[House Hearing, 116 Congress]
[From the U.S. Government Publishing Office]
DIVERSITY IN THE BOARDROOM:
EXAMINING PROPOSALS TO
INCREASE THE DIVERSITY
OF AMERICA'S BOARDS
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HEARING
BEFORE THE
COMMITTEE ON FINANCIAL SERVICES
U.S. HOUSE OF REPRESENTATIVES
ONE HUNDRED SIXTEENTH CONGRESS
FIRST SESSION
__________
JUNE 20, 2019
__________
Printed for the use of the Committee on Financial Services
Serial No. 116-33
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]
__________
U.S. GOVERNMENT PUBLISHING OFFICE
39-494 PDF WASHINGTON : 2020
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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
C O N T E N T S
----------
Page
Hearing held on:
June 20, 2019................................................ 1
Appendix:
June 20, 2019................................................ 53
WITNESSES
Thursday, June 20, 2019
Akutagawa, Linda, President and CEO, Leadership Education for
Asian Pacifics (LEAP) and Chair, Alliance for Board Diversity.. 9
Creary, Stephanie J., Assistant Professor of Management, The
Wharton School of the University of Pennsylvania............... 12
Gurkin, Chelsa, Acting Director, Education, Workforce, and Income
Security, U.S. Government Accountability Office (GAO).......... 4
Lumbra, Ron, Managing Partner, Centers of Excellence, and
Partner, CEO & Board Practice, Heidrick & Struggles............ 7
Martinez, Ambassador Vilma (Ret.), on behalf of the Latino
Corporate Directors Association (LCDA)......................... 11
Visconti, Luke, Founder and Chairman, DiversityInc............... 6
APPENDIX
Prepared statements:
Akutagawa, Linda............................................. 54
Creary, Stephanie J.......................................... 57
Gurkin, Chelsa............................................... 64
Lumbra, Ron.................................................. 86
Martinez, Ambassador Vilma................................... 89
Visconti, Luke............................................... 94
Additional Material Submitted for the Record
Waters, Hon. Maxine:
Written statement of Catalyst................................ 96
Written statement of DiverseForce............................ 97
Written statement of The Executive Leadership Council........ 100
Written statement of the National Bankers Association........ 103
DIVERSITY IN THE BOARDROOM:
EXAMINING PROPOSALS TO
INCREASE THE DIVERSITY
OF AMERICA'S BOARDS
----------
Thursday, June 20, 2019
U.S. House of Representatives,
Committee on Financial Services,
Washington, D.C.
The committee met, pursuant to notice, at 10:06 a.m., in
room 2128, Rayburn House Office Building, Hon. Maxine Waters
[chairwoman of the committee] presiding.
Members present: Representatives Waters, Maloney, Sherman,
Meeks, Clay, Scott, Green, Cleaver, Perlmutter, Foster, Beatty,
Vargas, Gottheimer, Tlaib, Axne, Casten, Ocasio-Cortez, Adams,
Dean, Garcia of Illinois, Garcia of Texas, Phillips; McHenry,
Wagner, Lucas, Posey, Luetkemeyer, Huizenga, Duffy, Stivers,
Barr, Tipton, Williams, Hill, Loudermilk, Mooney, Davidson,
Kustoff, Hollingsworth, Gonzalez of Ohio, Rose, Steil, Gooden,
and Riggleman.
Chairwoman Waters. The Committee on Financial Services will
come to order. Without objection, the Chair is authorized to
declare a recess of the committee at any time.
Today's hearing is entitled, ``Diversity in the Boardroom:
Examining Proposals to Increase the Diversity of America's
Boards.''
I now recognize myself for 4 minutes to give an opening
statement.
Today, this committee convenes for a hearing on the lack of
racial, ethnic, and gender diversity on Federal and corporate
boards. Strong diversity in the boardroom is critical to
continued U.S. competitiveness and to ensuring that consumers
of all backgrounds are served and not excluded.
Unfortunately, corporate and Federal boards are not living
up to their responsibility to reflect America's rich diversity.
According to the Alliance for Board Diversity, over 80 percent
of new board directors at Fortune 500 companies in 2017 were
white males.
The Federal Government also has a long way to go. For
example, our own Federal Reserve System has been in existence
since 1913, but it wasn't until 2017 that Raphael Bostic became
the very first African American and first openly gay man to
serve as a Federal Reserve Bank President.
At the same time, America continues to become more
demographically diverse. According to the 2018 census
projections, youthful minorities will be the leading source of
future workers, taxpayers, and consumers. In our May 1st
Diversity and Inclusion Subcommittee hearing entitled, ``Good
for the Bottom Line: A Review of the Business Case for
Diversity and Inclusion,'' we set the record straight that
highly inclusive companies outperform their competitors, rate
themselves 170 percent better at innovation, and generate 1.4
times more revenue.
Despite the clear benefits of inclusivity and diversity,
white males still remain in the majority of seats on corporate
and Federal boards. Women of color, in particular, have been
excluded from participation on boards, although some reports
show that the percentages of women on boards may be increasing.
The raw numbers reveal that compared to white males and white
women, African American, Asian, and Latino women still have the
fewest seats.
In order to understand these trends, we must continue to
have access to board diversity data. Diversity is one of the
best investments a company can make. Diverse boards
intentionally guide companies and industry toward business
solutions that maximize returns on that diversity investment.
