June 9, 2015
Today, the Securities and Exchange Commission failed to take meaningful steps to advance diversity and inclusion in the financial services industry, as required by Section 342 of the Dodd-Frank Act.[1] Accordingly, I have no choice but to dissent from the Final Interagency Policy Statement Establishing Joint Standards for Assessing the Diversity Policies and Practices of Entities Regulated by the Agencies (the “Final Policy Statement”) that was issued today by the SEC and a number of other financial regulators.[2]
The financial services industry has a long history of failing to promote diversity in its workforce.[3] The industry has consistently failed to recruit and retain a diverse workforce over the years, and the need is particularly acute at the executive and senior management levels.[4] This lack of diversity has persisted despite the mounting evidence that diversity makes the American workforce more creative, more diligent, and more productive—and, thus, makes U.S. companies more profitable.[5]
The persistent lack of diversity prompted Congress to mandate that the federal government play a more active role in advancing the goals of diversity in the financial services industry. Specifically, Congress included Section 342 in the Dodd-Frank Act of 2010 to establish an Office of Minority and Women Inclusion (“OMWI”) at various federal financial regulators (the “Agencies”)[6] and, among other things, required them to develop standards to assess the diversity policies and practices of entities that they regulate.[7] As Members of Congress have made clear, the Agencies are required to implement Section 342 in a way that advances the Congressional goal of improving diversity and inclusion.[8]
Let’s look at the facts. The most recent data from the U.S. Equal Employment Opportunity Commission (“EEOC”) shows a severe underrepresentation of minorities and women at the executive and senior level positions in the financial services industry.[9] For example, although white men constitute only 31% of the total workforce, they account for 64% of the executive and senior level positions.[10] In contrast, minorities and women constitute 30% and 59% of the total workforce, respectively, but account for only 10% and 29% of the executive and senior level positions, respectively.[11] Significantly, African-Americans constitute 12% of the total workforce, but account for only 2.5% of the executive and senior level positions.[12] Similarly, Hispanics constitute 8% of the total workforce, but account for only 3% of the executive and senior level positions.[13] Moreover, while there is limited data on LGBT[14] representation in executive and senior level positions, or even representation in the workforce generally,[15] at least one report found that 74% of LGBT women that could potentially rise to executive leadership positions in many companies, including companies in the financial services industry, seemed to have experienced more discrimination because of the “double jeopardy” of gender and sexual orientation.[16]
Clearly, there is much room for improvement, to say the least. Improving diversity in the financial services industry requires board members and senior corporate executives to demonstrate a strong commitment to diversity,[17] something that the statistics show is not occurring.[18]
Diversity and inclusion provide enormous benefits to the American workforce.[19] Various studies show that businesses that promote diversity also realize significant increases in workforce productivity and job performance, which drives economic growth.[20] In addition, promoting diversity enables businesses to tap into a growing workforce that is becoming more diverse.[21]
Despite known benefits, however, we are still nowhere near where we need to be on diversity and inclusion. For example, let’s consider gender diversity.[22] One research paper shows that the representation of women in top management led to an average increase of $42 million in firm value.[23] Moreover, companies with women on their boards tend to deliver higher returns on equity (“ROE”) than all-male boards.[24] Yet, we are still seeing obstacles to greater gender diversity persist, such as cultural biases, workplace-related biases, and structural or policy issues.[25]
This brings us back to Section 342 of the Dodd-Frank Act. In 2013, in seeking comments on the implementation of Section 342, the Commission and the other Agencies issued a Proposed Interagency Policy Statement Establishing Joint Standards for Assessing the Diversity Policies and Practices of Entities Regulated by the Agencies and Request for Comment (the “Proposed Policy Statement”).[26] The Proposed Policy Statement asked a number of questions concerning the establishment of certain standards in the areas of organizational commitment to diversity, workforce profile, employment practices, procurement, business practices, and organizational transparency.[27] The Proposed Policy Statement, however, proposed a purely volitional approach to assessing diversity policies and practices at regulated entities. At the time, I issued a public statement voicing my concerns about this approach.[28] In particular, I was concerned that, under the proposed approach, the goal of increasing workforce diversity would rely solely on voluntary self-assessments and disclosures by regulated entities, and that, without a requirement to actually do anything, companies would not be incentivized to conduct assessments or otherwise address diversity-related issues.[29]
During the two-year comment period, the Agencies received more than 200 comment letters from a wide variety of groups—including Members of Congress, civil rights organizations, community-based organizations, professional associations, consumer advocacy groups, banking organizations, employer associations, financial services trade organizations, banks, credit unions, and individuals.[30] Many provided detailed comments and information on all aspects of the Proposed Policy Statement, including whether self-assessments are effective; whether self-assessments should be voluntary; whether assessments should be conducted by the Agencies; whether the standards would be effective; whether disclosure of data should be mandatory; whether data should be reported; and whether “diversity” should be defined.[31]
The comments received reflect the complexity and importance of diversity and inclusion in the financial services industry, and it is telling that a large number of commenters, including Members of Congress who drafted Section 342, supported mandatory assessments and public disclosure.[32]
Today, in issuing the Final Policy Statement,[33] the Commission and the Agencies disregard and dismiss the vast majority of comments received from Members of Congress, civil rights organizations, community-based organizations, professional associations, and consumer advocacy groups.[34] These groups included the Americans for Financial Reform, the National Urban League, the U.S. Hispanic Chamber of Commerce, the Martin Luther King Jr. Civic Council, The Greenlining Institute, Howard University School of Law, and, notably, Members of Congress, several of whom were the architects of Section 342 of the Dodd-Frank Act. For example, the Final Policy Statement fails to address the following concerns raised by commenters:
These are all important concerns that should have been addressed. However, the Agencies largely ignored these concerns, failed to explain the rationale for the policy choices they made in the Final Policy Statement, and left too many questions unanswered.
