Top mutual fund manager Vanguard Group on Monday said it will continue pressing companies to make their boards and workforce more diverse, but stopped short of setting specific targets as rivals have done.
John Galloway, who oversees stewardship efforts for the $6.2 trillion asset manager, said that calling for a certain number of women or ethnic minority directors could lead to unintended consequences such as putting a greater focus on women who are easier for investors to identify by name.
The all-white top ranks of many businesses have drawn growing investor attention because of social protests this summer and as funds focused on environmental, social and governance concerns take in record amounts of money.
“We don’t believe in quotas, because we believe they could be counter-productive,” Galloway said in an interview late Monday.
Pennsylvania-based Vanguard will encourage boards to take other steps toward diversity such as looking for candidates among human-resources executives and other untapped talent groups, or increasing their sizes, he said.
Vanguard may vote against directors at companies not making any progress, Galloway said. By Vanguard’s count among Russell 3000 company boards, some 200 lack gender diversity and about 500 appear to lack racial diversity.
Activists have pressed Vanguard and other top asset managers to cast their influential proxy votes more aggressively. Their traditional support has “shielded boards from accountability,” shareholder group Majority Action said on Tuesday.
Vanguard’s approach breaks with those of other big investment firms. For instance, Goldman Sachs Group’s asset management arm said last week that it would urge U.S. boards to have at least one woman and a second diverse director based on gender identity, sexual orientation or racial and ethnic background.
Among top U.S. companies 8% of directors are Black and 5% are Hispanic or Latino, well below the groups’ share of the U.S. population, 13% and 19%, respectively.