Before us today are witnesses who can share perspectives on
the status of board demographics. I look forward to drilling
down on the current state of board diversity and discussing
solutions so that more women and minorities can be appointed to
board seats.
I now recognize the ranking member of the committee, the
gentleman from North Carolina, Mr. McHenry, for 2 minutes for
an opening statement.
Mr. McHenry. Thank you, Chairwoman Waters. Thank you for
your leadership on this very important issue.
I want to start by thanking the ranking member of the
Subcommittee on Diversity and Inclusion, Mrs. Wagner, for all
her work. She and her colleagues on the subcommittee have spent
a great deal of time gathering information about diversity and
inclusion in our jurisdiction. I also want to commend
Chairwoman Waters and Chairwoman Beatty for their leadership on
these issues as well.
It is extremely important to increase the diversity
inclusion of American boardrooms. Pursuing more diverse boards
is the right thing to do as a matter of economic interest for
these institutions, but there is also a good reason for
corporate leaders to prioritize diversity. Research shows that
when you have a more diverse array of inputs, you actually get
better outcomes. Wider experience and perspectives actually
lead to better decision-making and risk management.
The statistics show that women and minorities continue to
be underrepresented, though. Women and minorities only hold
approximately 38 percent of board positions at America's top
100 companies. While we have made progress, progress does not
mean we have arrived. Progress does not mean we have completed
the job. We have a lot more work to do in order to ensure that
we have diverse boardrooms and diverse decision-making at the
top level and all levels of corporate America.
We are fortunate today to have witnesses who can share the
strategies that have been effective. Nominating committees
cannot simply rely on a pile of resumes from C-suite social
networks and personal relationships. Recruiting more diverse
board members is only part of the challenge. Dr. Stephanie
Creary, who is testifying today, interviewed board directors
across a variety of industries and found that the board's
culture is also critically important. I look forward to hearing
about Dr. Creary's research today and to hearing from the
distinguished panel.
And with that, I yield back.
Chairwoman Waters. Thank you.
I now recognize the Chair of our Subcommittee on Diversity
and Inclusion, Mrs. Beatty, for 1 minute.
Mrs. Beatty. Thank you, Chairwoman Waters, for examining
diversity in the boardroom. It is simple: America's boards
should be more representative of our rich, diverse culture.
According to research, greater diversity in leadership leads to
better possibility, more financial stability, and creates
better gains for shareholders.
It is in that spirit that I am honored to have this point
of personal privilege to introduce a good friend of mine, Skip
Spriggs III, the president and CEO of the powerful Executive
Leadership Council, who is here today with his colleagues. His
organization of some 300 Fortune 1,000 companies leads the
efforts to increase the number of global black executives in C-
suites and on corporate boards. We are honored that he and his
colleagues have pledged their support to help us with this
movement.
With that, I yield back. And thank you, Madam Chairwoman.
Chairwoman Waters. Thank you very much.
I now recognize the ranking member of the Diversity and
Inclusion Subcommittee, the gentlewoman from Missouri, Mrs.
Wagner.
Mrs. Wagner. Thank you, Ranking Member McHenry, and thank
you, Chairwoman Waters, for holding this hearing today.
Chairwoman Beatty and I have been speaking with many experts
versed in these issues and are proud of the steps that
financial services leaders are taking to ensure that workforces
are more diverse and inclusive.
Many of the most successful corporations in the financial
sector and throughout the economy are proactively seeking to
improve the diversity of their workforce. It is the right thing
to do and a highly effective way to increase innovation and
profitability. Studies continue to show that diverse
corporations outperform their less diverse competitors.
We must continue to treat diversity and inclusion as
complementary, but separate, issues. Although a company may be
able to increase recruitment, it is also critically important
to focus efforts on making sure an environment is inclusive for
retention purposes. More can be done in both areas, but it is
encouraging to see that more corporations are taking on this
mission. Efforts to diversify should include entry level
positions all the way through executive and director-level
positions.
My goal today will be to identify the conditions that lead
to meaningful diversity and uncover best practices so more
companies can follow the lead of the firms that have already
been successful on this front.
I look forward to hearing about strategies for improving
diversity and inclusion, and I am proud, very proud, of this
committee for examining these very important issues. I welcome
our witnesses, one and all, and look forward to their
testimony.
I thank you, Madam Chairwoman, and I yield back the balance
of my time.
Chairwoman Waters. Thank you very much.
I would like to welcome today's distinguished panel:
Ms. Chelsa Gurkin, acting Director, Education, Workforce
and Income Security Team, U.S. Government Accountability
Office; Mr. Luke Visconti, founder and chairman, DiversityInc;
Mr. Ron Lumbra, managing partner, Heidrick and Struggles; Ms.
Linda Akutagawa, Chair, Alliance for Board Diversity;
Ambassador Vilma Martinez, who represented the United States in
Argentina from 2009 to 2013, and has served on numerous
corporate boards and public commissions; and Dr. Stephanie
Creary, assistant professor of management, Wharton School of
Business, University of Pennsylvania.
Without objection, all of your written statements will be
made a part of the record. Each of you will have 5 minutes to
summarize your testimony. When you have 1 minute remaining, a
yellow light will appear. At that time, I would ask you to wrap
up your testimony so we can be respectful of both the
witnesses' and the committee members' time.