In addition, the Final Policy Statement described statements made by certain commenters—presumably in an effort to justify its policy choices—but failed to identify those commenters. As such, the public is unable to ascertain the credibility of the commenters, the rationale of the policy choices being advanced, and the justification for the Agencies’ policy choices. This calls into question the reasons for soliciting public comments in the first place (i.e., what is the purpose of soliciting comments when they are not going to be acknowledged and addressed publicly?) and how the Agencies considered those comments. The public demands more accountability and transparency. Importantly, as a federal administrative agency that promotes “full and fair disclosure” in the capital market, the SEC has to uphold its public responsibility of making policy choices that are transparent, well-reasoned, fact-based, and not arbitrary.
Obviously, the SEC can, and must, do better.[35] Nothing in Section 342 requires the SEC to act in tandem with other Agencies in adopting a weak Final Policy Statement.[36] And nothing in Section 342 requires voluntary self-assessments. Simply issuing guidance that relies on a purely voluntary process and hoping that it will work over time will only cause further delay in advancing diversity and inclusion in the financial services industry.
Many financial service companies, as well as many publicly-owned companies, have long known about the lack of diversity in their companies, yet have not been proactive in addressing the obvious deficiency. For example, it’s long been acknowledged that women and minorities have been vastly underrepresented in corporate leadership and corporate boards, yet there has been little progress in increasing their numbers.[37] Again, let’s look at the facts. While the representation of Caucasian men in corporate boardrooms remained unchanged at around 70% between 2004 and 2012, the number of women and minority board members increased only 3.3% during the same period—from 28.8% to 32.1%.[38] Likewise, diversity and inclusion remains an issue at the senior executive levels.[39] According to one research paper, for example, only 1% of our nation’s Fortune 500 CEOs were African-Americans and only 4% were women.[40]
For these reasons, the “voluntary, and let’s hope for the best” approach taken by the Final Policy Statement is woefully inadequate and fails to meet Congressional mandate. Thus, a good opportunity to have real positive impact on diversity and inclusion has been squandered. As implemented, Section 342 will be reduced to a mere exhortation to regulated entities, many of which have not shown a commitment to achieve diversity in their companies.
While there are some who believe that Section 342 did not provide the Agencies with authority to require mandatory assessments by regulated entities,[41] there are other more compelling arguments supporting those who take the opposite view. In fact, many commenters—including eight Members of Congress who drafted Section 342—have provided strong arguments that Section 342 requires mandatory assessments and disclosures.[42] Commenters have argued that nothing in Section 342 precludes the Agencies from adopting robust and mandatory standards that require assessments and disclosures.[43] Unfortunately, the Final Policy Statement does not shed light on why these views were dismissed, except to say that the Agencies “interpret the statutory language as ambiguous with respect to who should conduct the assessments or the form that assessments should take.”[44] In this instance, even if one accepts the existence of the “ambiguity,” it is disappointing that it was used as an excuse to do as little as possible.
Clearly, the Agencies could have taken a different approach.[45] For example, even if voluntary self-assessments were used, a mechanism could have been included in the standards that would provide for the identification of regulated entities that failed to conduct self-assessments. In this regard, the companies might have an incentive to actually undertake self-assessments, and the failure to do so could be viewed by the OMWI Directors and the public as a measure of the entities’ commitment to diversity and inclusion. In addition, the SEC could have gone its own way by engaging in rulemaking using its powers under the federal securities laws—in conjunction with Section 342—and issuing standards requiring assessments by regulated entities, requiring that the results of these assessments be disclosed to the SEC, and requiring that the results also be made public (either individually or as part of an aggregated report).
Given the approach taken by the Final Policy Statement in implementing Section 342, future policy change to the demographics in the financial services industry now relies on the mere hope that companies will act in good faith to use the standards outlined in the Final Policy Statement and conduct effective self-assessments, and to use the information derived from these self-assessments to promote diversity and inclusion. I hope that they do, but the track record of many companies in the financial services industry belies that hope.[46]
In the end, the Agencies have chosen to do what is convenient for the companies, rather than doing the right thing for the long-term benefit of our country. When faced with a choice between doing what is convenient and doing what is right, we must choose to do what is right. As Dr. Martin Luther King, Jr., once said, “There comes a time when one must take the position that is neither safe nor politic nor popular, but he must do it because conscience tells him it is right.”[47]
Unfortunately—and regrettably—the Final Policy Statement failed to meet the goals of Section 342, and, thus, missed an opportunity to advance the cause of diversity and inclusion.
Accordingly, I must respectfully dissent.
[*] The views expressed by Commissioner Luis A. Aguilar are his own and do not necessarily reflect the views of the U.S. Securities and Exchange Commission (“Commission” or “SEC”), his fellow Commissioners, or members of the staff.
[1] Dodd-Frank Wall Street Reform and Consumer Protection Act, Pub. L. No. 111-203 (2010).
[2] Final Interagency Policy Statement Establishing Joint Standards for Assessing the Diversity Policies and Practices of Entities Regulated by the Agencies, Release No. 34-75050 (May 27, 2015), available at http://www.sec.gov/rules/policy/2015/34-75050.pdf (hereinafter “Final Policy Statement”); see also, SEC Press Release, Agencies Issue Final Standards for Assessing Diversity Policies and Practices of Regulated Entities (June 9, 2015), available at http://www.sec.gov/news/pressrelease/2013-114.html.
[3] See Comment Letter from Members of Congress to the Consumer Financial Protection Bureau (CFPB), the Federal Deposit Insurance Corporation (FDIC), the Board of Governors of the Federal Reserve System (Federal Reserve), the National Credit Union Administration (NCUA), the Office of Comptroller of the Currency (OCC), and the Securities and Exchange Commission (SEC), Proposed Interagency Policy Statement Establishing Joint Standards for Assessing the Diversity Policies and Practices of Entities Regulated by the Agencies and Request for Comment, p. 4 (Apr. 11, 2014), available at http://www.federalreserve.gov/SECRS/2014/May/20140509/OP-1465/OP-1465_041514_126311_475617696392_1.pdf (“[General Accountability Office] found that while industry and trade associations had initiated programs to increase workforce diversity, these efforts failed to significantly increase the representation of diversity within the industry”); Alliance for Board Diversity, Fact Sheet, Missing Pieces: Women and Minorities on Fortune 500 Boards, p. 1 (Aug. 15, 2013), available at http://www.sec.gov/servlet/Satellite/goodbye/PublicStmt/1370545250291?externalLink=http%3A%2F%2Ftheabd.org%2FABD_Fact_Sheet_Final.pdf.
