[House Hearing, 116 Congress]
[From the U.S. Government Publishing Office]
GOOD FOR THE BOTTOM LINE:
A REVIEW OF THE BUSINESS CASE.
FOR DIVERSITY AND INCLUSION
=======================================================================
HEARING
BEFORE THE
SUBCOMMITTEE ON DIVERSITY
AND INCLUSION
OF THE
COMMITTEE ON FINANCIAL SERVICES
U.S. HOUSE OF REPRESENTATIVES
ONE HUNDRED SIXTEENTH CONGRESS
FIRST SESSION
__________
MAY 1, 2019
__________
Printed for the use of the Committee on Financial Services
Serial No. 116-22
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]
__________
U.S. GOVERNMENT PUBLISHING OFFICE
37-521 PDF WASHINGTON : 2019
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HOUSE COMMITTEE ON FINANCIAL SERVICES
MAXINE WATERS, California, Chairwoman
CAROLYN B. MALONEY, New York PATRICK McHENRY, North Carolina,
NYDIA M. VELAZQUEZ, New York Ranking Member
BRAD SHERMAN, California PETER T. KING, New York
GREGORY W. MEEKS, New York FRANK D. LUCAS, Oklahoma
WM. LACY CLAY, Missouri BILL POSEY, Florida
DAVID SCOTT, Georgia BLAINE LUETKEMEYER, Missouri
AL GREEN, Texas BILL HUIZENGA, Michigan
EMANUEL CLEAVER, Missouri SEAN P. DUFFY, Wisconsin
ED PERLMUTTER, Colorado STEVE STIVERS, Ohio
JIM A. HIMES, Connecticut ANN WAGNER, Missouri
BILL FOSTER, Illinois ANDY BARR, Kentucky
JOYCE BEATTY, Ohio SCOTT TIPTON, Colorado
DENNY HECK, Washington ROGER WILLIAMS, Texas
JUAN VARGAS, California FRENCH HILL, Arkansas
JOSH GOTTHEIMER, New Jersey TOM EMMER, Minnesota
VICENTE GONZALEZ, Texas LEE M. ZELDIN, New York
AL LAWSON, Florida BARRY LOUDERMILK, Georgia
MICHAEL SAN NICOLAS, Guam ALEXANDER X. MOONEY, West Virginia
RASHIDA TLAIB, Michigan WARREN DAVIDSON, Ohio
KATIE PORTER, California TED BUDD, North Carolina
CINDY AXNE, Iowa DAVID KUSTOFF, Tennessee
SEAN CASTEN, Illinois TREY HOLLINGSWORTH, Indiana
AYANNA PRESSLEY, Massachusetts ANTHONY GONZALEZ, Ohio
BEN McADAMS, Utah JOHN ROSE, Tennessee
ALEXANDRIA OCASIO-CORTEZ, New York BRYAN STEIL, Wisconsin
JENNIFER WEXTON, Virginia LANCE GOODEN, Texas
STEPHEN F. LYNCH, Massachusetts DENVER RIGGLEMAN, Virginia
TULSI GABBARD, Hawaii
ALMA ADAMS, North Carolina
MADELEINE DEAN, Pennsylvania
JESUS ``CHUY'' GARCIA, Illinois
SYLVIA GARCIA, Texas
DEAN PHILLIPS, Minnesota
Charla Ouertatani, Staff Director
Subcommittee on Diversity and Inclusion
JOYCE BEATTY, Ohio, Chairwoman
WM. LACY CLAY, Missouri ANN WAGNER, Missouri, Ranking
AL GREEN, Texas Member
JOSH GOTTHEIMER, New Jersey FRANK D. LUCAS, Oklahoma
VICENTE GONZALEZ, Texas ALEXANDER X. MOONEY, West Virginia
AL LAWSON, Florida TED BUDD, North Carolina
AYANNA PRESSLEY, Massachusetts DAVID KUSTOFF, Tennessee
TULSI GABBARD, Hawaii TREY HOLLINGSWORTH, Indiana
ALMA ADAMS, North Carolina ANTHONY GONZALEZ, Ohio, Vice
MADELEINE DEAN, Pennsylvania Ranking Member
SYLVIA GARCIA, Texas BRYAN STEIL, Wisconsin
DEAN PHILLIPS, Minnesota LANCE GOODEN, Texas
C O N T E N T S
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Page
Hearing held on:
May 1, 2019.................................................. 1
Appendix:
May 1, 2019.................................................. 31
WITNESSES
Wednesday, May 1, 2019
Budson, Victoria, Co-Founder and Executive Director, Women and
Public Policy Program, Kennedy School, Harvard Univeristy...... 4
Guzzo, Richard, Partner, Mercer.................................. 11
Trimble, Adrienne, President, National Minority Supplier
Development Council............................................ 6
Verrett, Rory E., Founder and Managing Partner, Protege Search... 9
Von Hoene, William A., Jr., Senior Executive Vice President and
Chief Strategy Officer, Exelon Corporation..................... 8
APPENDIX
Prepared statements:
Budson, Victoria............................................. 32
Guzzo, Richard............................................... 35
Trimble, Adrienne,........................................... 70
Verrett, Rory E.,............................................ 72
Von Hoene, William A., Jr.................................... 75
Additional Material Submitted for the Record
Beatty, Hon. Joyce:
Written statement of Chris Armstrong, Co-Owner, Veritas
Culture.................................................... 85
GOOD FOR THE BOTTOM LINE:
A REVIEW OF THE BUSINESS CASE
FOR DIVERSITY AND INCLUSION
----------
Wednesday, May 1, 2019
U.S. House of Representatives,
Subcommittee on Diversity
and Inclusion,
Committee on Financial Services,
Washington, D.C.
The subcommittee met, pursuant to notice, at 2:07 p.m., in
room 2128, Rayburn House Office Building, Hon. Joyce Beatty
[chairwoman of the subcommittee] presiding.
Members present: Representatives Beatty, Green, Gottheimer,
Gonzalez of Texas, Lawson, Pressley, Dean, Garcia of Texas,
Phillips; Wagner, Lucas, Mooney, Kustoff, Hollingsworth,
Gonzalez of Ohio, Steil, and Gooden.
Ex officio present: Representatives Waters and McHenry.
Chairwoman Beatty. The Subcommittee on Diversity and
Inclusion will come to order. I note a quorum is present.
Without objection, the Chair is authorized to declare a
recess of the subcommittee at any time.
Also, without objection, members of the full Financial
Services Committee who are not members of this subcommittee are
authorized to participate in today's hearing.
Today's hearing is entitled, ``Good for the Bottom Line: A
Review of the Business Case for Diversity and Inclusion.'' I
now recognize myself for 4 minutes to give an opening
statement.
Thank you, everyone, for joining me today for this
trailblazing hearing of the Subcommittee on Diversity and
Inclusion.
This hearing speaks to the foundation of why this
subcommittee exists because diversity and inclusion is a
business imperative. Those who embrace it will be more likely
to prosper, and those who ignore it will be more likely to
fail.
According to a study conducted by McKinsey & Company
entitled, ``Delivering Through Diversity,'' researchers have
found that companies in the top 25 percent for gender and
ethnic diversity on executive teams were 21 percent and 33
percent more likely to outperform on profitability, while
companies in the bottom 25 percent for both gender and ethnic
diversity are 29 percent less likely to achieve above average
profitability.
Today's hearing seeks to set the stage and highlight the
positive, tangible ways diversity leads to greater financial
performance. This topic does not stop at the jurisdiction of
this committee either.
This narrative applies equally across corporate America.
According to a Harvard Business Review article entitled, ``How
Diversity Can Drive Innovation,'' employees at diverse
companies are 45 percent more likely to report that their
firm's market share grew over the previous year, and 70 percent
more likely to report that the firm captured the new market.
It is also important to remember that diversity and
inclusion goes far beyond race and gender. There are many
studies that I could quote, but studies by Intel show that
improving ethnic and gender diversity in the United States
technology workforce represents a massive economic opportunity
that could create between $470 billion to $570 billion in new
value for the tech industry.
There are also studies, I am pleased to say, through the
National Minority Supplier Development Council that reinforce
this. This is not new to us. For many decades we have been
working on diversity, so I am proud to have today's hearing
establish new policy setting for diversity and inclusion
established by the Democratic Majority under the leadership of
Full Committee Chairwoman Maxine Waters.
I look forward to hearing from the expert witnesses today
on how to tackle the business case and to further take action
in transforming the culture of the financial services industry
and beyond.
I reserve the balance of my time for the Chair of the full
Financial Services Committee, Chairwoman Maxine Waters.
The Chair now recognizes the ranking member of the
subcommittee, Mrs. Wagner, for 4 minutes for an opening
statement.
Mrs. Wagner. Thank you, Madam Chairwoman, for hosting our
hearing today entitled, ``Good for the Bottom Line: A Review of
the Business Case for Diversity and Inclusion.'' As the
chairwoman has made reference to, and many in this audience
know, McKinsey & Company published a study in 2015 identifying
a direct correlation between corporate diversity and
profitability of a company.
Diversity can also help drive productivity, innovation, and
good decision-making. When we talk about how diversity is good
for business, I appreciate that it can encompass several
different facets.
It can mean, as Mr. Guzzo writes in his testimony, that a
company's profits are growing or that a company is attracting a
talented diverse workforce or that it is attracting more
investment. Mr. Von Hoene describes diversity as indispensable
to Exelon's success and growth. And Mercer has taken tremendous
strides in this field as well.