Ms. Gurkin, you are now recognized for 5 minutes to present
your oral testimony.
STATEMENT OF CHELSA GURKIN, ACTING DIRECTOR, EDUCATION,
WORKFORCE, AND INCOME SECURITY, U.S. GOVERNMENT ACCOUNTABILITY
OFFICE (GAO)
Ms. Gurkin. Chairwoman Waters, Ranking Member McHenry, and
members of the committee, thank you for the opportunity to
share GAO's work on strategies to increase diversity on boards
of directors. Over the years, GAO has worked with the Financial
Services Committee to share information on progress for
minorities and women in the financial services industry. I look
forward to continuing to work with you and with today's
witnesses to address the challenges to increasing board
diversity and identify strategies to boost representation.
Boards of directors make decisions that affect the lives of
millions of employees and consumers, and influence the policies
and practices of the global marketplace. Research suggests that
diversity in the workplace can help organizations better
identify and address risks, provide innovative solutions to
complex problems, and enhance the quality of decision-making
and monitoring.
My statement today draws primarily from two key GAO reports
on board diversity: one of the reports examines the
representation of women on corporate boards; and the other
examines the representation of women and minorities on the
Federal Home Loan Bank boards. I will discuss the challenges we
found that contribute to fewer women and minorities on
corporate and Federal Home Loan Bank boards and the strategies
that we identified to address them.
It is well known that women and minorities have fewer seats
at the table when some of the most important decisions are
being made in corporate America. Our analysis in 2015 of
corporate boards found that while women's representation on
corporate boards had increased, it would likely take decades
before women and men had an equal number of seats in America's
boardrooms.
We also found that while the share of women on the 11
Federal Home Loan Bank boards across the country increased from
2015 to 2018, women still comprise less than one-fourth of all
of those directors. We found a similar increase in the number
of Federal Home Loan Bank Directors from minority groups,
including African American, Hispanic, and Asian, but they also
made up only a small portion of all board seats.
To understand these trends and to identify what can be done
to increase the representation of women and minorities on
boards, we spoke with industry representatives, board members,
and with other stakeholders.
We found three key barriers to increasing board diversity
and a number of strategies that could help overcome them.
First, organizations were not always prioritizing diversity in
their board recruiting efforts. Second, organizations looked to
the traditional CEO pipeline for potential board candidates,
often overlooking other talent pools of potentially qualified
directors. And third, few board seats open up each year.
For each of these three broad challenges, we identified a
number of strategies that could address them, and along the way
we heard from industry representatives and others that there
was no silver bullet, no one-size-fits-all solution to these
challenges.
They said boards should pursue diversity using whichever
strategies best suit their organization. While industry
officials we spoke with generally agreed on the potential
benefits of having more diverse boards, they also identified
some advantages and disadvantages to the specific strategies
discussed today. However, despite the strategy employed,
stakeholders generally agreed that without an intentional and
deliberate commitment to increasing diversity, increased
representation on boards would remain slow.
Among the strategies we identified was that boards could
prioritize diversity by requiring a diverse slate of candidates
any time a board position became available, for example, a
slate would have to include a number of women for
consideration. Boards could look beyond their traditional CEO
candidates and recruit talent from other senior level
positions, for example, accounting or legal executives or from
other institutions like academia. And boards could consider
increasing their size, either permanently or temporarily, to
overlap with long-tenured board members or as a tool for
succession planning and to create more opportunities for women
and minorities to join.
Many stakeholders we interviewed supported improving
disclosure requirements to include more specific information on
board diversity. These disclosures not only increased the
transparency, but they demonstrated the board's commitment to
diversity to their investors and to the public.
I look forward to further discussing strategies to increase
board diversity. This concludes my remarks, and I look forward
to your questions.
[The prepared statement of Ms. Gurkin can be found on page
64 of the appendix.]
Chairwoman Waters. Thank you.
Mr. Visconti, you are now recognized for 5 minutes to
present your oral testimony.
STATEMENT OF LUKE VISCONTI, FOUNDER AND CHAIRMAN, DIVERSITYINC
Mr. Visconti. Good morning, Chairwoman Waters, Ranking
Member McHenry, and distinguished members of the committee.
Thank you for inviting me to testify. I am Luke Visconti,
founder and chairman of DiversityInc. I stepped aside as CEO on
May 7th of this year. Carolynn Johnson, our CEO, asked me to
provide today's testimony. She is with us here today.
DiversityInc is a business publication dedicated to the
business benefits of diversity. The cornerstone of our
publication is the annual top 50 companies for diversity
competition.
Diversity is commonly seen as an issue concerning everyone
but white men. This is erroneous. Diversity is a concern of
every American, because our destiny is shared by all. Professor
Steve Phillips, author of, ``Brown is the New White'', recently
wrote that, ``There are 7,000 more people of color added to the
U.S. population every single day as compared to just 1,000
whites through a combination of birth, deaths, and legal
immigration.''
From a business perspective, diversity is an issue of
profitability, ethical corporate governance, and, for publicly
traded companies, return on equity. It is not an issue for the
future; it is an urgent issue of today.
A lack of diversity on corporate boards of directors is an
ongoing and persistent problem across all industries, but in
the banking industry, it has an especially deleterious effect
on our country, holding back our national GDP by denying equal
access to finance, and as a result of poor workforce diversity,
thwarting innovation and the talent needed to compete.