[4] See U.S. Government Accountability Office, Diversity Management: Trends and Practices in the Financial Services Industry and Agencies after the Recent Financial Crisis, Highlights (Apr. 2013), available at http://www.gao.gov/assets/660/653814.pdf; U.S. Government Accountability Office, Financial Services Industry: Overall Trends in Management-Level Diversity and Diversity Initiatives, 1993-2008, Highlights (May 12, 2010), available at http://www.gao.gov/assets/130/124630.pdf; U.S. Government Accountability Office, Financial Services Industry: Overall Trends in Management-Level Diversity and Diversity Initiatives, 1993-2004, Highlights (June 2006), available at http://www.gao.gov/assets/260/250328.pdf.
[5] See Katherine W. Phillips, Scientific American, How Diversity Makes Us Smarter (Sept. 16, 2014), available at http://www.sec.gov/servlet/Satellite/goodbye/PublicStmt/1370545250291?externalLink=http%3A%2F%2Fwww.scientificamerican.com%2Farticle%2Fhow-diversity-makes-us-smarter%2F; Cristian L. Dezso" and David Gaddis Ross, Does Female Representation In Top Management Improve Firm Performance? A Panel Data Investigation, Strat. Mgmt. J., 33:1072-1089, at 1080 (2012), available at http://www.sec.gov/servlet/Satellite/goodbye/PublicStmt/1370545250291?externalLink=http%3A%2F%2Fonlinelibrary.wiley.com%2Fdoi%2F10.1002%2Fsmj.1955%2Fepdf. In addition, and as with many publicly-owned corporations, women and persons of color continue to be significantly underrepresented on corporate leadership and in corporate boards. See, e.g., Russell Reynolds Associates, Global Leadership: Minority & Female Representation on Fortune 250 Boards & Executive Teams (June 2013), available at http://www.sec.gov/servlet/Satellite/goodbye/PublicStmt/1370545250291?externalLink=http%3A%2F%2Fwww.russellreynolds.com%2Fcontent%2Fdiversity-in-leadership (last visited May 4, 2015) (“Minority and female executives are significantly underrepresented across all C-suite roles and particularly are underrepresented among CEOs and CFOs, the two positions most likely to lead to an invitation to join a board.”); Calvert Investments, Examining the Cracks in the Ceiling: A Survey of Corporate Diversity Practices of the S&P 100, (Mar. 2013), available at http://www.sec.gov/cgi-bin/goodbye.cgi?www.calvert.com/nrc/literature/documents/BR10063.pdf (the study show that, since 2010, the overall percentage of women serving on S&P 100 boards rose just 1%, from 18% to 19%); Kenji Yoshino and Christie Smith, Deloitte University, Uncovering talent: A new model of inclusion, p. 3 (Dec. 6, 2013), available at https://www2.deloitte.com/content/dam/Deloitte/us/Documents/about-deloitte/us-inclusion-uncovering-talent-paper.pdf; U.S. Government Accountability Office, Financial Services Industry: Overall Trends in Management-Level Diversity and Diversity Initiatives, 1993-2008, Highlights (May 12, 2010), available at http://www.gao.gov/assets/130/124630.pdf (“EEOC data indicate that overall diversity at the management level in the financial services industry did not change substantially from 1993 through 2008, and diversity in senior positions remains limited.”); Michelle Daisley and Nick Studer, Oliver Wyman, Women in Financial Services, p. 6 (Dec. 2014), available at http://www.sec.gov/servlet/Satellite/goodbye/PublicStmt/1370545250291?externalLink=http%3A%2F%2Fwww.oliverwyman.com%2Fcontent%2Fdam%2Foliver-wyman%2Fglobal%2Fen%2F2014%2Fdec%2FOW-Women-in-Financial-Services-04_12_14_FINAL-v3.pdf (“Our analysis of US data reveals that women’s probability of progression from middle to senior levels of management relative to their male counterparts is worse in financial services than in any other sector”).
[6] Consumer Financial Protection Bureau, the Federal Deposit Insurance Corporation, the Board of Governors of the Federal Reserve System, the National Credit Union Administration, the Office of Comptroller of the Currency, and the Securities and Exchange Commission.
[7] Section 342(b)(2)(C) of the Dodd-Frank Act.
[8] See Comment Letter from Members of Congress to the Consumer Financial Protection Bureau (CFPB), the Federal Deposit Insurance Corporation (FDIC), the Board of Governors of the Federal Reserve System (Federal Reserve), the National Credit Union Administration (NCUA), the Office of Comptroller of the Currency (OCC), and the Securities and Exchange Commission (SEC), Proposed Interagency Policy Statement Establishing Joint Standards for Assessing the Diversity Policies and Practices of Entities Regulated by the Agencies and Request for Comment, p. 4 (Apr. 11, 2014), available at http://www.federalreserve.gov/SECRS/2014/May/20140509/OP-1465/OP-1465_041514_126311_475617696392_1.pdf; see also, Comment Letter from Cheryl C. Nichols and Ronald L. Crawford, Proposed Interagency Policy Statement Establishing Joint Standards for Assessing the Diversity Policies and Practices of Entities Regulated by the Agencies and Request for Comment—SEC Release No. 34-70731; File No. S7-08-13, p. 2 (Feb. 7, 2014), available at http://www.sec.gov/comments/s7-08-13/s70813-21.pdf.
[9] U.S. Equal Employment Opportunity Commission, 2013 Job Patterns for Minorities and Women in Private Industry (EEO-1), 2013 EEO-1 National Aggregate Report by NAICS-2 Code (Finance and Insurance) (2013), available at http://www1.eeoc.gov/eeoc/statistics/employment/jobpat-eeo1/2013/index.cfm#centercol.
[10] See id.
[11] See id.
[12] See id.
[13] See id.
[14] Lesbian, Gay, Bisexual, and Transgender (LGBT).