Identifying how financial services companies can continue
to invest in diversity and inclusion is a primary purpose of
this hearing, and I am thankful to everyone who is lending
their best practices and expertise.
I look forward to discussing the business case for
diversity, but let me be clear: Promoting diversity and
inclusion is not just good for business; it is also simply the
right thing to do.
It is right for businesses to reflect the diverse make-up
of our country, and we need to focus on working to change
business culture and environments from within. It is nearly
impossible to legislate away cultural barriers or attitudes. A
change in how a company treats and embraces women and
minorities must come from active engagement and leadership.
That is why I am so pleased to welcome our witnesses today,
leaders from business and academia who are leading the way and
helping us do better in this space.
Mr. Guzzo, thanks for being here. I had the pleasure of
meeting your Mercer colleague, Pam Jeffords, in March, when she
participated in a very thoughtful, productive roundtable
discussion on diversity and inclusion. I understand that she
was not able to testify here today, but I want to thank you for
being here. I look forward to your testimony.
I have read through a copy of the report you included with
your testimony entitled, ``When Women Thrive, Businesses
Thrives,'' and I am excited about the conversation that Mercer
is leading to offer thoughtful solutions to addressing female
participation in the workforce and senior management. I hope we
will hear more today about how to bring about cultural and
programmatic changes that help women thrive.
I look forward to diving into practical strategies that
help financial services companies take the next steps in
ensuring that women can rise through the professional ranks,
even as many are simultaneously raising the next generation.
Thank you all for sharing your time with us, and thank you
to my dear friend and colleague, Chairwoman Beatty, for your
leadership.
I yield back, and reserve one minute for the ranking member
of the Full Committee, Mr. McHenry.
Mr. McHenry. I thank the ranking member for yielding. Thank
you, Ms. Wagner, for your leadership.
And thank you, Chairwoman Beatty, for your leadership.
At our last hearing, I highlighted a Harvard Business
School study on the distinction between diversity and
inclusion, with inclusion being the driving force behind
success in diverse companies.
I will take it one step further to say that the market
actually rewards diversity in recruiting, hiring, and retaining
that diverse talent.
So how we reward diversity, how we drive inclusion, should
be the conversation we have today. I appreciate this great
panel for assembling today. It was our intention for this to be
a statement that we are bipartisan by having a bipartisan
panel.
Nonetheless, we have the same members of the panel that we
had negotiated for a bipartisan hearing. We just have four
Democrat witnesses and one Republican witness, even though we
had offered to make this a fully bipartisan panel, because I
think all of you have a great story to tell and we have a lot
to learn from you. So, thank you for being here.
And with that, I yield back.
Chairwoman Beatty. Thank you.
Today, we welcome the testimony of a very diverse panel of
five witnesses, and as has just been said by the ranking
member, we are very honored that the Majority has four
witnesses and the Minority also has a witness.
First, we welcome the testimony of Victoria Budson, co-
founder and executive director of the Women and Public Policy
Program at the Harvard Kennedy School of Government. She also
served as chairperson of the Massachusetts Committee on the
Status of Women from 2011 to 2016.
Second, we welcome the testimony of Adrienne Trimble,
president of the National Minority Supplier Development Council
(NMSDC). She is a known leader in advancing corporate
diversity, equity, and inclusion initiatives. Prior to her role
with NMSDC, she was general manager of diversity and inclusion
at Toyota Motor North America.
Third, we are proud to welcome the testimony of William Von
Hoene. He is the chief strategy officer and senior executive
vice president of Exelon. A former partner at the law firm of
Jenner & Block, in 2016 Mr. Von Hoene was appointed as co-Chair
of the Obama Foundation Inclusion Council, which assists the
foundation in establishing a framework for diversity and
inclusion in all aspects of its operation.
Fourth, we welcome the testimony of Rory Verrett, founder
and managing partner of Protege Search. Mr. Verrett is a former
leader in the diversity and public affairs practices of two
global executive search firms, and the first ever head of
Talent Management at the National Football League.
He is the host of Protege podcasts, an award-winning series
of podcasts on career success, and has 20 years of experience
in recruiting, developing, and mentoring high-performing
executives from diverse backgrounds.
Finally, we welcome the testimony of Rick Guzzo, partner
and co-founder of the Workforce Sciences Institute at Mercer.
He has written dozens of professional papers and was one of the
primary authors of ``Bridging the Diversity Gap,'' the report
on the Chicago financial services sector initiatives to bring
more African-American and Latino talent into the industry.
He has earned a Bachelor's degree from the Ohio State
University, I put emphasis on that, and a Ph.D. from Yale
University in administrative sciences.
The witnesses are reminded that their oral testimony will
be limited to 5 minutes. And without objection, your written
statements will be made a part of the record. The witnesses are
reminded to turn on their microphones and abide by the three
lights in front of you: green means go; yellow means wrap it
up; and red means stop.
Ms. Budson, you are now recognized for 5 minutes to give an
oral presentation of your testimony.
STATEMENT OF VICTORIA BUDSON, CO-FOUNDER AND EXECUTIVE
DIRECTOR, WOMEN AND PUBLIC POLICY PROGRAM, KENNEDY SCHOOL,
HARVARD UNIVERISTY
Ms. Budson. Thank you very much. Chairwoman Beatty, Ranking
Member McHenry, and members of the subcommittee, thank you for
the opportunity to testify today about the importance of
diversity inclusion within this industry.
For America to be most competitive in the global
marketplace, we need to draw on our full talent pool, not 50
percent of it. Every major city in the United States is
predicted to be majority-minority by 2040.
American women today are more highly educated than their
male counterparts. They receive more high school, Associate's,
Bachelor's and post-graduate degrees.
When we look across the financial services industry, we see
that the industry has yet to fully leverage this talent. In the
industry, we also find that although there may be many women in
entry-level positions, the ability to then retain and promote
these women has not been maximized.
Although 40 percent of the top 10 business schools will be
graduating female MBAs at the rate of the top 10 schools, only
34 percent of financial advisors and 40 percent of financial
analysts are women. And as it moves up the ranks to the top of
the hierarchy, only about 20 percent of leadership positions
are held by women.
When we look particularly at intersectionality and women of
color, the numbers are much lower, and women of color are
nearly completely absent from the C-suite.
There are, however, very specific ways that gender
diversity and other forms of diversity can benefit the
financial services industry. Numerous research studies show us
that diversity in teams leads to better performance.
Heterogenous teams solve complex problems and catch errors
better than homogenous ones. Even top-thinking homogenous teams
are out-performed by heterogenous ones.
This is because cognitive diversity enables us to do some
very specific things. When we bring divergent views and
different life experiences and cognitive viewpoints into teams,
people are more likely to view information carefully, to remain
objective, to consider more viewpoints, and also to reexamine
the facts.
As a result, gender and racial diversity on teams is
correlated with the creation of novel solutions, greater
innovation, and higher collective intelligence. And in the
financial services context specifically, diverse teams have
been shown to price stocks more accurately. They are less
likely to make a false bubble.
Benefits to the overall economy show us that when women
have a greater labor force attachment, the economy grows. Now,
it would be better if we saw women's numbers rising. As of
2000, we had 77 percent of prime age women, meaning 24 to 55,
in the workforce.
But by 2017 Bureau of Labor Statistics, what we find is a
drop. This is compared compared to the 89 percent of men who
are currently in the labor force.
When we have more women in the labor force and their
participation is rising, what we find is overall market
productivity rises. And this stimulus does several important
things. Perhaps the most important of which, for many of our
listeners today, is that wage growth continues for women and
men.
In summary, the research illuminates that more women in the
financial services industry is important for the efficiency and
competitiveness of the U.S. economy, as well as for financial
services companies themselves.
Gender inclusion needs to become business as usual, not
only in this particular industry but across society as a whole.
Newer research highlights that companies that have more
diversity do better when the societal context values diversity
overall. They get greater leverage out of this work of having
ensured that they have a diverse and inclusive workforce.
We need women in the financial services industry in
general, and we need them as well at the top of the hierarchy.
We need to create a broader environment that supports women and
men's maximal success, not to mention that utilizing the full
talent pool is simply the right thing to do for all of us and
for America.
Thank you again for inviting me today. I look forward to
responding to your questions and to providing information about
specific strategies and tools that can be used within the
workforce to create greater diversity and inclusion. Thank you.
[The prepared statement of Ms. Budson can be found on page
32 of the appendix.]
Chairwoman Beatty. Thank you.
Ms. Trimble, you are now recognized for 5 minutes to give
an oral presentation of your written testimony.
STATEMENT OF ADRIENNE TRIMBLE, PRESIDENT, NATIONAL MINORITY
SUPPLIER DEVELOPMENT COUNCIL
Ms. Trimble. Thank you very much. Diversity and inclusion
are my life's work, but I don't say that because diversity and
inclusion is a nice sentiment. It is not a social program. It
is not a handout. I can tell you that diversity and inclusion
make good business the best business. It is nothing less than
the American future.
In American business, diversity and inclusion already have
concrete, specific, and strategic meaning. It is a mistake to
assume, as some will, that diversity and inclusion are today's
form of affirmative action with supporting quotas. Not at all.
Diversity and inclusion strategies make good business more
profitable, more efficient, and more of a factor in every
aspect of American life. They have a clear, measurable impact
to a corporation's bottom line.