We have been conducting our top 50 competition for 18
years. It is voluntary and open to any company with more than
1,000 employees. There is no cost to compete and results have
no association with business conducted with our company.
Thousands of companies look at our survey every year, and
hundreds complete it. The survey takes a deep look at human
capital performance and governance, including supplier
diversity. The survey has 1,200 fields of data, including
boards of directors, top four levels of management, total
management, total workforce, and management best practices
statistically associated with superior human capital results.
There are 5 banks on our 2019 top 50 list: Wells Fargo at
13; TD Bank at 19; Key Bank at 36; HSBC at 40; and U.S. Bank at
46. We do not disclose the companies who compete but do not
rank; however, we do not provide anonymity to companies who
choose not to compete. Wells Fargo and TD are the only top 10
largest banks in the U.S. that compete for a spot in the top
50; JPMorgan Chase, Bank of America, Citigroup, Goldman Sachs,
Morgan Stanley, PNC, and Capital One do not fill out a survey
or bother to compete. In contrast, heavily regulated companies
such as AT&T, EY, PwC, Comcast, Abbott, Eli Lilly, Mastercard,
and TIAA are all in the top 15 of our list.
On the boards of the 10 largest U.S. banks, 30 percent of
the directors are women and 22 percent are not white. This is
better than the average for Fortune 500 companies, which is 16
percent women and 23 percent not white, but far worse than the
diversity in the top 10: 30 percent women and 34 percent not
white. It is important to note, however, that for people in the
age range of directors, more than half of 4-year degrees were
earned by women, and today, more women than men earn 4-year
degrees, master's degrees, and Ph.D.s.
There are several diversity management best practices that
we have measured to be associated with superior results. The
only one appropriate for board of directors purview is an
executive diversity committee, or EDC.
In the top 10 companies on our list, 86.7 percent in the
top 10 includes 6 companies which were previously number one on
our list; 86.7 percent of the top 10 companies have a CEO
chairing the committee, and it meets monthly. And if you
consider that meetings focus on metrics-driven results and the
accountability of diversity management efforts, particularly
regarding advancement and retention of non-majority groups,
especially high-potential people, this is why they are on the
top 10 of our list. The results bear out the attention to
detail that the CEOs provide.
This would be an easy report-out to a board and,
standardized, could be included in the EEO-1 report, which
would make everybody equal in that regard in terms of
measurement. However, the board has to be competent to
understand the diversity report. Unfortunately, boards of
financial institutions are not competent in managing their own
diversity.
The progress of everyone not white and male in banking,
executive leadership, and board seats is too slow to lead to
nonaccountable techniques, in my opinion. For example, the
Rooney Rule was established in the NFL in 2003, but the NFL is
still a plantation; 88 percent of head coaches, and 97 percent
of owners are white; and only 30 percent of players are white.
Fair access to capital is an essential competitive
advantage for our country and it will remain an aspiration
until boards of directors develop the discipline to have fair
representation themselves. The lack of transparency in the
process of selecting board members and of the data in general
is a real hindrance, and I recommend that regulation be
implemented.
[The prepared statement of Mr. Visconti can be found on
page 94 of the appendix.
Chairwoman Waters. Mr. Lumbra, you are now recognized for 5
minutes to present your oral testimony.
STATEMENT OF RON LUMBRA, MANAGING PARTNER, CENTERS OF
EXCELLENCE, AND PARTNER, CEO & BOARD PRACTICE, HEIDRICK &
STRUGGLES
Mr. Lumbra. Good morning. Thank you, Chairwoman Waters,
Ranking Member McHenry, and members of the committee, for this
opportunity to speak with you today and provide remarks on this
important topic.
My name is Ron Lumbra. I am managing partner for Centers of
Excellence, and a partner in the board and CEO practice at
Heidrick & Struggles. I am in New York.
We are a global executive search firm that advises
companies around the globe on leadership, on board succession,
on leadership development, and succession. I have had the
privilege of being in the executive search business for 21
years and have had the privilege to advise boards throughout
the economy in various industries on board succession and board
recruitment.
Over this period, I have seen a number of trends emerge.
The biggest one, the most prominent one we are currently facing
is diversity in the boardroom. It is a hot topic that companies
are acting on and calling us to act on with them.
In 2019, our U.S. Board Monitor, which is a survey we do
that talks about director trends in the Fortune 500, was just
published. We saw that women last year--2018--filled 40 percent
of new board seats. That is double from a decade ago.
Minorities filled 23 percent of new board seats, up from 14
percent in 2009.
Despite the recent progress and gains, however, the total
share of minority and female directors on boards is still quite
low. According to a 2018 report from Deloitte and the Alliance
for Board Diversity, from 2010 to 2018, the percentage of women
on boards only moved from 16 to 22.5 percent. The movement of
minorities on boards only moved from 13 to 16 percent in that
nearly a decade period of time. Progress has been slow, as you
can see.
We have observed a few key obstacles that are standing in
the way of the progress of diversity on corporate boards.
First, as was mentioned previously, low turnover. Most
directors who run corporate boards serve on the board for more
than a decade. Turnover is slow.