[15] See, e.g., Crosby Burns, Kimberly Barton, and Sophia Kerby, Center for American Progress, The State of Diversity in Today’s Workforce: As Our Nation Becomes More Diverse So Too Does Our Workforce (July 12, 2012), available at https://www.americanprogress.org/issues/labor/report/2012/07/12/11938/the-state-of-diversity-in-todays-workforce/ (“It is worth noting that our understanding of the gay and transgender workforce is incomplete, given the lack of federal data on this population. Unlike race, ethnicity, gender, and other demographic characteristics, the Department of Labor does not collect information on workers’ sexual orientation and gender identity.”)
[16] See Sylvia Ann Hewlett, Todd Sears, Karen Sumberg, and Christian Fargnoli, Center for Talent Innovation, The Power of “Out” 2.0: LGBT in the Workplace, p. 1 (Feb. 1, 2013), available at http://www.sec.gov/servlet/Satellite/goodbye/PublicStmt/1370545250291?externalLink=http%3A%2F%2Fwww.talentinnovation.org%2F_private%2Fassets%2FPowerOfOut-2-ExecSumm-CTI.pdf; Angela Kolter, Edge Media Network, Shattering the Glass Cliff: Lesbians in Executive Roles (Sept. 24, 2013), available at http://www.sec.gov/servlet/Satellite/goodbye/PublicStmt/1370545250291?externalLink=http%3A%2F%2Fwww.edgemedianetwork.com%2Fbusiness_finance%2Fcorporate%2F149695%2Fshattering_the_glass_cliff%3A_lesbians_in_executive_roles/.
[17] Boris Groysberg and Katherine Connolly, Harvard Business Review, Great Leaders Who Make the Mix Work (Sept. 2013), available at https://hbr.org/2013/09/great-leaders-who-make-the-mix-work (last visited May 5, 2015). Corporate leaders like CEOs send a powerful message when they show their commitment to diversity and inclusion, especially when they approach inclusivity as a personal mission. See id. As described in a Harvard Business Review article, corporate leaders that support diversity view diversity as a business imperative in order for their companies to stay competitive. See id. A diverse workforce prevents a company from being too insular and out of touch with a growing and diverse customer base. See id.
[18] See U.S. Government Accountability Office, Diversity Management: Trends and Practices in the Financial Services Industry and Agencies after the Recent Financial Crisis, Highlights (Apr. 2013), available at http://www.gao.gov/assets/660/653814.pdf; U.S. Government Accountability Office, Financial Services Industry: Overall Trends in Management-Level Diversity and Diversity Initiatives, 1993-2008, Highlights (May 12, 2010), available at http://www.gao.gov/assets/130/124630.pdf; U.S. Government Accountability Office, Financial Services Industry: Overall Trends in Management-Level Diversity and Diversity Initiatives, 1993-2004, Highlights (June 2006), available at http://www.gao.gov/assets/260/250328.pdf.
[19] According to one report, diversity promotes hard work and creativity by encouraging people to consider different ways of looking at problems. See Boris Groysberg and Katherine Connolly, Harvard Business Review, Great Leaders Who Make the Mix Work (Sept. 2013), available at https://hbr.org/2013/09/great-leaders-who-make-the-mix-work (last visited May 5, 2015); Scott E. Page, The Difference: How the Power of Diversity Creates Better Groups, Firms, Schools and Societies (Princeton, NJ: Princeton University Press, 2007). Studies have shown that a diverse workforce results in diversity in thinking, because when people hear from someone who is different from themselves, it provokes more thought than when it comes from someone who looks like they do. See Katherine W. Phillips, Scientific American, How Diversity Makes Us Smarter, (Sept. 16, 2014), available at http://www.sec.gov/servlet/Satellite/goodbye/PublicStmt/1370545250291?externalLink=http%3A%2F%2Fwww.scientificamerican.com%2Farticle%2Fhow-diversity-makes-us-smarter%2F; Scott E. Page, The Difference: How the Power of Diversity Creates Better Groups, Firms, Schools and Societies (Princeton, NJ: Princeton University Press, 2007) (A study found that “there is a lot of evidence that people’s identity groups—ethnic, racial, sexual, age—matter when it comes to diversity in thinking.”). Likewise, when there are differences of opinion and perspective, people tend to assume that they need to work harder—both cognitively and socially—to get the job done. See Katherine W. Phillips, Scientific American, How Diversity Makes Us Smarter (Sept. 16, 2014), available at http://www.sec.gov/servlet/Satellite/goodbye/PublicStmt/1370545250291?externalLink=http%3A%2F%2Fwww.scientificamerican.com%2Farticle%2Fhow-diversity-makes-us-smarter%2F.
[20] See Credit Suisse Research Institute, The CS Gender 3000: Women in Senior Management, p. 5 (Sept. 2014), available at http://www.sec.gov/servlet/Satellite/goodbye/PublicStmt/1370545250291?externalLink=http%3A%2F%2F30percentclub.org%2Fwp-content%2Fuploads%2F2014%2F10%2F2014-09-23_Research_Institute_Women_in_Business.pdf (last visited May 5, 2015); Katherine W. Phillips, Scientific American, How Diversity Makes Us Smarter (Sept. 16, 2014), available at http://www.sec.gov/servlet/Satellite/goodbye/PublicStmt/1370545250291?externalLink=http%3A%2F%2Fwww.scientificamerican.com%2Farticle%2Fhow-diversity-makes-us-smarter%2F; Boris Groysberg and Katherine Connolly, Harvard Business Review, Great Leaders Who Make the Mix Work (Sept. 2013), available at https://hbr.org/2013/09/great-leaders-who-make-the-mix-work (last visited May 5, 2015); Crosby Burns, Kimberly Barton, and Sophia Kerby, Center for American Progress, The State of Diversity in Today’s Workforce: As Our Nation Becomes More Diverse So Too Does Our Workforce, p. 1 (July 2012), available at https://cdn.americanprogress.org/wp-content/uploads/issues/2012/07/pdf/diversity_brief.pdf; Cristian L. Dezso" and David Gaddis Ross, Does Female Representation In Top Management Improve Firm Performance? A Panel Data Investigation, Strat. Mgmt. J., 33:1072-1089, at 1080, (2012), available at http://www.sec.gov/servlet/Satellite/goodbye/PublicStmt/1370545250291?externalLink=http%3A%2F%2Fonlinelibrary.wiley.com%2Fdoi%2F10.1002%2Fsmj.1955%2Fepdf; Scott E. Page, The Difference: How the Power of Diversity Creates Better Groups, Firms, Schools and Societies (Princeton, NJ: Princeton University Press, 2007).
