Investor Equality for Women starts with (Proxy) Votes

Over the last year or two, I have grappled with a situation that many has plagued the most knowledgeable investor advocates, been largely ignored by directors of not only corporate boards and the mutual funds who vote for their shareholders, and as the business of investing has expanded, the folks who bring you the ability to invest. This situation has not improved and in fact, doesn't show any signs of doing so in the near-term.

Martha Burk is a political psychologist, women’s issues expert, and director of the Corporate Accountability Project for the National Council of Women’s Organizations (NCWO) and because of this involvement with these issues, has helped advise numerous presidential candidates over her fifty year career. And even as she recently pointed out in a column posted in the East Texas Review concerning the number of women now serving on the boards of directors as less than representative of the workforce at large, the difficulties of making the corporate world more representative of the workforce that now represents a majority of women comes with a cost.

Her points are valid when she suggests that the problem is not as simple to solve as it seems. Simply selling your shares in a particular institution will not change the way the corporation is run, how representative it is of the shareholders or worse, how your mutual fund, the proxy voter for every 401(k) investor, approves or disapproves the boards the vote for on your behalf. While money can always walk, the message it sends is muted when it comes to the numerous layers, twists and turns it must take when trying to send a message.

Last week on the Financial Impact Factor radio, we spoke with Lewis Braham about the sad state of the proxy vote. For those of you who may not be versed, the proxy vote is what you mutual fund does for you when it comes time to vote for the underlying investments in your fund choice. For an S&P 500 index fund, your mutual fund company votes for you on 500 separate occasions. While the conversation during this broadcast was centered on the mutual fund giant Vanguard and their ability to say one thing and do another when it comes to this task, the issues is systemic amongst almost all mutual funds.

And while Ms. Burk does suggest that the corporate boards need to be more representative of the shareholders, those shareholders are in the greatest majority in the funds we own and not as individual investors who could simply sell their shares and move on. And while this sort of revolutionary stance feels good, it also jeopardizes the long-term financial goals that women already trail when compared to their male counterparts.

So from which direction do we approach this complicated topic? If you were to suggest that women find more suitable mutual fund investments, and Ms. Burk does by offering a socially responsible fund family such as PaxWorld, the cost of doing so can be so egregious as to actually add to the problem. Because most SRI type funds are actively managed with a host of caveats (on what and how they should invest the fund assets) placed before its investment teams, the cost of running such funds can run as high as 2%. Add to that, or should I say subtract from the paltry returns most of these funds have posted, and you could easily trail the broadest of benchmarks by 5% or more in returns. Advocacy apparently has a very high cost.

Nothing says responsible like keeping the socially conscious from gaining ground for retirement. Which brings us to another fork in the road. While Ms. Burk wants better exposure at the corporate level, a move that would increase the voice on executive compensation, there is no guarantee that much would change.

In fact, women still trail their executive male cohorts in terms of top level, high paying jobs. This keeps the statistics for female compensations statistically lower, often skewing the numbers. More women at the top would level those numbers dramatically but as we have witnessed, over the last ten years, the pace has been much slower than most would like to see.

Over the last six months, I have had numerous conversations with women concerning this topic and two things stand out.

One, I'm not so sure women believe me when I suggest that the financial crisis we recently had would have in large part been preventable had women been at the helm. Even women who have made their living in the world of finance seem surprised by this proclamation. While women have their own set of biases when it comes to investing, intuition plays a major role in how they approach decisions. To advance to the top, empirical evidence, the sort of thing that men survive on often displaces this feeling of what is right and wrong. They may know better but convincing men to act otherwise is often back-burnered in favor of profits.

Two, because of this parsing of information to make it more digestible to the men who already reside at the top of these companies, this additional layer of thinking about what is right and perhaps what might be wrong would have kept the markets from reaching bubble-like status. Do women get exuberant about investing? Of course they do. But for different reasons. Do women desire the same compensation? Of course they do and when they do, the

The solution will be slow in coming. As Ms. Burk does point out, the workforce is now more skewed towards women while their presence at the executive level, both corporately and on the boards of mutual fund companies has been stagnant. It has been well noted that women who participate in their retirement plans at work has increased, it still lags behind men in total invested dollars.

It is easy to suggest that women increase their contributions to these plans. But doing so only enables the current corporate structure to stay in place. Ms. Burk's assertion is correct: "The money female workers pour into these retirement funds is huge, and the folks that control the votes ought to pay attention to who is represented on the investment end. All these entities should have policies against supporting all-male boards."

Boomer Women may Want to Work Longer: But will they be Allowed?

Boomer women, faced with lesser time in the workforce are increasingly looking at the option of working longer. The question is: will their employer see this as beneficial? And if they do, how far are they willing to go to permit this extended work career?