I am here today because I believe that the National
Minority Supplier Development Council, or what we refer to as
NMSDC, is the go-to for diversity and inclusion in American
business.
We are a non-profit organization sustained by our
membership with a national network of 23 regional affiliate
councils, over 1,400 corporate members, and over 12,000
certified minority businesses. Some of those businesses, over
2,300, are women-owned.
We are uniquely positioned to partner with this committee
as we drive economic growth in communities. We do this through
business ownership, through employment, and through setting a
foundation for sustainable wealth creation.
I would like to take this opportunity to thank all of you,
Congresswoman Waters and Congresswoman Beatty in particular,
for bringing emphasis to this initiative and making it a top
priority for American corporations.
It is a fact that racial and ethnic demographics are on the
move in our country. It has been that stated by 2045, our
population will be majority-minority. As we approach that
fundamental shift, it becomes more important than ever that all
Americans have a stake in the economy that will support them,
every race and ethnicity, as well as full gender parity.
Diversity and inclusion strategies also transform the
approach to the consumer. They offer the best ways to develop
products to meet the market demand, as well as the best way to
create disposable and discretionary income in communities,
particularly those that have been underserved and
underrepresented.
Last year, Forbes magazine cited a recent study by the
Boston Consulting Group that found that increased diversity of
leadership teams in business resulted in 19 percent higher
revenue due to innovation, a huge factor in tech start-up
companies and industries of the future.
I built my career in diversity and inclusion by working for
a global leader in the automotive industry. The strategy we
developed and implemented lined up with the company's business
objectives.
That was how we won senior leadership buy-in and support.
It covered everything from talent acquisition to marketing to
the changing consumer demographics, to building a diverse
supplier base.
Senior leaders embraced the idea that in order to achieve
maximum business results their consumers had to be reflected
throughout the company. The best D&I strategies take a holistic
view of the business.
The bottom line is that CEOs have to drive this initiative
within their corporations. Sometimes it is just asking the
simple question, how diverse is your team, and how are all of
our consumers reflected in product and/or service strategies?
Diverse supply chains are better equipped to address
consumer preferences in a direct way. Diverse companies tend to
hire diverse workers at a much higher rate. That decreases
unemployment in underserved communities, typically with those
communities being populations of people of color.
In fact, in 2018, our certified minority businesses
sustained over 525,000 jobs and generated over $31 billion in
wages earned; 70 percent of those workers were classified as
minority. NSMDC serves to ensure that those who claim to be
minority firms are indeed minority-owned, operated, and
controlled. Our certification is the gold standard for
corporate America.
After we certify our minority firms, we develop their
skills for building growth and capacity. Diversity and
inclusion drives everything that we do at NMSDC. For that
reason, I would like to close by reminding everyone how
urgently important it is to address some of the challenges that
impact our MBEs, such as access to capital.
The challenge in seeking access to capital for our minority
firms is obvious. Our certified minority businesses generated
over $214 billion in tax revenues yet still struggle to get the
needed capital to sustain and grow their businesses.
That is why NMSDC has established its own initiatives, and
that is the call to action and an advocacy issue and one that I
look forward to working with and partnering with this Diversity
and Inclusion Subcommittee.
Thank you for allowing me to be here today.
[The prepared statement of Ms. Trimble can be found on page
70 of the appendix.]
Chairwoman Beatty. Thank you very much.
Mr. Von Hoene, you are now recognized for 5 minutes to
give an oral presentation of your testimony.
STATEMENT OF WILLIAM A. VON HOENE, JR., SENIOR EXECUTIVE VICE
PRESIDENT AND CHIEF STRATEGY OFFICER, EXELON CORPORATION
Mr. Von Hoene. Good afternoon, Chairwoman Beatty, Ranking
Member Wagner, and members of the subcommittee. Thank you for
the opportunity to speak today about the critical role of
diversity and inclusion in achieving financial success in
business. Thank you for your commitment to this issue.
I am pleased to share Exelon's experience, which is this:
Our success would be impossible but for our comprehensive
commitment to diversity and inclusion within our company, with
many other companies that provide essential services to us, and
with the communities we serve.
Exelon operates six electric and gas utilities centered
around major metropolitan areas, including Pepco, which
provides electricity here in the District. We also are the
largest operator of nuclear plants and the biggest producer of
clean energy in the country.
All in, we have over 12 million customers, including two-
thirds of the Fortune 100 corporations, and we operate in 48
States. Our business is extraordinarily complex, rapidly
changing, and frequently volatile. Nonetheless, as my written
testimony reflects, in the last 6 years Exelon has enjoyed
significant success.
Illustratively, our total shareholder value during that
period has increased 120 percent. Among other things, this has
enabled us to contribute over $50 million annually to
organizations providing critical services to the communities in
which we work.
Our commitment to diversity and inclusion has been
invaluable in achieving these results. To meet the challenges
we face, we need superb engineering, operational dexterity,
regulatory and financial sophistication, political acumen,
close connections to our customers, and myriad other skills.
We have that array of skills only when our people possess a
wide variety of perspectives, backgrounds, ideas, and
connections to the diverse world in which we operate.
Our commitment to diversity and inclusion has included, in
addition to many other initiatives, the following: one,
tracking our diversity internally against specific metrics,
just as we do for safety, operational financial performance,
and holding our officers accountable.
The result? Where the utility industry is heavily white
male, our workforce is 41 percent diverse.
Two, recognizing the importance of diversity in senior
leadership. Our 6 regulated utilities now produce well over 50
percent of our net income and that percentage is increasing.
The CEO for five of those six utilities is either Hispanic or
African American and all the utility CEOs report to the CEO for
Exelon Utilities, the holding company, who is a woman.
The result? Our utilities are in the top quartile or decile
of virtually every metric by which utility performance is
measured.
Three, pursuing diversity and inclusion with our suppliers
of goods and services. Our overall spend with diverse suppliers
totaled $2.2 billion last year, a 100 percent increase over 5
years ago. This is more than 25 percent of our overall supply-
managed spend.
The result? A supply chain unsurpassed in our industry for
efficiency, cost savings, and delivering value to our
customers.
Four, and perhaps of most relevance to this subcommittee,
zealous pursuit of diversity and inclusion with professional
service providers including banks and money managers.
Many banks do business with us. We track the percentage of
Exelon work done by professionals at each bank, rank the banks
against each other, disclose to them their rankings, and weigh
those results in deciding where to place our business.
The result? Sixty-four percent of the outside bankers
providing coverage services to Exelon companies are diverse.
With respect to money managers, in 2010 we revamped a
modest minority money manager program that relied almost
exclusively on fund of funds arrangements by converting to a
direct mandate approach. We then aggressively sought out
relationships with minority- and female-owned money management
firms.
Today, 24 of those firms manage over $3 billion in Exelon
pension, decommissioning, and employee savings funds. The
result? In 3 of the last 5 years, a minority-owned firm has had
the highest returns of any Exelon U.S. public money manager.
It is, of course, impossible to measure with precision the
financial impact of our diversity and inclusion efforts, but
our financial success over the last 6 years unmistakably
coincides with those efforts.
A friend of mine captured the business case for diversity
in a single question: Is a person smarter if she or he reads
the same newspaper 4 times rather than reading 4 different
newspapers? The obvious answer to that question is, of course
not.
And the compelling business case for diversity is just as
obvious. Exelon is a vivid example of precisely that principle.
Thank you. I look forward to your questions.
[The prepared statement of Mr. Von Hoene can be found on
page 75 of the appendix.]
Chairwoman Beatty. Thank you, Mr. Von Hoene.
Mr. Verrett, you are now recognized for 5 minutes to give
your oral presentation on your written testimony.
STATEMENT OF RORY E. VERRETT, FOUNDER AND MANAGING PARTNER,
PROTEGE SEARCH
Mr. Verrett. Thank you. I want to thank Chairwoman Beatty
and Ranking Member Wagner for the invitation to provide remarks
at this important hearing. My name is Rory Verrett and I am the
founder and managing partner of Protege Search. We are the
leading retained executive search and leadership advisory firm
focused on diverse talent.
At Protege Search we don't make excuses about not having a
diverse talent pipeline. We don't invent the people we recruit.
We simply find them. We lead searches for senior leaders at
corporations, start-ups, trade associations, and nonprofit
organizations.
I am also the host of Protege Podcast, the leading career
success show for diverse professionals. At Protege, we are in
the trenches every single day working with corporations and
organizations trying to meet their diversity and inclusion
goals.
Madam Chairwoman, diversity and inclusion are vital to the
competitiveness of American companies. There are three
principal reasons why companies are simply more successful the
more diverse and inclusive they are.
First, you will hear talk about diversity and inclusion
being the right thing to do or the business case is right for
diversity and inclusion. But simply put, diversity and
inclusion helps companies become the fullest, most successful
version of themselves as enterprises.
From my experience in professional sports, I can tell you
every single professional sports league, from the NBA to the
PGA Tour, owes its current level of success and profitability
to diversity and inclusion. The NBA, for instance, has several
innovative D&I initiatives which have helped grow the game in
Asia and Africa, and years ago launched a women's league.
The strategic decisions by the NBA to enter these new
markets were guided by a diverse team of executives, including
Deputy Commissioner Mark Tatum and Amadou Gallo Fall who leads
the efforts in Africa, both of whom brought a global
perspective to the business of basketball.