[21] Crosby Burns, Kimberly Barton, and Sophia Kerby, Center for American Progress, The State of Diversity in Today’s Workforce: As Our Nation Becomes More Diverse So Too Does Our Workforce, p. 1 (July 2012), available at https://cdn.americanprogress.org/wp-content/uploads/issues/2012/07/pdf/diversity_brief.pdf.
[22] Commissioner Luis A. Aguilar, Merely Cracking the Glass Ceiling is Not Enough: Corporate America Needs More than Just A Few Women in Leadership (May 22, 2013), available at http://www.sec.gov/News/Speech/Detail/Speech/1365171515760.
[23] Cristian L. Dezso" and David Gaddis Ross, Does Female Representation In Top Management Improve Firm Performance? A Panel Data Investigation, Strat. Mgmt. J., 33:1072-1089, at 1080 (2012), available at http://www.sec.gov/servlet/Satellite/goodbye/PublicStmt/1370545250291?externalLink=http%3A%2F%2Fonlinelibrary.wiley.com%2Fdoi%2F10.1002%2Fsmj.1955%2Fepdf.
[24] See Credit Suisse Research Institute, The CS Gender 3000: Women in Senior Management, p. 5 (Sept. 2014), available at http://www.sec.gov/servlet/Satellite/goodbye/PublicStmt/1370545250291?externalLink=http%3A%2F%2F30percentclub.org%2Fwp-content%2Fuploads%2F2014%2F10%2F2014-09-23_Research_Institute_Women_in_Business.pdf (last visited May 5, 2015).
[25] See id.
[26] Proposed Interagency Policy Statement Establishing Joint Standards for Assessing the Diversity Policies and Practices of Entities Regulated by the Agencies and Request for Comment, SEC Release No. 34-70731 (October 22, 2013), available at http://www.sec.gov/rules/policy/2013/34-70731.pdf.
[27] See id.
[28] See Commissioner Luis A. Aguilar, Statement on the Proposed Interagency Policy Statement to Establish Standards to Assess the Diversity Policies and Practices of Regulated Entities (Oct. 23, 2013), available at http://www.sec.gov/News/PublicStmt/Detail/PublicStmt/1370542558306.
[29] See id.
[30] The comment files are available at http://www.sec.gov/comments/s7-08-13/s70813.shtml (SEC),
http://www.federalreserve.gov/apps/foia/ViewComments.aspx?doc_id=OP%2D1465&doc_ver=1 (Federal Reserve), https://www.fdic.gov/regulations/laws/federal/2013/2013-diversity-assessment.html (FDIC), http://www.ncua.gov/Legal/Regs/Pages/PR20131216Extension.aspx (NCUA), http://www.ncua.gov/Legal/Regs/Pages/PR20131001JointStandards.aspx (NCUA), http://www.regulations.gov/#!docketBrowser;rpp=25;po=0;D=OCC-2013-0014 (OCC; OCC-2013-0014), http://www.regulations.gov/#!docketBrowser;rpp=25;po=0;D=CFPB-2013-0029 (CFPB; CFPB-2013-0029).
[31] See id.
[32] See, e.g., Comment Letter from American GI Forum City of Commerce Chapter, Public Comment on the Offices of Minority and Women Inclusion’s Proposed Interagency Policy Statement (Feb. 4, 2014), available at http://www.regulations.gov/#!documentDetail;D=OCC-2013-0014-0050; Comment Letter from Americans for Financial Reform, Public Comment on the Offices of Minority and Women Inclusion’s Proposed Interagency Policy Statement (Feb. 7, 2014), available at http://www.sec.gov/comments/s7-08-13/s70813-38.pdf; Comment Letter from The Greenlining Institute, Public Comment Regarding the Proposed Interagency Policy Statement Establishing Joint Standards for Assessing the Policies and Practices of Entities Regulated by the Agencies (Feb. 7, 2013), available at https://www.fdic.gov/regulations/laws/federal/2013/2013-diversity-assessment-c_32.pdf; Comment Letter from Cheryl C. Nichols and Ronald L. Crawford, Proposed Interagency Policy Statement Establishing Joint Standards for Assessing the Diversity Policies and Practices of Entities Regulated by the Agencies and Request for Comment—SEC Release No. 34-70731; File No. S7-08-13 p. 2, (Feb. 7, 2014), available at http://www.sec.gov/comments/s7-08-13/s70813-21.pdf; Comment Letter from Members of Congress to the Consumer Financial Protection Bureau (CFPB), the Federal Deposit Insurance Corporation (FDIC), the Board of Governors of the Federal Reserve System (Federal Reserve), the National Credit Union Administration (NCUA), the Office of Comptroller of the Currency (OCC), and the Securities and Exchange Commission (SEC), Proposed Interagency Policy Statement Establishing Joint Standards for Assessing the Diversity Policies and Practices of Entities Regulated by the Agencies and Request for Comment, p. 4 (Apr. 11, 2014), available at http://www.federalreserve.gov/SECRS/2014/May/20140509/OP-1465/OP-1465_041514_126311_475617696392_1.pdf; Comment Letter from the National Urban League, Request For Comment on the Proposed Interagency Policy Statement Establishing Joint Standards For Assessing the Diversity Policies and Practices of Entities Regulated By the Agencies (Feb. 7, 2014), available at http://www.sec.gov/servlet/Satellite/goodbye/PublicStmt/1370545250291?externalLink=http%3A%2F%2Fnulwb.iamempowered.com%2Fsites%2Fnulwb.iamempowered.com%2Ffiles%2FNational%2520Urban%2520League%27s%2520Comment%2520on%2520the%2520Agencies%27%2520Proposed%2520Interagency%2520Policy%2520Statement%2520Establishing%2520Joint%2520Standards%2520for%2520Assessing%2520the%2520Diversit.pdf; Comment Letter from the Comment Letter from the Southeast Asian Community Center, Public Comment on the Offices of Minority and Women Inclusion’s Proposed Interagency Policy Statement, available at http://www.regulations.gov/#!documentDetail;D=OCC-2013-0014-0023 (Jan, 22, 2014); Comment Letter from the United States Hispanic Chamber of Commerce, Proposed Interagency Policy Statement Establishing Joint Standards for Assessing the Diversity Policies and Practices of Entities Regulated by the Agencies, available at http://www.regulations.gov/#!documentDetail;D=OCC-2013-0014-0060 (Feb. 7, 2014); Comment Letter from the National Federation of Filipino American Associations Region 8, Northern California, Public Comment on the Offices of Minority and Women Inclusion’s Proposed Interagency Policy Statement, available at http://www.regulations.gov/#!documentDetail;D=OCC-2013-0014-0012 (Dec. 9, 2013).