On average, companies only add a director approximately
every 18 months. For example, in the Fortune 500, over the last
decade, in any particular year, about two-thirds of companies
would add a director, to give you a sense of the velocity of
how new directors come on corporate boards.
Second, demand for CEO experience: It is a key attribute
that boards look for. There are reasons for that. Having
strategic perspective matters, having a CEO perspective
matters. However, we understand that the pool of Fortune 500
CEOs is not a particularly diverse pool, so concentrating on
that pool, by definition, has you looking at nondiverse
populations to join corporate boards.
Third, board culture: Culture matters. Typically, boards
like to bring on people that they can get familiar with
quickly, who are often in their networks, known to them, or
easily referenced or introduced to their networks. It makes it
very difficult if those networks don't happen to be diverse.
Those are three inhibitors we see that are fairly universal
in slowing the trend of bringing diverse talent onto corporate
boards. Despite these challenges I have talked about, some
progress has been made recently, and that progress continues.
Here are some of the things that are helping.
First and foremost, board assessment. Rather than waiting
for terms to expire, for directors to retire, best-run boards
are looking carefully at their constituencies, looking at, are
we bringing the best skill set for the challenges and the
strategy the board is facing at the moment or could we do
better, and they are moving away from directors whose skill
sets no longer fit, and bringing on new contemporary directors.
Those new directors are often diverse.
In addition, the best boards expand opportunistically.
Although some boards have been shrinking in size, boards that
see great diverse talent will occasionally expand in order to
capture diverse talent and bring it on. That has been a best
practice.
Casting a wider net is a critical factor. Rather than
looking in the networks that already exist, looking at the CEO
network, looking at business unit heads, division heads, and
P&L leaders, considering people from academia, former
government officials, and former military veterans provides a
much broader, more diverse pool to look at. And best companies
are now doing that, looking at diverse pools.
Having a disciplined process-oriented approach: Being
intentional about the desire for diversity on boards. Companies
that have the discipline to follow a process and not jump at
the first person they see that they might know have more
success bringing on diversity than others. It requires
patience, and it requires discipline.
Last year, at Heidrick & Struggles, 57 percent of our board
placements--57 percent--were diverse. That tells you it can
happen. Boards can bring on diverse talent. If you cast a wide
net, are disciplined, and look in new areas, you have the
ability to do it; that has been proven. It is our belief that
that will continue. This is a passion for me.
Thank you for the opportunity to share these remarks with
you today.
[The prepared statement of Mr. Lumbra can be found on page
86 of the appendix.]
Chairwoman Waters. Thank you very much.
Ms. Akutagawa, you are now recognized for 5 minutes to
present your oral testimony.
STATEMENT OF LINDA AKUTAGAWA, PRESIDENT & CEO, LEADERSHIP
EDUCATION FOR ASIAN PACIFICS (LEAP); AND CHAIR, ALLIANCE FOR
BOARD DIVERSITY
Ms. Akutagawa. Thank you.
Chairwoman Waters, Ranking Member McHenry, and members of
the committee, thank you for the opportunity to testify before
the committee today on behalf of diversity in the boardroom.
My name is Linda Akutagawa, and it is my honor to be here
in my dual roles as president and CEO of LEAP, Leadership
Education for Asian Pacifics, a national nonprofit organization
dedicated to developing, growing, and uncapping the talent of
Asian and Pacific Islander leaders, and as the Chair of the
Alliance for Board Diversity, a collaboration of four
leadership organizations working together to increase the
representation of women and minorities on corporate boards.
LEAP, together with Catalyst, the Executive Leadership
Council, and the Hispanic Association on Corporate
Responsibility are the partner members of the Alliance for
Board Diversity (ABD), along with our adviser, Diversified
Search, and our report partner, Deloitte.
Individually, our organizations are advocates for our
communities, and we provide programming from board
preparations, sponsorship, research, and referral that is
uniquely tailored to the needs of our constituencies. Fifteen
years ago, we formed the Alliance for Board Diversity as a
means of combining our collective strengths to better address
our common goal.
There is a saying that you may be familiar with: What gets
measured gets done. Our report, ``Missing Pieces: The Board
Diversity Census of Women and Minorities on Fortune 500
Boards'', shines the spotlight on the fact-based board census
numbers to dispel misunderstandings and misconceptions. In
addition to our research, we also collectively identify and
refer diverse candidates for board opportunities because, while
the numbers tell a significant story, we know it is not enough.
From 2016 to 2018, the total number of available corporate
board seats increased by 230. That is good news. The pie is
slightly larger, and that has enabled women and minorities to
go from sharing a sliver of the pie to sharing a slice. It is
nice to have more than one bite. Before we cheer, though,
advancement does continue to be slow, and corporate boards are
still not fully reflective of the change in demographics.
In disaggregating the women and minority data, you will see
that African Americans grew fastest in the Fortune 100, Asian
Americans grew fastest in the Fortune 500, and Hispanics grew
the least overall.
I also offer this caveat for context. On the Fortune 100,
African-American women grew by what seems like a whopping 44.8
percent, but that in raw numbers was only 13 seats. For Asian-
American women, a 38.6 percent increase in the Fortune 500 and
30.8 percent growth rate in the Fortune 100 may seem like
progress, but in the Fortune 100, the raw number is really only
4 seats. For Asian Americans, the starting number was small to
begin with, so any growth will seem significant. And despite
being one of the fastest growing populations, Hispanic women
experienced the smallest number of board appointments from 2016
to 2018.