We know two things in this post or almost post-recession era we are currently in: One, older workers are returning to work or not leaving the workforce at all and two, younger workers who traditionally made up the bulk of the workforce, are being crowded out by this newer pool of older workers. Delaying retirement due to economic concerns that have stymied our financial well-being has been news for quite some time. But what if the new face of the workforce is slightly wrinkled and framed in grey?

According to a study conducted by WorkplaceFlexibility.org and authored by Richard W. Johnson, Senior Fellow at The Urban Institute: "As the U.S. population ages and the number of Americans reaching traditional retirement ages increases, employers may need to attract and retain more older workers, many of whom are highly experienced, knowledgeable, and skilled." Basing the study on well-known assumptions, Mr. Johnson explores the shift in the workplace to accomodate the older worker who is increasingly choosing to hang on to their employment longer.

Among those assumptions is a longer life. As the older population reaches retirement age, they are finding the ability to continue working a possibility in large part because the work these folks tend to do is less physically demanding that many jobs were just a decade ago. While financial concerns are most likely to enter into the newsworthy conversations, the study seems to suggest that this trend is centered more on women than men.

The result is increased complications both for the company, the worker and the benefits they might or should be receiving at that age. The result is an experiment unlike any conducted prior to this where the lines blur between what is full-time work and what is full-time retirement.

Phased retirement, the new buzzword in this process involves reduced hours and responsibilities that include some perks normally reserved for women and men in the workplace who temporarily leave because of families. Among those phased perks are "flexible work arrangements, including part-time employment, flexible schedules, telework, contract work, and job sharing."

For the employer, the fringe benefits often accessible to the older workforce, such as traditional pensions could open the door to age discrimination. And this could hurt women more than men. Even as women have made great strides over the last several decades in pay, benefits and workplace populations, it is this group that is most likely to continue, or want to continue working beyond the traditional age of 65. Men, despite the reports of longer and healthier lives, choose to retire more now than when the jobs they engaged in were more physically demanding and strenuous.

Because the focus of this report is on the effects various policies and practices surrounding this transitional time of a workers life, Mr. Johnson points out some of the incentives and disincentives for working or not. Social Security has been gradually pushing back the retirement age and will probably continue to do so in the coming years. Defined benefit plans or pensions further complicate this trend by penalizing the annuitized payment should the worker continue to be employed.

The shift over the last three decades to defined contribution plans (401(k)s, 403(b)s) are much more accommodating to this segment of the workforce that wants to work longer. They can continue to contribute to a DC plan long after the traditional pension retirement age has been reached, adding the potential for greater lifetime incomes in the process. Because of these types of plans, workers reaching retirement age are more likely to work at least two-three years longer than they may have previously anticipated.

The study also revealed that if the employer provides health benefits for early retirees. of which according to a 2009 study conducted by the Kaiser Foundation only 29% of the employers do, that person is more likely to retire. Take them away or not provide these benefits and the worker will stay on the job longer.

Because Social Security benefits are calculated on a 35 year work history, one that favors men who have never had any interruption in their work history, this group is more likely to take their leave from the workforce. For women, each additional year worked eliminates a zero earnings year that may have come due to family leave because of children or the need to take care of aging parents.

The question facing employers is whether to retain these workers. In most instances, the older worker is at the top of the pay scale and poses a greater cost on the health benefits provided. Mr. Johnson notes: "Another study found that employers were less likely to call back older job applicants than otherwise identical younger applicants (Lahey, 2008). And it takes laid-off workers age 50 and older much longer than younger workers to become reemployed, even though older unemployed workers appear to search just as intensively as their younger counterparts (Johnson and Mommaerts, 2010)." Even if the desire to work longer is there, the opportunities may be limited.

Employers have acknowledged that the pool of potential retirees in the coming years will have a negative impact on the skill level of their employees. Yet few have done anything to address this shortfall of talent and skill. "For example, in the Cornell survey only 26 percent of employers allowing phased retirement would provide the same health benefits to workers after they reduced their hours. About two-fifths of employers allowing phased retirement in the Cornell survey, but only 9 percent of employers in the Ernst & Young survey, would allow in-service pension benefits."

The problem will need to be addressed by Congress at some point. Women Boomers face the greatest challenge in the coming years as they attempt to make up earnings shortfalls and look to adjust their schedules to a more flexible arrangement.

Employers will also need to address the issue as well. they may say that the talent looking to retire is worth retaining. But their current policies don't suggest they are doing much in the way of providing incentives. They may say they desire the older workforce. In practice, they have yet to make substantive moves to permit this choice.

Paul Petillo is the managing editor of Target2025.com/BlueCollarDollar.com and a fellow Boomer.

You're a Boomer, Remember?

I often post here, generalizing on the Boomer as a single entity. Yet Boomer women face some greater challenges. And in many instances, it is the approach financial planners take that makes all the difference.

