State Street Global Advisors last week announced that they will no longer support companies that allow boardroom one-sidedness. That’s a fresh approach to an old problem, according to one money-manger interviewed by the Washington Post. She likened the announcement to a carrot-and-stick strategy. We’ve all heard about the CARROT: statistics have shown for years that companies with more diverse boards perform better financially. Yet boardroom composition hasn’t changed all that much. Enter the STICK: State Street, the second largest US investor with $2.5 trillion under management, warning it will vote against director re-elections where there’s no women on the board.

But without understanding why the carrot doesn’t work, it’s dangerous to rely only on the stick. State Street’s spotlight on the topic helps but will this bold move create lasting impact? Do companies care enough about keeping one institutional investor happy to change their behavior and…change their board composition? State Street certainly hopes so. But hope is not a strategy.

State Street is nibbling around the edges of an immensely important point: The lack of board diversity is a demand side problem, not a supply side problem.  (If you’re on a board that’s struggling to find high-quality diverse candidates – put the screen down NOW – and call us!)

Knowing what holds back demand is critical to making change. The reality is, one carrot is not enough. What’s needed is a whole BUNCH OF CARROTS. That’s because altering board composition feels risky with a lot at stake. A board needs to be convinced that the gains from making a change clearly outweigh the concerns, namely losing camaraderie and collaboration.  Thus diversifying the board for the sake of checking-a-box or even the possibility of improved performance isn’t enough. For the rewards to outweigh the risks, a board needs to be convinced that a new director adds distinctive value, incremental expertise and a strong cultural fit. The bunch of carrots has to be really enticing.

And on the other side of the equation, we need a BUNDLE OF STICKS. Great job State Street – you stepped up to be first. Now let’s get BlackRock, Vanguard, Fidelity and others to stand with you. Combined, the top five asset managers own more than 20 percent of US stocks. That’s a collective voice to be reckoned with…and will influence those who directors who currently sit at the table, maybe even offer them some reassurance.

To be clear, this conversation is really about ALIGNMENT: Institutional investors care as much about getting fantastic board members as anyone. After all, it’s their customers’ money at stake. And boards and CEOs want their companies to soar so having additional, fresh perspective is not only smart – it’s a competitive advantage. There’s no reason everyone can’t win in this quest. And the long-term goal should be to set aside both the carrots and the sticks because they’re no longer needed. Until then, we must use every incentive we can to build better boards.

Abby Adlerman is CEO and founder of Boardspan.