A noteworthy indicator is the recycle rate or the rate at
which individuals are serving on more than one board. The
higher the number, the more boards a person sits on. Fortune
100 boards were better at seeking out unique directors versus
recycling the same directors. African-American men, however,
had the highest recycle rate among Fortune 500 board members,
and Hispanic women have the highest recycle rates among Fortune
100 board members. Interestingly, Asian Americans have the
lowest recycle rates on both Fortune 500 and Fortune 100
boards, but remember, Asian Americans still only occupy 4
percent or less than 4 percent of total board seats.
On a closing note, there is a bright spot for optimism. In
2018, there were 35 Fortune 500 companies, up from 29 in 2016,
that had at least one director from each of the four major
racial and ethnic groups, and at least one female director.
Diversity works, it matters, but supporters, policymakers,
and advocates like us need to stay aware to ensure that we and
the boards don't get complacent. With each census, we get a
better lay of the land, we know the gaps, and where to keep
strengthening. Our great nation needs the best that all of our
diverse communities can bring to the boardrooms.
Thank you for inviting me today. I look forward to
answering any of your questions.
[The prepared statement of Ms. Akutagawa can be found on
page 54 of the appendix.]
Chairwoman Waters. Thank you, Ms. Akutagawa.
Ambassador Martinez, you are now recognized for 5 minutes
to present your oral testimony.
STATEMENT OF AMBASSADOR VILMA MARTINEZ (RET.), ON BEHALF OF THE
LATINO CORPORATE DIRECTORS ASSOCIATION (LEAP)
Ms. Martinez. Madam Chairwoman and members of the
committee, I thank you for this invitation and the opportunity
to provide the views of the Latino Corporate Directors
Association (LCDA) at today's hearing. I am Vilma Martinez. I
am pleased to present my views and the summary of LCDA's full
statement submitted to your committee.
I want to thank LCDA's Board Chair Roel Campos, founding
Chair Patricia Salas Pineda, and CEO Esther Aguilera, for their
contributions.
As you noted, I am the former U.S. Ambassador to Argentina,
the first woman to represent our country in that post. I also
had the privilege of serving as a director on the boards of
Anheuser-Busch companies, Fluor Corporation, Burlington
Northern Santa Fe Corporation, as well as Sanwa Bank
California, Bank of the West, and the U.S. Board of Shell Oil
Company.
LCDA is comprised of U.S. Latinos who serve on publicly
traded and large private company boards, along with C-suite
executives and board-qualified candidates. Our mission is to
support Latino directors, develop the next phase of Latino/
Latina directors, and increase their numbers serving on
corporate boards.
We thank you and the committee for providing a forum to
have this important conversation.
As you know, our duties as directors are to add shareholder
value and promote good governance as we strive for healthy,
sustainable, long-term corporate growth.
Today, U.S. Latinos total nearly 59 million or 18 percent
of the U.S. population and are projected to add, on average,
over 1.2 million people a year between 2017 and 2060. We
account for the vast majority of the growth in the U.S.
workforce; 74 percent of the 10.5 million workers projected to
be added to the U.S. labor force from 2010 to 2020 will be
Latino. The U.S. Latino gross domestic product is $2.13
trillion and is on a par to grow $80 billion to $90 billion a
year.
An additional good news aside: Latino entrepreneurs are
driving job creation and economic growth. There are 4 million
Latino-owned businesses that together contribute in excess of
$660 billion to the American economy.
Unfortunately, despite a strong talent pool, Latinos and
Latinas are the least represented on America's corporate
boards. Based on our analysis of new data released today on
boardroom demographics, women, racial, and ethnic groups
continue to lag, with Latinos following far behind.
As part of LCDA's and my statements, we have released a
comprehensive table based on data compiled by ISS Analytics on
board composition of S&P 1500 companies comparing the 2019
statistics to 2008. In summary, the data demonstrate that over
the last 10 years, gender diversity on corporate boards has
increased by about 11 percent, with more room to go, but at the
same time, the rate for board diversity has been much slower
for communities of color, with an increase of 3.12 percentage
points.
By all measures, Latinos and Latinas are woefully
underrepresented. In 2019, Latinos overall held only 2.28
percent of these board seats, an increase of just .56
percentage points from 2008. Latinas represented only less than
one half of a percent of board seats, and this despite the
growing body of research which has been testified to today
demonstrating the correlation between board diversity and
positive corporate financial performance.
Disclosure and transparency on the diversity composition of
boards is an important step to advance board diversity.
Disclosure of this information helps investors and shareholders
make informed investment decisions since board composition is
an important component of good corporate governance. For this
reason, LCDA endorses the Improving Corporate Governance
Through Diversity Act, which would require public companies to
disclose data based on self-identification of the racial,
ethnic, and gender composition of their boards of directors,
nominees for the boards, and corporate officers.
In summary, LCDA seeks to be a part of the solution to
close this underrepresentation gap of U.S. Latinos on corporate
boards. Ultimately, greater boardroom diversity that includes
Latinos is an integral component to accelerating the growth
potential of our U.S. companies.
LCDA and I stand ready to be a resource to help advance
these efforts. We appreciate your consideration of these views.
Thank you, again, for your consideration on this issue and the
time today.