Douglas Wolk writes about comics, not retirement planning, women or independence. Yet, sometimes, quite by accident, the world of the comic book becomes a portal into a world we think we know, or better, wish we knew better. Writing in this past Sunday's NYTimes Book Review, he suggested: "There’s nothing quite as creepy as a creepy drawing: almost real, but just wrong enough to suggest it’s wearing only the torn-off skin of reality." Perhaps, unless we are considering retirement. It offers the same creepy look at our own mortality.  The question is: who is better at realizing what lays ahead, men or women?


There was a survey published recently focused on women and ultimately, how to sell them the same products that men seem so eager to purchase. The process of meeting with someone who knows about finances is filled with potential (from a man's perspective) and more often than not, trepidation (from a woman's).

Exercising caution is a natural reaction for women of all ages as they approach most of the decisions they make. They seem to be gifted with the ability to see just a little further down the road than men and when it comes to finances, this sort of foresight can be especially difficult when financial professionals are attempting to sell them the products that are supposedly well-suited for both sexes.

I have often pointed out that one of the greatest dangers facing women of any age is not their ability to manage their finances. Most understand the need to exert control over the money they earn. The outside influence on how well they do this and the danger they face in making the wrong move is often the result of the men in their lives.


Couples often visit a financial planner together. And financial professionals play to that image in their ads, depicting women in an almost antiquated role of dependent on the success of their husbands, he with arms wrapped around her, providing protection. This is not how women see the world unfortunately and financial professionals, by playing to this stereotype, are alienating the very segment of the population they need to work with the most.

Women, according to the latest survey done by yet another group looking to identify away to tap this group, are not as dependent on their husbands as these financial pros believe. But, at the same time, they must deal with the repercussive effects of how men handle the family finances, the stereotypical approach they often take with those decisions and the role men play in the long-term financial health of women.

If you are a Boomer woman, in the plus fifty range, you have a much greater likelihood of having grown up with the notion that a man was the ultimate protector of your fate, your future and your financial prosperity. Younger women have found, perhaps through trial and error or simply through the power of observation that this is not and should not be the case. Yet when faced with a financial decision, one that could impact them in retirement, women still turn to men for advice. And men fall quite comfortably into that role even if they don't have a clue.

So why do men fail women when it comes to money? We tend to be narrow-minded thinkers - I'm generalizing of course. But we look at the target rather than everything that can play a role in hitting the bull's eye. A man is more likely to see the goal as something that is down a long, straight line. Women know that life is a series of twists and turns and wonder why financial products don't offer these sorts of flexible options.

Flexibility in financial planning relies on the ability to juggle numerous options that decentralize the nest egg - a term that I find increasingly annoying. There is no nest and in many cases, the concept of an egg waiting to hatch portrays exactly this sort of anticipation that good things will happen. They sometimes do. But you need to know what's going on is what you planned to happen and not something left to chance.

There are basically four things you need to consider for a healthy retirement and if your financial planner isn't addressing each of these, you need to find one that will.


First is debt. Nothing draws down your finances faster than servicing something you borrowed money to have. Women are more likely than men to understand this concept.  But men are more likely to assume debt based on their belief that they are in a good financial position. And when are they most commonly feeling this way: when they see how much they have accumulated for retirement and feel good about it.


Two, a financial planner will in most instances, lump insurance needs into one basket. Even if you are both covered by Medicare, the cost of your financing your health in retirement has been estimated at about $200,000 per couple. This "lumping" of different insurance needs, or worse, underestimating those needs is a mistake that should be easy to spot yet is often overlooked. The cost of insuring a working woman is statistically higher than that of a man. Why would you consider those costs differently when planning for retirement, which often leads to not enough insurance in place for the person most likely to live the longest?


Three, taxes and inflation get more complicated and confusing in retirement. Most folks don't anticipate the tax rate of working well into retirement and simply figure they will add value to their retirement income by remaining in the workforce. Depending on how much you are drawing from your retirement accounts, almost half of what you earn can be taxed. Men, who tend to be more optimistic - acting in the role of assuring spouse, often overlook the effect of inflation as well, which will have a greater impact on their longer living spouse. Your financial advisor should be addressing this while you are working.


Four, consolidation of accounts is a typical mistake.  In some instances, it might seem like a good idea. But once again, it is that misguided nest egg notion that allows this to happen. A good financial planner will suggest numerous accounts distant enough from each other to prevent one from impacting the other. Women and men have an increased chance of cross-over investing during their work years (something I addressed a couple of days ago) and as a result, increase the risk in those investments. Keeping accounts separate, diversified and complimentary is key to keeping them safe from a single disaster.

And that disaster, as it was pointed out recently in the NYTimes, can come from your own inability to handle your finances due to dementia. A good financial planner will involve the children in this account structuring as well and in doing so, enable them to review how well the plan is progressing once you enter retirement. Men might balk at this notion. But it is a prudent and wise move and women should insist they know.

Paul Petillo is the Managing Editor of Target2025.com/BlueCollarDollar.com and a fellow Boomer.