Second, diversity and inclusion helps companies outperform
their competitors. As was mentioned previously about the
McKinsey study, companies in the top quartile for ethnic and
cultural diversity on executive teams are 33 percent more
likely to have industry-leading profitability.
As one venture capitalist in Silicon Valley told me, social
media is driven by culture. Culture is driven by music. Music
is primarily driven by influencers of color.
So if we want to know what trends our social media
portfolio companies need to predict, need to harness and focus
on, all we need to do is follow what is happening in
communities of color.
Third, diversity and inclusion allow companies to better
solve the problems they face. One of our clients at Protege
Search is Freddie Mac. Freddie Mac has an innovative initiative
in which the company actively hires as interns students who are
on the autism spectrum.
From the program's launch in 2012, Freddie Mac has found
these professionals to be exceptionally capable, for instance,
in data analytics, an area of critical importance for the
company.
So what can companies do to foster greater diversity and
inclusion? From my work with companies in healthcare, financial
services, tech, sports, and consumer products, there are five
core principles which should guide any D&I strategy.
First, the D&I strategy must have the support of the CEO
and the board with the requisite budget and personnel necessary
to execute an enterprise-wide strategy.
Second, the diversity and inclusion strategy must be linked
to individual and group performance standards and be tied to
executive compensation.
Third, companies have to move beyond diversity on candidate
slates and mandate diversity on interview teams. Moreover,
executive search firms must be held accountable for the
diversity of candidate slates they submit to their corporate
clients and not simply state that there is a pipeline problem.
There is no pipeline problem.
Fourth, companies must be transparent about hiring rates,
promotion rates, and compensation and advancement to senior
management by employees of color and women.
It should not require public pressure by advocacy groups
for companies to be transparent about equality. If companies
want to continue to earn consumer trust, they must make public-
facing disclosures about where they stand on diversity and
inclusion.
And fifth, companies must be smart enough to harness the
latent entrepreneurial talent of their diverse staff by
unleashing these high-potential professionals to help solve the
enterprise's toughest challenges and help seize the company's
greatest opportunities.
In a country which will be majority people of color by the
middle of this century, in an era where consumers and
prospective employees are motivated by the social values in the
companies they support, and against the overwhelming research
which supports the positive business outcomes of diversity and
inclusion, companies ignore this strategic imperative at their
peril.
[The prepared statement of Mr. Verrett can be found on page
72 of the appendix.]
Chairwoman Beatty. Thank you very much.
I now recognize Mr. Guzzo for 5 minutes.
STATEMENT OF RICHARD GUZZO, PARTNER, MERCER
Mr. Guzzo. Thank you, Chairwoman Beatty, Ranking Member
Wagner, and members of the subcommittee. I appreciate the
opportunity to share my views with you today on this important
topic.
I am Rick Guzzo, a partner at Mercer. Mercer is a
consulting firm and a unit of a 75,000-person strong Marsh &
McLennan Companies family of companies, and I do lead Mercer's
Workforce Sciences Institute, of which I am quite proud.
Mercer has worked with hundreds of companies on diversity,
both in the U.S. and globally. We are well-known for our When
Woman Thrive Initiative which provides research and solutions
on gender diversity for many industry sectors, including
financial services.
During my 20-plus years with Mercer, I have witnessed the
importance of diversity rise on the business agenda, and some
of my most rewarding professional experiences have come with
clients working on this topic. It is a topic that matters to
me.
One element of our diversity-related work is fairness. I am
proud to be part of a company that has affected millions of
work lives by helping employers ensure that pay is fair, and
that opportunities for advancement exist for all. While
compliance has always been part of the agenda, today that
agenda also is very much about values, and the business value
of diversity has many aspects.
For one, reputations matter. Employers are constantly under
scrutiny in social media and on websites devoted to employer
reviews by employees and job applicants. Companies that acquire
reputations of being inclusive, of enabling all types of people
to contribute to the best of their abilities will be favored
when competing for top talent and in the eyes of consumers.
Investors matter. For publicly traded companies, ESG
investing, environmental, social and governance, is on the
rise, and how a company manages gender, racial, and other types
of diversity is an important element of the social and
governance qualities that ESG investors look for. Those
qualities influence where investors put their money.
And, of course, business results matter. There is real,
tangible evidence that well-managed diversity contributes to
business success. I would suggest the story is not a simple
one, however. It is not the case that all diversity is good for
all aspects of business performance. Whose diversity, what
types of diversity, and what measures of performance we are
talking about all matter.
Commensurate with the intensifying interest in diversity is
the rapid rise of data and analytic methods in business. And so
why is this worth noting today? I think there are two reasons.
First, financial services firms respect good analytics of
customer behavior, of market dynamics and applying analytics to
issues of workforce diversity can produce powerful and readily
accepted insights. Applying this to ourselves, for example, we
at Mercer recently learned some new things about the value of
gender diversity in our sales teams.
Second, workforce analytics change the game for employers
with regard to how best to attract, retain, and unleash the
capabilities of a diverse workforce. What is a best practice in
one employer may not be a best practice in another because
circumstances differ. Analytics can reveal what diversity
practices work best in what circumstances, thus making
employers smarter.
Another development to note is the growth of collaborations
among employers, and I am fortunate enough to have firsthand
experience with one such example, the Financial Services
Pipeline Initiative.
If you are not familiar with it, this is a Chicago-based
collaborative among banks, asset managers, the Federal Reserve
Bank of Chicago, and other employers in the industry, small and
large, working with the Chicago Community Trust with a mission
to achieve 2 things: increased representation of African
Americans and Latinos at all levels in the industry; and
increased cultural competence in the industry.
The Initiative is remarkable for its many services and
resources such as online toolkits for individuals and for
employers, the internships it offers, career advancement
workshops for people in the industry and more. It is also
remarkable for its transparency. I encourage you to visit its
websites, see who is doing what, the information that is
shared, talk to its people.
And it is also remarkable for its reliance on data and
research to guide actions. Participating employers share
workforce data and make their employees available for research
inquiries for the good of all.
In conclusion, it is clear that the financial services
industry faces many challenges on the road to greater
diversity. Progress on that road, I believe, is being made.
And I think it can be accelerated through a genuine
appreciation of the business case for diversity, through good
research and data to steer by and by the energy produced by
collaborating to achieve common goals.
Thank you again for this opportunity. I look forward to
answering your questions.
[The prepared statement of Mr. Guzzo can be found on page
35 of the appendix.]
Chairwoman Beatty. Thank you very much, Mr. Guzzo.
I now recognize myself for 5 minutes for questions. We have
heard a lot of data and statistics. We have even heard about
asset management, so I am going to start my questioning and
hopefully we can give brief and concise answers and I can get a
question to most of you.
Mr. Von Hoene, you are up first. We have heard a lot about
statistics and data, and you mentioned that your company
started a diverse asset management initiative. Can you tell us
briefly how you made that decision and what was one challenge
with that?
Mr. Von Hoene. Thank you for your question, Chairwoman
Beatty. We made the decision because of two reasons. First, the
program that we had in place was not advancing our interests
nor was it advancing the social interests that we think were
important for a diverse management program.
The second reason we made the decision is because we
weren't performing as well as we needed to perform in terms of
returns on money management for our company.
So what we did was say we will be responsible for direct
relationships. We sought out those relationships. We used them
and deployed them, and we were able to bring into our
management of money in pension funds and other funds tremendous
assets that had not previously been available to us. The
success story, as I mentioned in my testimony, is obvious.
Chairwoman Beatty. Thank you very much.
Ms. Trimble, can you tell us how we can ensure that
minority business enterprises are getting fair access to
Federal contracting opportunities in order to generate more of
this kind of economic growth?
Ms. Trimble. Absolutely, and thank you, Chairwoman Beatty,
for the question and for allowing me to participate. I think
that it is really important for the Federal Government to
understand where their sourcing opportunities lie and to do
more forecasting of what those needs are going to be and reach
out to the partners who can help provide those minority
suppliers that have the capability and the capacity to meet
those contracting opportunities.
That is something that the NMSDC is positioned to do, and
there are other advocacy groups that also have membership of
minority firms that can deliver on those goods and services.
Our minority firms can only get access to opportunities if
those opportunities are made available to them and they are
transparent in the procurement process.
So I think that those are things that we need to work more
closely hand-in-hand and understanding who the capable minority
suppliers are, how do we position them for those opportunities
and making sure there are accountability measure throughout the
Federal Government for inclusion.
Chairwoman Beatty. Thank you very much.
Mr. Verrett, we have heard a lot about pipeline and all
this great statistics about if we do this, it builds a case for
diversity. But can you tell us, if you look inside a company,
what do we need to know to ensure minority retention in firms
so they are getting into the pipeline?
Mr. Verrett. Thank you, Madam Chairwoman, for that
question. I think a couple of things have to happen. First, I
think most companies underappreciate the difficult journey that
women and executives and professionals of color have in
corporate America.
They are the least likely to be mentored. They are the
least likely to be sponsored. They are the least likely to be
promoted. And so I think having the right data on the
engagement of your minority and women employees is hugely
important.
I think companies have to also have a brand recognition
about how they are recognized in the market by women and by
executives and professionals of color. Not every employee,
future employee, thinks about that company the same.
And what we encourage our clients to do is to have a
narrative that is specific to employees of color, specific to
women candidates of color, who may want to work at the company.
