expenses. Contact us for a prospectus containing this and other information. Read it carefully. The Domini Impact Equity Fund is subject to certain risks including impact investing, portfolio management, information, market, recent events, and mid- to large-cap companies risks. The Domini Impact International Equity Fund is subject to certain risks including foreign investing, emerging markets, geographic focus, country, currency, impact investing, and portfolio management risks. The Domini Sustainable Solutions Fund is subject to certain risks including sustainable investing, portfolio management, information, market, recent events, midto large-cap companies and small-cap companies risks. The Domini International Opportunities Fund is subject to certain risks including foreign investing, geographic focus, country, currency, impact investing portfolio management and information risks. Investing internationally involves special risks, such as currency fluctuations, social and economic instability, differing securities regulations and accounting standards, limited public information, possible changes in taxation, and periods of illiquidity. These risks may be heightened in connection with investments in emerging market countries. The Domini Impact Bond Fund is subject to certain risks including impact investing, portfolio management, style, information, market, recent events, interest rate and credit risks.

The Adviser’s evaluation of environmental and social factors in its investment selections and the timing of the Subadviser’s implementation of the Adviser’s investment selections will affect the Fund’s exposure to certain issuers, industries, sectors, regions, and countries and may impact the relative financial performance of the Fund depending on whether such investments are in or out of favor. The value of your investment may decrease if the Adviser’s or Subadviser’s judgement about Fund investments does not produce the desired results. There is a risk that information used by the Adviser to evaluate environmental and social factors, may not be readily available or complete, which could negatively impact the Adviser’s ability to evaluate such factors and Fund performance. The market value of Fund investments will fluctuate and you may lose money. DSIL Investment Services LLC, Distributor, Member FINRA. 7/21


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Domini Impact Investments LLC (Domini) is the Funds’ investment manager. The Funds are subadvised by unaffiliated entities.

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