[The prepared statement of Ambassador Martinez can be found
on page 89 of the appendix.]
Chairwoman Waters. Thank you very much, Ambassador
Martinez.
Dr. Creary, you are now recognized for 5 minutes to present
your oral testimony.
STATEMENT OF STEPHANIE J. CREARY, ASSISTANT PROFESSOR OF
MANAGEMENT, THE WHARTON SCHOOL OF THE UNIVERSITY OF
PENNSYLVANIA
Ms. Creary. Thank you, Chairwoman Waters, Ranking Member
McHenry, and members of the committee, for this opportunity to
testify today.
My name is Stephanie Creary, and I am an assistant
professor of management at the Wharton School of the University
of Pennsylvania. I will focus on sharing excerpts from an
article published on March 27, 2019, by Harvard Business
Review, highlighting some of the findings for my recent
research on corporate board diversity and board culture.
Based on interviews with 19 board directors who held seats
on 47 corporate boards in the United States, across a variety
of industries, my colleagues and I found that diversity doesn't
guarantee a better performing board and firm; rather, the
culture of the board is what can affect how well diverse boards
perform their duties and oversee their firms. Specifically, we
found that board diversity matters, but concentrating on only
one form of diversity isn't enough.
Our interviewees suggested that social diversity, for
example, gender, race, ethnicity, and age diversity, and
professional diversity are both important for increasing the
diversity of perspectives represented on the board. Many of our
interviewees suggested that their boards had made progress on
gender diversity, but not on other forms of diversity, such as
race, nationality, and age.
They also raised concerns with what they referred to as
checking-the-box initiatives and tokenism for the sake of board
diversity.
One interviewee revealed how she turned down a board
position because she felt that the interviewing board members
were not able to comment on her expertise, only on their desire
to have gender diversity on the board. She shared, ``I can
understand what it means to be a token person. I don't like
that.'' I said, ``If you think my only value is the fact that I
am a female, I can't add value to your board.''
To offset these concerns, some boards are ensuring that
skills and expertise along with demographics are front and
center in their recruiting processes. One board member shared,
``We look at diversity in a lot of different ways: experience;
age; ethnicity; and gender.''
Many boards are also broadening the range of professional
backgrounds considered for board member positions, allowing
them to attract socially diverse directors. This is easier to
achieve when boards avoid filling open seats with people
already in their personal and professional networks.
One interviewee with current boards said they are shifting
to a different approach, a process of assessment where the
board periodically looks at the skill sets that they would
ideally want on the board, given the business the firm is in,
and then the skill sets that are represented on the board and
then identifying any missing. So as long as they are going to
look for a new board member, they use it as an opportunity to
build diversity.
It is also important to consider recruiting from outside of
the CEO and CFO pool to increase board diversity. One
interviewee commented on how having social diversity wasn't
good enough if all board members were former CEOs or CFOs. She
said, ``Having board members that come from a different
background is really good, such as chief information, chief
technology, and chief human resource officers.''
My colleagues and I also found that diversity doesn't
matter as much on boards where members' perspectives are not
regularly elicited or valued.
Some boards are more hierarchical in their communication
orientation while others are more egalitarian. These dynamics
appear to shape whether diversity on the board actually matters
to the board's work. On more hierarchical boards, the CEO,
chairman, or lead independent director tends to dominate board
meetings. In contrast, more egalitarian boards have a more
collegial board culture.
One interviewee explained that their collegial board
culture resulted from information being shared openly with
little back channeling or meeting outside of the formal meeting
to raise concerns.
Collegial boards are more likely to accept and integrate
differences of opinion. Members of these boards believe that
both their expertise and willingness to learn is recognized and
incorporated into the board's work.
Interestingly, several interviewees told us that boards
that value open communication are more likely to engage in
conversations about diversity. One interviewee commented on how
longer-term board members still struggled to understand the
value of diversity. Another explained raising issues around
diversity in the leadership pipeline and his desire to make
this a higher board priority. He said, ``One of our board
members who is African American came up to me after I raised
this issue and said, `Thank you for bringing this topic up,
because I brought it up years ago, not so delicately, and
nothing ever happened. Maybe if we get more of us board members
looking at this issue, it will move the needle.'''
In closing, it is clear from this research that the
benefits of having a socially and professionally diverse board
cannot be realized without an egalitarian board culture where
different perspectives are regularly elicited and integrated
into the board's work. Therefore, I encourage the committee to
consider, not only how to increase board diversity, but also
how to create more inclusive boards.
I thank the committee for considering these important
issues.
[The prepared statement of Dr. Creary can be found on page
57 of the appendix.]
Chairwoman Waters. Thank you very much.
I now recognize myself for questions.
The first thing that I would like to talk about or the
question I would like to ask is about what we hear so much
about from corporations and Federal agencies, that they are
taking steps to expand their recruitment efforts more deeply
into diverse communities, such as Historically Black Colleges
and Universities (HBCUs) and affinity groups. We also know that
the talent is out there, but these efforts alone may not be
enough.
Can any of you, starting with Ms. Gurkin and going right,
in the few minutes that we have, tell me what you think can be
done to improve recruitment, because we hear so much, ``Well,
we are interested but we can't find the talent.''
Ms. Gurkin, have you heard that?