So I think there is a lot of work that needs to be done and,
frankly, there are companies like Exelon and others in sports
and in utilities that are doing admirable work in this area.
Chairwoman Beatty. Thank you.
Ms. Budson, we know that you have done extensive work at
Harvard University and you mentioned in your testimony the
inequities and disparities with gender equality in talking
about women. Can you give us one thing or one practice that you
think organizations should take heed to to help overcome gender
and racial biases in the workplace?
Ms. Budson. Yes, and thank you for the question, Chairwoman
Beatty. So one of the things that we see is often when someone
is recruited into an organization who is a woman, who is a
woman of color or who is a person of color, anywhere across the
gender spectrum, they often, even if they are on the team,
aren't given the same opportunities for stretch assignments
which are the pathway to promotion.
So if there can be a system that is metric-based, that is
organized and that is tracked, we can then provide
opportunities more equally across the organization so people
aren't going to people who read physically like them, might
happen to live in their same community, might go to their same
community of worship, but instead there is an evidence-based,
tracked system so that each new employee has opportunities for
advancement.
Now, within the financial services industry, this is
particularly important around profit and loss. So we have a--
Chairwoman Beatty. Sorry, my time is up, but hold some of
those thoughts. I know we will be able to let you get to them.
I now recognize the distinguished ranking member of the
subcommittee, Mrs. Wagner, for 5 minutes for questions.
Mrs. Wagner. I thank the chairwoman.
Mr. Guzzo, I think we are all here because we recognize
that diversity and inclusion are essential for future growth
and innovation in the financial services industry. Both from
your experience and from your report on ``When Women Thrive,
Businesses Thrive,'' how specifically can leaders in this
industry actively implement practical strategies to build
diverse workforces?
And then also, how does the financial services sector
compare to other industries, please?
Mr. Guzzo. The financial services sector has, if you will,
a more favorable representation of women and minorities than
some industries. It could be, if I recall, manufacturing and
energy. But less favorable than others, right? So I think each
industry has its own unique challenges. Certainly, financial
services does as well, but it is in the distribution.
In terms of tactics, I think the first tactic that everyone
looks to, business leaders look to, is hiring. And you have to,
if you want to increase representation. But the big lesson that
we have had in our work with clients is that hiring surely is
not enough, right?
That the notion of bringing people in can sometimes be a
revolving door because they go out. Why? Because of the factors
that create a work environment that are not accommodating,
friendly, which frankly don't let them flourish, don't let them
thrive, hence how we got to that word with regard to women.
I would say that the fundamentals of fair practices in the
workplace, right, fair opportunities are the starting point
after hiring, and close tracking of the dynamics of who is
staying, who is going, who is advancing and how to change it
are the--
Mrs. Wagner. In your testimony, you mentioned how the
evidence-based business case for diversity in terms of its
impact on business is sometimes nuanced.
Mr. Guzzo. Yes.
Mrs. Wagner. Can you elaborate on these nuances?
Mr. Guzzo. Well, the standards of evidence, if you will,
that sometimes go into the public discourse aren't maybe the
standards of evidence that you would find in research
publications, right?
Mrs. Wagner. Yes.
Mr. Guzzo. And I make that statement based on the standards
of evidence in research publications to say it is not simple.
It is very nuanced, such that we might find, for example, in
our organization that gender diversity matters to sales teams,
but ethnicity may not in one situation, but it may in another.
There are lots of place and people differences that need to
be understood and need to be accounted for. And my observation
is simply that we need to be nuanced in our thinking about the
topic with regard to the business case.
Mrs. Wagner. Ah, I see. Well, you also write that the
business case for diversity is multifaceted. We shouldn't
assume that one of the best practices discussed today will work
effectively, as you said, in all business sectors. So could you
elaborate on the one-size-fits-all approach when it comes to
diversity within a company?
Mr. Guzzo. Yes. No, absolutely true. For example, many
companies will have what might be called resource groups in
their organization which are affiliations of people with
something in common. It could be ethnicity. It could be a
women's group, et cetera.
Sometimes those groups are really effective at creating
climates and cultures in the place that enable others like them
to succeed. Sometimes it is not. Why?
I think it is sometimes leadership. I think it is sometimes
resources. I think it is sometimes other aspects of the
environment which make their work believable or not to the
newcomer to the organization.
So there is just lots of variation. The fact that you
implement a resource group isn't sufficient.
Mrs. Wagner. Mr. Von Hoene, you spoke about your efforts to
recruit, retain, and promote underrepresented groups. Can you
tell us what programs you have established to make Exelon a
more attractive place to work for your diverse employees?
Mr. Von Hoene. Thank you for the question, Ranking Member
Wagner. We do a series of things once people arrive, including
an extensive mentorship and sponsorship program for new people
entering the company, programs that are particular for
lifestyle challenges that people may have in terms of flexible
work schedules, in terms of equal pay, in terms of paid family
leave.
We have systems in which we have training programs for
people at all levels in the company designed to enable them to
be successful and to learn how they can rotate through the
company and find opportunities in other areas in the company.
And we take a personal stake in development and hold our
officers and our leaders accountable for doing all of these
things.
Mrs. Wagner. In my brief time here, tell me more about the
Honor Roll Program.
Mr. Von Hoene. The Honor Roll Program is a program that we
instituted with respect to professional services. We started it
with law firms. What we do is we measure--
Mrs. Wagner. Banks and then other institutions, too, right?
Mr. Von Hoene. Insurance companies, consultants, banks.
What we do is we measure for each engagement team at Exelon the
percentage of work that is performed by women, by people of
color. We then rank those. We tabulate that.
We rank the firms from first to last. We tell them where
they are ranked. We give them report cards. Those who perform
best get an opportunity to have a personal dinner with our CEO.
Those who perform worse don't get as much business as they
would have if they had been in the latter categories.
Mrs. Wagner. Thank you. My time has expired.
I yield back.
Mr. Von Hoene. Thank you.
Chairwoman Beatty. Thank you.
The Chair now recognizes the distinguished Chair of the
full Financial Services Committee, the gentlewoman from
California, Chairwoman Maxine Waters.
Chairwoman Waters. Thank you so very much, Madam
Chairwoman. I appreciate the opportunity to be here with you
this afternoon. I appreciate all the work that you have done on
OMWI where we created this opportunity for diversity in the
Dodd-Frank reform.
And you have been carrying that for the whole time that you
have been here and what you are doing now is a part of all of
that, and I appreciate the work that you have done.
I want to just raise a question about upper mobility in
firms, in corporations. One of the consistent complaints that
we get all the time, particularly from African Americans, and
African-American women in particular, is that, ``I have been on
this job for 10 years and they pass over me and give the job to
newcomers coming in.'' And this is a constant, consistent
complaint of African Americans in general, and African-American
women in particular.
So what do we do to help companies stop passing over good
employees who put the time in, who do the work, but when the
time comes to select a new supervisor or manager, they are
overlooked? It is constant. Who wants to take this question?
Mr. Verrett?
Mr. Verrett. Madam Chairwoman, thank you so much for that
question. It is common. It is frequent. And the research behind
this beyond the anecdotal information that stretches across
nearly every company.
David Thomas, who is the president at Morehouse, and was an
organizational design professor at Harvard, wrote a book
called, ``Breaking Through.'' And he said that if you want to
understand diversity and inclusion in corporate America, and
why people don't get promoted who are not white men, it is
because of risk. It is the risk of the blowback if they don't
work out.
So what you have to do is simply tie promotion of minority
and women executives to executive compensation. What gets
measured will get done. If people's performance standards are
tied to diversity and inclusion it will get done. If it is a
nice-to-do it will be the last thing that gets done, and it
most often will not get done.
Chairwoman Waters. I think Ms. Budson had her hand up? Yes.
Ms. Budson. Thank you, Chairwoman Waters. One of the things
which can take place is that when these decisions are being
made rather than having an evidence-based framework where there
is a clearly defined set of what needed to be achieved for
someone to move forward, there is, in essence, a conversation
which takes place where people talk about who is ready.
And when companies can use best practice and evidence-based
performance models where instead of saying who is ready you
define out clear characteristics for that upward mobility
within the organization that are transparent to the employees.
And these decisions are made within the management team
where it is literally written out. And instead of talking about
general fit or readiness, one can mark who has ticked off all
the different things to rise.
Sometimes what we find is that this implicit bias makes it
so one does not, as my colleague shared, take the risk instead
of looking at who has demonstrated. And as I mentioned earlier,
if people are not given the opportunity for their stretch
assignments they then can't collect those key factors for
upward mobility.
A second piece which can take place as well is during the
evaluation process ensuring that there are metrics which can
live outside of either the self-evaluations, because people
with less social capital in the organization tend to rate
themselves lower and people with more tend to rate themselves
higher. But to again move to an evidence-based approach rather
than a readiness or a fit conversation.
Chairwoman Waters. Well, thank you. And of course what we
have had to do is we have had to file discrimination complaints
and we can't keep doing that for the rest of our lives. But
what about when you first get hired and you are told what the
job is all about and how you get promotions and what is
possible so that when the time comes and it doesn't happen, you
know what to do in order to speak up for yourself, et cetera,
et cetera?
I want to thank you for your comments. This is a very
important subcommittee and this is very important work that is
being done.
And again, I want to thank our chairwoman here, Ms. Beatty,
for the work that is being done. And I am very pleased that
this issue is finally getting attention in this country all
over every section of the country. Thank you very much, and I
yield back.