[33] See Final Policy Statement.
[34] See, e.g., Comment Letter from American GI Forum City of Commerce Chapter, Public Comment on the Offices of Minority and Women Inclusion’s Proposed Interagency Policy Statement, (Feb. 4, 2014), available at http://www.regulations.gov/#!documentDetail;D=OCC-2013-0014-0050; Comment Letter from Americans for Financial Reform, Public Comment on the Offices of Minority and Women Inclusion’s Proposed Interagency Policy Statement (Feb. 7, 2014), available at http://www.sec.gov/comments/s7-08-13/s70813-38.pdf; Comment Letter from anewamerica Community Corporation, Public Comment on the Offices of Minority and Women Inclusion’s Proposed Interagency Policy Statement, available at http://www.regulations.gov/#!documentDetail;D=OCC-2013-0014-0071 (Feb. 7, 2014); Comment Letter from the Asian Pacific Islander Small Business Program, Public Comment on the Offices of Minority and Women Inclusion’s Proposed Interagency Policy Statement, available at http://www.regulations.gov/#!documentDetail;D=OCC-2013-0014-0024 (Jan. 29, 2014); Comment Letter from the California Reinvestment Coalition, Public Comment on the Offices of Minority and Women Inclusion’s Proposed Interagency Policy Statement, available at http://www.regulations.gov/#!documentDetail;D=OCC-2013-0014-0020 (Dec. 30, 2013); Fresno Metro Black Chamber of Commerce, Public Comment on the Offices of Minority and Women Inclusion’s Proposed Interagency Policy Statement, available at http://www.regulations.gov/#!documentDetail;D=OCC-2013-0014-0074 (Feb. 7, 2014); Comment Letter from The Greenlining Institute, Public Comment Regarding the Proposed Interagency Policy Statement Establishing Joint Standards for Assessing the Policies and Practices of Entities Regulated by the Agencies (Feb. 7, 2013), available at https://www.fdic.gov/regulations/laws/federal/2013/2013-diversity-assessment-c_32.pdf; Comment Letter from Cheryl Nichols and Ronald L. Crawford, Proposed Interagency Policy Statement Establishing Joint Standards for Assessing the Diversity Policies and Practices of Entities Regulated by the Agencies and Request for Comment—SEC Release No. 34-70731; File No. S7-08-13, p. 2 (Feb. 7, 2014), available at http://www.sec.gov/comments/s7-08-13/s70813-21.pdf; Comment Letter from the Inland Empire Latino Coalition, Public Comment on the Offices of Minority and Women Inclusion’s Proposed Interagency Policy Statement (Jan. 24, 2014), available at http://www.ncua.gov/Legal/CommentLetters/CLExtension20140124Figueroa.pdf; Comment Letter from the Korean Churches for Community Development, Public Comment on the Offices of Minority and Women Inclusion’s Proposed Interagency Policy Statement (Jan. 9, 2014), available at http://www.regulations.gov/#!documentDetail;D=OCC-2013-0014-0029; Comment Letter from the MLK Jr. Civic Council, Public Comment on the Offices of Minority and Women Inclusion’s Proposed Interagency Policy Statement (Feb. 6, 2014), available at http://www.regulations.gov/#!documentDetail;D=OCC-2013-0014-0040; Comment Letter from Members of Congress to the Consumer Financial Protection Bureau (CFPB), the Federal Deposit Insurance Corporation (FDIC), the Board of Governors of the Federal Reserve System (Federal Reserve), the National Credit Union Administration (NCUA), the Office of Comptroller of the Currency (OCC), and the Securities and Exchange Commission (SEC), Proposed Interagency Policy Statement Establishing Joint Standards for Assessing the Diversity Policies and Practices of Entities Regulated by the Agencies and Request for Comment, p. 4 (Apr. 11, 2014), available at http://www.federalreserve.gov/SECRS/2014/May/20140509/OP-1465/OP-1465_041514_126311_475617696392_1.pdf; Comment Letter from the National Association of Minority Companies, Docked ID OCC-2013-0014 Request for Comments on the “Proposed Interagency Policy Statement Establishing Joint Standards for Assessing the Diversity Polcies and Practices of Entities Regulated by the Agencies (Feb. 6, 2014), available at http://www.regulations.gov/#!documentDetail;D=OCC-2013-0014-0052; Comment Letter from the National Association of Securities Professionals, Proposed Joint Standards for Assessing the Diversity Policies and Practices of Entities Regulated by the Agencies (Feb. 7, 2014), available at https://www.fdic.gov/regulations/laws/federal/2013/2013-diversity-assessment-c_31.pdf; Comment Letter from the National Council of Asian American Business Associations, Public Comment on the Offices of Minority and Women Inclusion’s Proposed Interagency Policy Statement (Feb. 7, 2014), available at http://www.regulations.gov/#!documentDetail;D=OCC-2013-0014-0064; Comment Letter from the National Fair Housing Alliance, Proposed Interagency Statement Establishing Joint Standards for Assessing the Diversity Policies and Practices of Entities Regulated by the Agencies (Feb. 7, 2014), available at http://www.regulations.gov/#!documentDetail;D=OCC-2013-0014-0059; Comment Letter from the National Federation of Filipino American Associations Region 8, Northern California, Public Comment on the Offices of Minority and Women Inclusion’s Proposed Interagency Policy Statement (Dec. 9, 2013), available at http://www.regulations.gov/#!documentDetail;D=OCC-2013-0014-0012; Comment Letter from the National LGBT Bar Association, Proposed Interagency Policy Statement Establishing Joint Standards for Assessing the Diversity Policies and Practices of Entities Regulated by the Agencies and Request for Comment (Dec. 24, 2013), available at http://www.federalreserve.gov/SECRS/2014/March/20140307/OP-1465/OP-1465_122413_111760_329459540065_1.pdf; Comment