Chairwoman Beatty. Thank you, Madam Chairwoman.
The gentleman from Indiana, Mr. Hollingsworth, is
recognized for 5 minutes.
Mr. Hollingsworth. Good afternoon. I appreciate everyone
being here and I genuinely appreciate you holding this hearing.
This is an important topic of discussion. I know every Member
sitting up here cares a lot about these outcomes and cares a
lot about the work that has been invested by so many private
firms and frankly us as a government in making sure we get to
better outcomes with regard to this.
And Mr. Von Hoene, I wanted to talk to you for a brief
second. You have talked about how you guys really walk the
walk. How you don't just talk the talk but you are genuinely
making these efforts, having these scorecards, ensuring this is
a part of your company's very DNA.
Now, we have seen so many of the research studies that
indicate there are tremendous rewards out there for firms that
do pursue with meaningful intent diversity and inclusion as a
part of who they are.
But I wondered if you might talk about the genesis of this
at your firm? How did this all get started? If everyone in
every private firm has the opportunity to see the rewards that
might come out of this not only for themselves, not only for
their employees but for their communities and for the country
as a whole, how is it that others haven't followed in your
footsteps? And how did you and your firm get started in this?
Mr. Von Hoene. Sure. Well, we are in an industry where we
touch large urban populations.
Mr. Hollingsworth. Right.
Mr. Von Hoene. So as a starting point one of the things
that we have to be mindful of is who are our customers? Who are
our stakeholders? And they reflect a very broad, diverse group
of individuals and institutions.
In order to address concerns that they have it is important
that we be able to mirror that effectively so we start with a
little bit of an advantage in that regard.
But the other part of it that is really important is the
work that this committee is doing today which is when you stop
and recognize that this is not simply the right thing to do, it
is the right business thing to do.
And you see how that evolves in your business as you see
people making contributions who had not historically been
invited to the table to do so and you see the value that comes
with that. It begins, I think, a trend or a momentum to
understand more fully the business case that all of you fully
embrace here.
So what we have found is as we have done these things
starting with baby steps and being more energetic as time went
on to see the progress that our business made and to be able to
tell people this is not only the right thing to do, this is a
thing that is going to make you and to make the company more
profitable and more successful. The key is delivering that
message over and over again.
Mr. Hollingsworth. Right. Well, I love that you see it as
an advantage that you are with a utility company that touches
so many different customers. One could see it as a disadvantage
though, right?
When I go to the supermarket I have a wide variety of
options perhaps on every shelf and I can choose the products
that match my values, companies that match my values, match my
ethics, but I don't always have that same choice in utilities.
So for you to be able to say, even as a utility, that it
matters to you that you have the same culture of the people
that you serve, I think that is a really unique position to
take, and I think you guys should be applauded for the efforts
that have already been undertaken with regard to that.
Mr. Von Hoene. Thank you very much, Congressman.
Mr. Hollingsworth. Absolutely.
Ms. Budson, I know that you earlier spoke a little bit
about some of the challenges that are associated with ensuring
that we get everybody's talent into the workforce. This is
something that I am passionate about as well, making sure that
everyone has the ability to contribute to this economy, the
ability to contribute to this country's future.
I wonder if you might just pick out a few little areas
where we are holding specifically women back from being able to
engage in the workplace. Where are we losing them along the
way, so to speak? In 90 seconds, hopefully you can solve that
problem.
Ms. Budson. Thank you. So sometimes we hear about women
opting out and I would like to state that women don't opt out.
Women get fed up, and there is a very significant difference.
We need to create environments where all employees are able to
fundamentally contribute. The most likely reason for a woman to
leave her place of employment is because she doesn't feel
valued.
Mr. Hollingsworth. Right.
Ms. Budson. More so even than what her income is in that
organization.
Mr. Hollingsworth. Right.
Ms. Budson. And how do we communicate value? Within
organizations we communicate value by pay. We communicate value
by status. We communicate value by flexibility. We communicate
value by what work we assign.
And we communicate value by what are the narratives that
our organizations share so that employees feel a specific sense
of investment. And who within the company do we highlight and
promote?
Mr. Hollingsworth. Can I ask you a specific question about
that?
Ms. Budson. Yes.
Mr. Hollingsworth. And I--
Ms. Budson. Please.
Mr. Hollingsworth. This is a sensitive topic but I want to
just parse something up. Are we not communicating to our female
employees that we value them enough? Or are we not
communicating it in the right way where they receive the
message? What is going on there? Kind of bifurcate that a
little bit for me in 20 seconds.
Ms. Budson. I think the answer is yes.
Mr. Hollingsworth. Okay.
Ms. Budson. And particularly when we talk about women of
color, and really this applies not just to women but for anyone
who doesn't have high social capital in their organization. My
colleagues' comments about sponsorship, mentorship, people
being reached out to to have those unique assignments to join
the team that is going to be defining whether someone can
advance and looking more thoughtfully about--
Are we done?
Mr. Hollingsworth. We are. Hopefully, someone else will let
you continue it again.
Madam Chairwoman, I appreciate you holding this hearing.
Chairwoman Beatty. Thank you.
The gentleman from Florida, Mr. Lawson, is recognized for 5
minutes.
Mr. Lawson. Thank you, Madam Chairwoman, and welcome to the
subcommittee, witnesses.
When I go into financial institutions, especially banks and
so forth, when you walk into the institution mostly the only
thing you see is women. Some women of color and some women of
non-color, but they are there.
So my question would be who determines whether women will
get promoted in those institutions? Is it the human relations
person, human affairs person who interviews people before they
come into the institution? And you just assume when you go into
the financial institution when you see the women who are clerks
and everything else there, you know that this must be a pretty
good atmosphere.
We don't know until later on that you find and see people
who say, well, I don't get promotions, but if you go upstairs,
then you will see up there then it is probably all men and so
forth, but you don't see that when you come into the
institution.
Now, I am in the financial services industry and the
insurance field and I know we have had a difficult time in
getting women into management positions for many, many years,
over the last 30 years in working with Northwestern Mutual and
other companies who are beginning to look at it differently and
see what can they do.
But I want to know from the position of financial
institutions and larger banks and so forth, how are they
recruited and the perception that you have? And any of you can
comment on it.
We can just go down the line and see what happens in human
resources, because you don't see anyone in human resources. You
just see the people out there working. So maybe you can comment
on that.
Yes, Ms. Trimble?
Ms. Trimble. Thank you for that question and I would like
to draw back on my human resources experience having been a
human resources professional before working in the diversity
and inclusion space.
I do think it is a joint effort between the line business
managers as well as the human resources department. You have
your H.R. professionals who are outsourcing talent and finding
talent to bring to hiring managers, however, many times that is
where the challenges usually occur is when the hiring managers
are making their final decisions.
So in my experience has shown me that we really have to
have a more intentional strategy for our hiring managers and
those in those line positions to have more accountability
measures for the types of decisions that they are making,
particularly around talent as you look at promotions and job
assignments and things of that nature. And understanding that
there are some biases that are bleeding into this process and
how do we address that.
Everyone brings a bias to work with them. We know that. It
is how you manage those biases that is going to make the
difference. So I think that companies, particularly financial
institutions, have to be much more intentional around
addressing what those challenges are, addressing those barriers
and making sure that they are being held accountable for the
decisions that they are making.
Mr. Lawson. Okay. Anyone else?
Yes, sir, go ahead?
Mr. Von Hoene. One point to amplify on that is this. It is
not just the responsibility of the financial institutions to
address the problem that you have articulated. It is the
responsibility of their clients to do so as well. Are the
clients looking at financial institutions and saying, we want a
diverse body of leaders servicing our business?
Because until that demand is made, the incentive internally
in the financial institutions is much less than it is if the
clients are saying, this is important to us. So this is a
problem not just in financial services but for all businesses
to address. And it is important that corporations step up to
the plate and do so.
Mr. Lawson. Would anyone else like to comment?
Mr. Guzzo. Well, if I could add to it? I agree with
everything that has been said, and I think there is an under-
observed or under-accounted for phenomena often which is that
in any one cycle of promotions in a year we might look at as an
employer, what is the ratio of minorities to whites hired or
promoted to the next level?
There might be a small difference. Over time those small
differences, if they are in the wrong directions, can really
accumulate and turn into big differences.
And I think the point here I am trying to make is that we
need to understand the running record of an organization's
actions, not point-in-time actions, to really manage the issue
of upward mobility in organizations.
Mr. Lawson. Yes, go ahead, Mr. Verrett.
Mr. Verrett. Congressman Lawson, just to finish up, I also
think we have to acknowledge that promotion processes are
subjective. There are some objective elements to them, but at
the end of the day every company has a group of people deciding
the behavior, the performance, the results of a group of
employees and deciding who gets advanced and who doesn't. It is
a subjective process.
To say the common retort that we simply want the best
people. We are fine with diversity and inclusion as long as we
find the best people. That is often only said when we are
talking about women and people of color.
It is assumed that the best people are hired when they are
non-diverse and we simply have to just get rid of that old
trope and decide that we are going to understand this as a
subjective process and lean into all the data that is
available.
Mr. Lawson. Okay, thank you.
And with that, I yield back, Madam Chairwoman.
Chairwoman Beatty. The gentleman from Ohio, Mr. Gonzalez,
is recognized for 5 minutes.
Mr. Gonzalez of Ohio. Thank you, Madam Chairwoman.
And thank you to all the witnesses for your testimony and
participation today.
One of the neatest things about my--I am new to Congress--
time in Congress so far is that when I go home and I talk about
what we are doing in committee and I mentioned this
subcommittee specifically, the Diversity and Inclusion
Subcommittee, to the business community I get more interest and
positive feedback than maybe anything that we are working on,
quite frankly.
And so I find that encouraging because to me what that
shows is there is a real hunger for this in our society. I
think we get it now. And then there is all kinds of progress we
still need to make obviously but I have just been so encouraged
by that and I just want to thank you all for being here.
I am going to start with my fellow Buckeye grad, Mr. Guzzo.
I see from your testimony that you are a fellow Buckeye grad
and you laid out Mercer's four-pronged approach to helping
companies implement a diversity and inclusion plan: one,
strategic development; two, creating a roadmap; three,
executing that roadmap; and four, measuring the success of the
plan.
Two questions. One, how is diversity defined in the
company? And then also, how do you measure success? What does
it look like?
Mr. Guzzo. Right. So diversity has different meanings to
some extent at different employers. It always refers to issues
of representation of people of color and women absolutely.
Other aspects of diversity, age for example, might pop up
as being really important in some employers' situations and not
others. I think a lot of companies here will face age-youth
diversity issues in the coming wave of retirement. So there are
some differences but the basic identities are always there.
And the measures of success have to do with two types of
outcomes I would offer. One is what I will call workforce
outcomes which is to say who is advancing? Who is getting their
lion's share of pay when they do well to earn it? What are the
outcomes experienced by the individual employee?
And the other would be the business outcomes. There are
indeed ways of deciphering and understanding the impact of
diversity on business results, customer satisfaction, customer
retention, dollars spent. Those are the measures.
Mr. Gonzalez of Ohio. Thank you.
And then Mr. Von Hoene, it is great to see all the effort
that Exelon is doing. Obviously, it has been a huge benefit to
the business but is also just the right thing to do.
I ran a small business prior to coming to Congress. It was
a start-up and I was so proud of what we were able to do on a
diversity and inclusion front. We were a tech company, a small
start-up competing against the Googles and Facebooks of the
world who can devote a lot of resources and energy to these
sorts of programs. As a startup sometimes it is a lot harder so
we were very intentional about what we were doing, and I think
we did a great job on that.
But I would be curious for your thoughts or anybody's
thoughts on the panel about how we can tailor what you all were
doing or what you are doing to small businesses so that we can
provide maybe guidance or a toolkit or whatever it is so that,
you know, it is not just the big companies who can focus on
this?
Mr. Von Hoene. Well, you have correctly surmised,
Congressman, that one size does not fit all and that programs
that can be implemented in a large company are not viable
programs for a smaller institution. But I think the same
general principles apply and it is a recognition of the fact
that there is a business advantage to doing so, as you
obviously did in your business.
In some ways, it would seem to me that a smaller company
that is really devoted to this issue would have some advantages
because the personal attention and the customization of the
work to enable someone to come in and feel comfortable who has
not historically been there at the company allows a sense of
warmth and a sense of receptivity that would be valuable.
But that depends on location, company, opportunities, and
the like. Note there is no blueprint for this.
Mr. Gonzalez of Ohio. Yes. What we found is it ended up
being kind of a virtuous cycle where once we started and we got
it going so that it kind of fed on itself in what was a really
positive way.
My last question, Ms. Budson, in the short time that I
have, I just want to kind of have you parse through what you
were talking about with my colleague, Mr. Hollingsworth. Can
you speak a little bit more about when women drop out of the
labor force, why is that? Just go a little bit deeper on that
if you could?
Ms. Budson. Yes, and I was talking a bit about particularly
when women leave the company.
Mr. Gonzalez of Ohio. Yes.
Ms. Budson. What we find is regardless of what reason is
either self-reported or presumed by the entity, that woman is
working for a competitor within 18 months.
Mr. Gonzalez of Ohio. Yes.
Ms. Budson. So the key is how can businesses effectively
both harness the current talent that they had where they have
already made an investment.
And note as a nation we have made an investment in
educating women; 57 percent of college students today are
female and we have this large number of women achieving MBAs.
If we can't keep that talent in the workforce we are
underleveraging an asset that in essence we have already paid
into.
And the same thing goes--
Mr. Gonzalez of Ohio. I think our time is up, but I
absolutely thank you for your feedback.
And I yield back.
Ms. Budson. Thank you.
Chairwoman Beatty. The gentlewoman from Massachusetts, Ms.
Pressley, is recognized for 5 minutes.
Ms. Pressley. Thank you, Madam Chairwoman.
And I would like to thank Chairwoman Waters for creating
this subcommittee.
And I want to thank you, Chairwoman Beatty, for your
leadership and your entire time. This is a historic happening
that this subcommittee even exists and we thank you all for
your participation today and your good work every day.
Certainly, I am biased, but Ms. Budson made great
contributions in the Massachusetts 7th and so it was wonderful
to have you here today.
The scope of my questioning, much of my line was asked
because I wanted to sort of lean in on the gender parity front
and the inclusion front, especially in light of a recent tour
at the IMF where we learned that if we were to have a more
inclusive economy and realize gender parity we could increase
the GDP by some 35 percent.
And that makes the business case, so this is both about
benevolence and justice and also the bottom line. And it is
unfortunate we have to keep making that case.
I wanted to ask, how much of that is about policies and
practices and metrics of accountability and how much of it is
simply about leadership and will?
And the other thing I wanted to ask you, Ms. Budson, is
specific to women. Are there variables outside of, since women
are not independent contractors, that we should be addressing
within the financial services industry, on-site childcare,
things like that?
Ms. Budson. Thank you, and it has been a pleasure working
on these issues together for many, many years of diversity and
inclusion. So when we look at the issue of leadership, a
tremendous amount of this is about leadership. My colleagues on
the panel have talked about how executive sponsorship can be
instrumental and that tying it to metrics, tying it to
compensation, tying it to numbers is invaluable.
And in addition, this is one of the places where justice
and good business intertwine sort of with a yield for everyone.
We will see men's and women's wages rise together when we grow
our economy.
Having this greater attachment to the labor force is
something where everyone can actually gain. And if we do it
mindfully it gives us an opportunity to provide additional jobs
in communities that haven't had them, to provide additional
promotion and opportunity for those who have been passed over
and overlooked who have earned them.
And for us to look at how we can truly compete as a nation
in what is a very global industry so that we are harnessing one
of our key advantages, which is that we have this diversity.
And to note as well that when we look at particularly
women, women are making the majority of purchasing decisions
when we are looking at banking, when we are looking at home
buying, even when we are looking at cars. And I believe the
statistic is that the largest purchasing power will be Latina
women by the time we get to about 2040.
Ms. Pressley. Okay. I am sorry. I am reclaiming my time
because I am running out here.
So you said that women leave not because they opt out but
because they get fed up. So that speaks to the retention
challenge around culture--
Ms. Budson. Yes.
Ms. Pressley. Right? Inclusion can't just be a seat at the
table. It is about the overall experience.
Ms. Budson. Yes.
Ms. Pressley. And so to that end, disproportionately the
data supports, Mr. Guzzo, bridging the diversity gap that
minorities are usually in the low level jobs. And so, one, how
do we keep them there and prevent them from being most
vulnerable to layoffs and general attrition?
And also A.I. is very heavy on my mind right now because
these will also be the folks most vulnerable to advances in
technology. So if you could speak to that? So culture,
retention and how do we protect the most vulnerable to layoffs?
So--
Mr. Guzzo. So I think--
Ms. Pressley. In some ways it is conflated.
Mr. Guzzo. You directed that to me, Congresswoman?
Ms. Pressley. Yes.
Mr. Guzzo. Great. So I think the vulnerability to layoffs
is a really terrific issue for you to raise because I do think
that there are segments of the population more vulnerable to
the challenges of new technologies, A.I., et cetera.
I don't think it is just at the entry level of work. I
think it is at the professional level as well, particularly in
financial services. So the skilled individual contributor,
right? The person with his or her MBA, person of color, et
cetera.
If there are dispersed risks of technology disruption, some
of us may be more prone or subject to those risks than others.
And I think it needs, like, we don't have data on it. I think
it is a real issue that we don't know yet the result.
In terms of I think the retention for us, one of our big
learnings is that what keeps people in the enterprise is very
local. You need to discover it in your enterprise about what is
working or not to keep the right people there.
Ms. Pressley. I am sorry, just reclaiming my time. And so
just for the record, do you believe we have insufficient data
on the Federal level in this space?
Mr. Guzzo. On the impact on the impending technology
impact?
Ms. Pressley. Yes.
Mr. Guzzo. Yes, insufficient data.
Ms. Pressley. Okay. All right.
And Ms. Budson, I will have to follow up with you offline.
It looks like I am running out, but I thank you for being here
and I have read your statement for today and I will follow up.
Thank you.
Chairwoman Beatty. Thank you.
And Ms. Budson, I hope we can note that you started first
that time so I did not have to cut you off.
The gentleman from Wisconsin, Mr. Steil, is recognized for
5 minutes.
Mr. Steil. Thank you very much, and thank you, Madam
Chairwoman, for holding today's hearing on what is a very
important topic.
I want to build on the comments that my colleague, Mr.