Letter from the National Urban League, Request For Comment on the Proposed Interagency Policy Statement Establishing Joint Standards for Assessing the Diversity Policies and Practices of Entities Regulated by the Agencies (Feb. 7, 2014), available at http://www.regulations.gov/#!documentDetail;D=OCC-2013-0014-0070; Comment Letter from the Southeast Asian Community Center, Public Comment on the Offices of Minority and Women Inclusion’s Proposed Interagency Policy Statement (Jan, 22, 2014), available at http://www.regulations.gov/#!documentDetail;D=OCC-2013-0014-0023; Comment Letter from the Southern Cal Alumni Coalition, Public Comment on the Offices of Minority and Women Inclusion’s Proposed Interagency Policy Statement (Feb. 6, 2014), available at http://www.regulations.gov/#!documentDetail;D=OCC-2013-0014-0043; Comment Letter from the United States Hispanic Chamber of Commerce, Proposed Interagency Policy Statement Establishing Joint Standards for Assessing the Diversity Policies and Practices of Entities Regulated by the Agencies (Feb. 7, 2014), available at http://www.regulations.gov/#!documentDetail;D=OCC-2013-0014-0060.
[35] The SEC, in particular, should have done better. The SEC is charged with creating and implementing rules requiring public companies to provide information that investors need to make informed investment decisions. We know that investors the SEC is committed to protect care a great deal about diversity. Investors know that the ability to draw on a wide range of viewpoints, backgrounds, skills, and experiences is crucial to a company’s success. In particular, because of the important role that boards of directors play in determining how companies are operated, investors want to know about the directors’ backgrounds and how they are appointed. To that end, the diversity of boards of directors has been a growing concern and a problem that has persisted for a long time. See, e.g., Commissioner Luis A. Aguilar, Moving Toward More Informed Shareholder Voting (Dec. 16, 2009), available at http://www.sec.gov/news/speech/2009/spch121609laa-1.htm (“This rule resulted from the repeated efforts of investors. For example, in 2003, the Commission did a rulemaking regarding nominating committees that did not mention diversity, and nonetheless the Commission received a significant number of letters requesting that the Commission require this disclosure. This time around, in response to our request, we were deluged with letters. These letters were overwhelmingly supportive, with approximately 90% expressing support for disclosure of information related to race and gender diversity on the board.”); Commissioner Luis A. Aguilar, Making Investors a Priority in Regulatory Reform (Apr. 17, 2009), available at http://www.sec.gov/news/speech/2009/spch041709laa.htm (“For example, in 2004, the Alliance for Board Diversity compiled statistics about the composition of the boards of directors of Fortune 100 companies and found the majority of board members, 72% were white American men, and only 28% of the board seats were held by women and minorities. Unfortunately, these board statistics have stayed virtually unchanged for the last four years.”); U.S. Government Accountability Office, Financial Services Industry: Overall Trends in Management-Level Diversity and Diversity Initiatives, 1993-2008, Highlights (May 12, 2010), available at http://www.gao.gov/assets/130/124630.pdf (“EEOC data indicate that overall diversity at the management level in the financial services industry did not change substantially from 1993 through 2008, and diversity in senior positions remains limited.”). Just recently, a group of nine public pension funds wrote to ask the SEC to strengthen its rules regarding the disclosure of a company’s board diversity. See Comment Letter to the SEC from the California Public Employees’ Retirement System, California State Teachers’ Retirement System, Connecticut Retirement Plans and Trust Fund, Illinois State Board of Investment, Comptroller of New York City, New York State Common Retirement Fund, Ohio Public Employees Retirement System, North Carolina Department of State Treasurer, and Washington State Investment Board, Petition For Amendment of Proxy Rule Regarding Board Nominee Disclosure — Chart / Matrix Approach (Mar. 31, 2015), available at https://www.nctreasurer.com/inv/Resources/ProxyRuleAmendmentPetition.pdf. In particular, these funds asked that companies disclose their board nominees’ gender, race, and ethnicity in a chart or matrix form. Id. These public fund fiduciaries believed that this information is necessary “to evaluate the nominees’ gender, racial, and ethnic diversity, as well as their mix of skills, experiences, and attributes needed to fulfill the corporation’s mission.” Id.
[36] See, e.g., Comment Letter from Diversity in Finance, Proposed Interagency Policy Statement Establishing Joint Standards for Assessing the Diversity Policies and Practices of Entities Regulated by the Agencies and Request for Comment, p. 2 (Feb. 6, 2014), available at https://www.fdic.gov/regulations/laws/federal/2013/2013-diversity-assessment-c_38.pdf (“We whole-heartedly endorse putting some ‘teeth’ into [Section 342], and providing the [Agencies] with enforcement power without further delay.”); Orson Aguilar and Tunua Thrash-Ntuk, American Banker, Dodd-Frank Diversity Standards Need Real Teeth (Oct. 8, 2014), available at http://www.sec.gov/servlet/Satellite/goodbye/PublicStmt/1370545250291?externalLink=http%3A%2F%2Fwww.americanbanker.com%2Fbankthink%2Fdodd-frank-diversity-standards-need-real-teeth-1070397-1.html (last visited May 5, 2015).