Gonzalez, had, in particular as it relates to small businesses.
Sometimes we hear about plans that work well for large
businesses. And larger companies with big human resource
departments and ample resources may find it sometimes easier to
incorporate some of the strategies that we have been discussing
today.
However, I want to focus in a little bit on small
businesses and how small businesses can take the strategies
that we are discussing today, how they can implement them and
also be successful.
Can you give and kind of talk about how you advise small
businesses that want to invest in diversity, and maybe start
with you, Mr. Von Hoene?
Mr. Von Hoene. Well, one of the things, we obviously run
very large businesses, but we have a number of very small
businesses who provide services, goods and services for us. And
we are very interested in diversity in that field as well as
our internal work.
So what we do in that regard is we make sure that they
understand how important this is to us, and we reward them
accordingly for being successful in that area.
So if you have done a good job in recruiting a diverse
workforce in a small business you are more likely to have favor
with Exelon in terms of rewarding work than you are if you
haven't done so.
Mr. Steil. Do you see challenges as you track that as it
relates to kind of standard deviation with a smaller sample set
in some of these smaller businesses as you are looking at how
you are identifying success?
Mr. Von Hoene. We do, but have a broad enough array of
businesses.
Mr. Steil. Okay.
Mr. Von Hoene. We have hundreds and hundreds of businesses
so we are able to be statistically, I think, accurate and
statistically meaningful in connection with looking at that.
Mr. Steil. I appreciate that. Does anybody else want to
comment on the small business side?
Mr. Verrett? And then I will come back across.
Mr. Verrett. Thank you, Congressman. We have small business
clients, start-up clients, backed by private equity and venture
capital. And it is much easier to attract a broad array of
talented individuals if, as the Congressman mentioned with his
company, you start at the beginning with a diverse workforce.
It is just much easier.
Millennials, in particular, research shows are much more
likely to work for diverse companies. They are choosing to work
for diverse companies over companies that are non-diverse, as
the most diverse generation in American history.
And in my conversations with Silicon Valley startups they
say, look, it is not our competitor down Sand Hill Road or in
San Jose. It is in China. And we have to simply get the best
talent with the best ideas to offset the next Googles and
Facebook that are likely going to come from China.
So this is about American competitiveness and building this
from the ground up as an institutional value at the board level
and at the executive level to maximize the ability to attract
that genius executive, that genius professional that might be
at an HBCU or a Latino-serving institution that might not be on
the radar of another tech company.
Mr. Steil. Thank you very much.
Ms. Trimble?
Ms. Trimble. Yes, thank you, Congressman. I think that my
colleagues are absolutely right. I think that there are
opportunities that small businesses have to be more flexible in
applying their strategies.
What I found in working and talking with Millennial workers
and Gen X is that they are looking for more flexible
environments. They are sometimes not as open to working in the
complex, larger corporate structures. So I think that there is
an opportunity to be able to bring these individuals in.
And one of the advantages that entrepreneurs have is that
they have the freedom and the flexibility to select their
leadership team and so they can start with diverse pool. And we
know that diverse people tend to hire more diverse people.
So I think that those are ways that we can maybe encourage
our small businesses to make sure that they are really living
out their values and bringing in people that reflect their
values.
And I would also agree with Mr. Von Hoene that when
corporations are doing business with these firms they need to
ask those questions and hold them accountable for making sure
that they are bringing diverse talent to represent their
interests in their supply chain.
Mr. Steil. Thank you.
Ms. Budson?
Ms. Budson. There are also many tools that small businesses
can use that have virtually little or no cost: one, building
partnerships with student organizations, talent management, and
other firms that specialize or are known to do a good job in
this area.
Two, one can also do some things internally if you don't
have a big human resource information system where once you
have been recruiting from a very diverse talent pool to de-bias
your processes, just covering the name removes a huge amount of
bias.
We like in our organization to also cover where somebody
went to school, cover motherhood or fatherhood so that we are
really just looking at those factors which are going to tell
whether or not you are going to yield the talent that you need
from the individual.
And in addition, small organizations have the ability to go
into the community in which they are located and to say this is
a value. We mean it realistically and even sometimes just
moving the interview site into the communities that you want to
deeper engage sends the signal of seriousness and partnership.
Mr. Steil. Thank you very much.
And I yield back.
Chairwoman Beatty. Thank you.
The gentleman from Texas, Mr. Green, the Chair of our
Subcommittee on Oversight and Investigations, is recognized for
5 minutes.
Mr. Green. Thank you, Madam Chairwoman, and I compliment
you and the ranking member on the fine job you are doing.
I have three areas of inquiry. The first has to do with the
performance metric that you mentioned, Mr. Verrett. I was
monitoring this in my office. You indicated that if we can tie
the acquisition of diversity to performance where is this
currently working? Can you give me some major corporations
where they are doing this?
Mr. Verrett. Congressman, I believe Exelon--
Mr. Green. Well, we have this one.
Mr. Verrett. --does this.
Mr. Green. Yes. But can you give me another? We are proud
to have them. I am just curious if you are aware of some
others?
Mr. Verrett. I believe the National Basketball Association
also ties it to that as well. There are other sports leagues
that do that. And how that is manifest is you don't have to tie
it to a specific, measurable goal per se. Most companies are
reticent to do that. The general counsel will come in and say
that is illegal, that is a quota. You can't do that.
If you tie it to the efforts made, what efforts have you
made to make sure your division has people of color and women
up for promotion? What efforts have you made to tie executive
search firms like mine to make sure they are really submitting
diverse slates of candidates?
If you force executives to actually show their efforts you
will find that most companies' executives will get in line if
their compensation is tied to it.
In some companies executive compensation can be 10 times
the base compensation. You can get a base salary of $350,000
and a bonus of $3 million. And so tying it to executive
compensation makes it measurable and make sure it is monitored.
Mr. Green. Thank you. And I think you have spoken well. I
am just curious about actual companies that are employing this
technique.
Yes, Ms. Trimble?
Ms. Trimble. Thank you, Congressman. I would like to say
that actually my previous company where I was working, our
automotive global leader, that was actually one of the ways we
were actually able to make traction is by tying it to executive
compensation and creating scorecards and dashboards for our
executive leaders so that we could monitor their progress,
measure their progress.
And frankly what I found is that there was a spirit of
competitiveness. So once we started visualizing this amongst
the leadership team, no one wanted to be at the bottom of that
list.
So those are ways that we were actually able to see
traction, to actually get progress is when we implemented a
formal scorecard they were held accountable to and tied it to
their performance metrics.
Mr. Green. Next area, you mentioned the NBA and
professional sports they do require that the talent pool, the
final three, perhaps, will have at least one person who would
represent diversity in it. How successful is this in business?
Yes?
Mr. Verrett. I would just say as somebody who was the
keeper of the Rooney Rule at the NFL, the Rooney Rule is an
extraordinarily effective tool to get diversity moving in your
organization. But it is not a complete solution.
It is part of a series of solutions. A better solution
related to that is to make sure that you have diversity on the
interview team to make sure that bias doesn't creep into the
questions, bias doesn't creep into the order in which
candidates are interviewed, into archetyping about what the
ideal candidate is, which might have a bias of gender or race
or age or orientation subtly built into it.
So the Rooney Rule is effective and many of our clients are
utilizing the Rooney Rule to make sure they have diversity. But
I also think we should be mindful. Research shows that if you
only have one person of color or one woman on the slate, the
research shows that it is almost a guarantee that that person
is not going to get selected for the role because they become
the outlier.
So organizations are now requiring two people of color or
two women on the slate to make sure that there is sufficient--
Mr. Green. I have little time and I do want to ask this
last question.
With reference to the culture in an office, a good many
offices are concerned about bringing people in who just won't
fit into the culture, don't play poker on Friday nights, not
avid sports fanatics, if you will. How do you deal with that?
Mr. Von Hoene. Well, I think all companies, Congressman, do
have that challenge wherever they are on the diversity and
inclusion spectrum.
One of the things that I did with the people who work for
me at one point in time who were officers of the company was, I
said, let us keep track of who you go to breakfast with, who
you go to dinner with, and who you go to lunch with, and let us
look at the end of the year and see whether you have
distributed your personal sponsorship and mentorship in an
even-handed way.
So we have to do those things that try to break that, but
that is a journey that requires an enormous amount of ongoing
effort. And to the degree that we can measure our success in
that, it is very valuable.
Mr. Green. Thank you, Madam Chairwoman.
And I thank the witnesses as well.
Chairwoman Beatty. Thank you, Mr. Chairman.
I would like to thank our witnesses for their testimony
today. And without objection, I would like to enter into the
record letters from the African-American Credit Union National
Association addressed to this entire subcommittee, thanking us
for holding this important hearing. Without objection, it is so
ordered.
Additionally, I would like to enter into the record an
article by Alex Gorsky, CEO of Johnson & Johnson, and Chair of
the Business Roundtable Governance Committee. Without
objection, it is so ordered.
The Chair notes that some Members may have additional
questions for this panel, which they may wish to submit in
writing. Without objection, the hearing record will remain open
for 5 legislative days for Members to submit written questions
to these witnesses and to place their responses in the record.
Also, without objection, Members will have 5 legislative days
to submit extraneous materials to the Chair for inclusion in
the record.
This hearing is now adjourned.
[Whereupon, at 3:35 p.m., the hearing was adjourned.]
A P P E N D I X
May 1, 2019