[37] See Alliance for Board Diversity, Fact Sheet, Missing Pieces: Women and Minorities on Fortune 500 Boards, p. 1 (Aug. 15, 2013), available at http://www.sec.gov/servlet/Satellite/goodbye/PublicStmt/1370545250291?externalLink=http%3A%2F%2Ftheabd.org%2FABD_Fact_Sheet_Final.pdf; U.S. Government Accountability Office, Diversity Management: Trends and Practices in the Financial Services Industry and Agencies after the Recent Financial Crisis, Highlights (Apr. 2013), available at http://www.gao.gov/assets/660/653814.pdf; U.S. Government Accountability Office, Financial Services Industry: Overall Trends in Management-Level Diversity and Diversity Initiatives, 1993-2008, Highlights (May 12, 2010), available at http://www.gao.gov/assets/130/124630.pdf; U.S. Government Accountability Office, Financial Services Industry: Overall Trends in Management-Level Diversity and Diversity Initiatives, 1993-2004 Highlights, (June 2006), available at http://www.gao.gov/assets/260/250328.pdf.
[38] Alliance for Board Diversity, Fact Sheet, Missing Pieces: Women and Minorities on Fortune 500 Boards, p. 2. (Aug. 15, 2013), available at http://www.sec.gov/servlet/Satellite/goodbye/PublicStmt/1370545250291?externalLink=http%3A%2F%2Ftheabd.org%2F2012_ABD%2520Missing_Pieces_Final_8_15_13.pdf.
[39] See Kenji Yoshino and Christie Smith, Deloitte University, Uncovering talent: A new model of inclusion, p. 3 (Dec. 6, 2013), available at https://www2.deloitte.com/content/dam/Deloitte/us/Documents/about-deloitte/us-inclusion-uncovering-talent-paper.pdf.
[40] See id.
[41] See, e.g., Comment Letter from the American Bankers Association, Proposed Interagency Policy Statement Establishing Joint Standards for Assessing the Diversity Policies and Practices of Entities Regulated by the Agencies, p. 3 (Feb. 7, 2014), available at http://www.sec.gov/comments/s7-08-13/s70813-23.pdf; Comment Letter from the Financial Services Roundtable, et al., Proposed Interagency Policy Statement Establishing Joint Standards for Assessing the Diversity Policies and Practices of Entities Regulated by the Agencies and Request for Comment, p. 3 (Feb. 6, 2014), available at http://www.sec.gov/comments/s7-08-13/s70813-20.pdf; Comment Letter from the Investment Company Institute, Proposed Interagency Policy Statement Establishing Joint Standards for Assessing the Diversity Policies and Practices of Entities Regulated by the Agencies and Request for Comment (File No. S7-08-13), p. 2 (Dec. 20, 2013), available at http://www.sec.gov/comments/s7-08-13/s70813-10.pdf; Comment Letter from the Securities Industry and Financial Markets Association (SIFMA), Proposed Interagency Policy Statement Establishing Joint Standards for Assessing the Diversity Policies and Practices of Entities Regulated by the Agencies and Request for Comment (SEC Release No. 34-70731; File No. S7-08-13), p. 4 (Dec. 17, 2013), available at http://www.sec.gov/comments/s7-08-13/s70813-7.pdf.
[42] See Comment Letter from Members of Congress to the Consumer Financial Protection Bureau (CFPB), the Federal Deposit Insurance Corporation (FDIC), the Board of Governors of the Federal Reserve System (Federal Reserve), the National Credit Union Administration (NCUA), the Office of Comptroller of the Currency (OCC), and the Securities and Exchange Commission (SEC), Proposed Interagency Policy Statement Establishing Joint Standards for Assessing the Diversity Policies and Practices of Entities Regulated by the Agencies and Request for Comment, p. 4 (Apr. 11, 2014), available at http://www.federalreserve.gov/SECRS/2014/May/20140509/OP-1465/OP-1465_041514_126311_475617696392_1.pdf; see also, Comment Letter from Cheryl C. Nichols and Ronald L. Crawford, Proposed Interagency Policy Statement Establishing Joint Standards for Assessing the Diversity Policies and Practices of Entities Regulated by the Agencies and Request for Comment—SEC Release No. 34-70731; File No. S7-08-13, p. 2 (Feb. 7, 2014), available at http://www.sec.gov/comments/s7-08-13/s70813-21.pdf; Comment Letter from Americans for Financial Reform, Public Comment on the Offices of Minority and Women Inclusion’s Proposed Interagency Policy Statement (Feb. 7, 2014), available at http://www.sec.gov/comments/s7-08-13/s70813-38.pdf; Comment Letter from The Greenlining Institute, Public Comment Regarding the Proposed Interagency Policy Statement Establishing Joint Standards for Assessing the Policies and Practices of Entities Regulated by the Agencies (Feb. 7, 2013), available at https://www.fdic.gov/regulations/laws/federal/2013/2013-diversity-assessment-c_32.pdf.
[43] See id.
[44] Final Policy Statement.
[45] In fact, according to the SEC’s OMWI, some Agencies advocated for the voluntary self-assessment approach because of “policy reasons.”
[46] See U.S. Government Accountability Office, Diversity Management: Trends and Practices in the Financial Services Industry and Agencies after the Recent Financial Crisis, Highlights (Apr. 2013), available at http://www.gao.gov/assets/660/653814.pdf; U.S. Government Accountability Office, Financial Services Industry: Overall Trends in Management-Level Diversity and Diversity Initiatives, 1993-2008, Highlights (May 12, 2010), available at http://www.gao.gov/assets/130/124630.pdf; U.S. Government Accountability Office, Financial Services Industry: Overall Trends in Management-Level Diversity and Diversity Initiatives, 1993-2004, Highlights (June 2006), available at http://www.gao.gov/assets/260/250328.pdf.
[47] Martin Luther King, Jr., Address at the National Cathedral, Washington, DC, Remaining Awake Through a Great Revolution, (Mar. 31, 1968), available at http://www.sec.gov/servlet/Satellite/goodbye/PublicStmt/1370545250291?externalLink=http%3A%2F%2Fmlk-kpp01.stanford.edu%2Findex.php%2Fencyclopedia%2Fdocumentsentry%2Fdoc_remaining_awake_through_a_great_revolution%2F (last visited May 5, 2015).