Ms. Gurkin. Yes. That was actually one of the key
challenges that we heard was that board members relied on their
personal networks or on the CEO position to identify new
talent. Some of the strategies that we heard from our industry
stakeholders, however, were that there were a lot of potential
talented board members out there, if they were willing to look
in other professions. Someone mentioned the chief human
resources officer or in the chief technology or even looking at
supply chain logistics experts who are retired military.
Chairwoman Waters. Okay. Mr. Visconti, what about you? What
can be done to dispel this argument that, ``We can't find any
of them?''
Mr. Visconti. Well, the talent hasn't been treated very
well in corporate America. It has failed to be promoted and
recognized to reach the levels where people are considered for
boards of directors. So, we have to look a little bit lower
than what is traditionally in terms of hierarchy, in terms of
where we normally select board members. They are there. There
is plenty of talent. It has to be looked at differently.
Chairwoman Waters. Thank you.
Dr. Creary, do you have any thoughts about that?
Ms. Creary. Yes. I think one of the biggest issues that we
found was that there weren't established criteria, other than
needing a CEO or a CFO, in order to take a board position or in
order to recruit for a board position. And when prompted, there
wasn't consensus around why a CEO or CFO was actually needed,
and there is a long history of research established both in
academia and in the practical sector that the criteria are too
narrow and they are not necessarily objective.
So, I think by focusing on what are the criteria, some of
these issues around who is talented and who should be
represented will go away.
Chairwoman Waters. Mr. Lumbra?
Mr. Lumbra. A disciplined process works very well. Defining
what a board truly needs in terms of the skill set and then
having the discipline to look for that kind of person will
often yield diverse results, rather than someone who is already
known and easy to find.
Chairwoman Waters. Ms. Akutagawa?
Ms. Akutagawa. I am going to add that looking to some of
the nontraditional sources for potential candidates is another
opportunity to expand that or cast that wider net. I think that
there are organizations like the Alliance for Board Diversity
members who do have access to a wide array of very qualified
diverse leaders who can step up into these board roles.
Chairwoman Waters. Ambassador Martinez?
Ms. Martinez. Yes. If I could just reiterate some of the
comments that were already made, such as require a diverse
slate of candidates. The board assessment process that Mr.
Lumbra spoke about is very effective in articulating what this
particular board might need at any point in time and casting
that wide net beyond the friends of people already on corporate
boards.
Chairwoman Waters. Thank you. It seems that we can find
qualified people serving as presidents of colleges and
universities, and we seem to have more minorities who have
achieved that level of representation. So, why aren't we
getting more from colleges and universities? Mr. Lumbra?
Mr. Lumbra. I had the privilege of co-heading a
presidential search committee for a university president
recently, and I was stunned at the amount of diversity that
showed up in the candidate pool. There are truly numbers of
diverse talent in academia.
I think one of the challenges and one of the differences
between that world and the corporate world is demand on campus.
In the campus community, there is a demand, a natural, latent
demand for diversity, so it is top of mind. No one needs to be
convinced of that, and that was apparent. It is a little
different in the corporate world. The intentionality in the
corporate world needs to be more disciplined and planful.
Chairwoman Waters. Mr. Visconti?
Mr. Visconti. Discipline is key, and right now, the process
is not disciplined. And if it were disciplined, you would see
different results. There is an acceptance of the bad results
over and over and over again, which is why I think regulation
needs to be put in place.
Chairwoman Waters. So, this is an area that you think we
can all do more in, in making sure that we develop databases,
that we are able to identify people, refer people, et cetera.
All right. Thank you very much.
The gentleman from North Carolina, Ranking Member McHenry,
is recognized for 5 minutes.
Mr. McHenry. Dr. Creary, your research goes a level deeper
than race, ethnicity, and gender, right? What is the practical
effect? The discussion here in Congress is largely about that.
Your research is a level deeper, which is simply--is that
having a threshold question of diversity is only one layer of
this conversation, not that it is meaningless or more
meaningful, but that it is a separate question. But then, it is
a practical effect.
Having a diverse board does not actually mean you have
diverse thought when you have those metrics of diversity. What
you are saying is, they could all be former CFOs and CEOs,
which actually doesn't give you a diversity of experience
either.
Go that next level deeper about what you do for a board to
ensure that there is that openness. You said ``egalitarian'',
but you get in and you say, I can actually share my perspective
without it being a meaningful relationship, not a brittle
relationship, so you can go in and have a strong perspective
and you get a better outcome from that.
Walk me through that, because this is a much deeper layer
than the conversation that we have been accustomed to.
Ms. Creary. Yes. Thank you. I think the first place to
start is what makes a high-functioning or an effective board.
What my research has shown is that effective boards are boards
where the members are actually utilized for the skill sets for
which they are recruited. But what we see time and time again
is the person who is in the lead, whether that is the
chairperson, the CEO, or the lead director, is dominating the
board meeting, so the other 6, 7, 8, 9, 10 board members are
actually not contributing much to what we think might be
happening.
If you start with that as the crux of the issue, then we
add diversity on top of that. You can add any form of
diversity: professional diversity; race; or gender ethnicity.
If that board is not eliciting any perspectives, it is not
going to matter. So, the issue becomes changing board dynamics
so that it actually utilizes the expertise of the people on the
board.
The issue of which type of diversity is helpful is, I
think, an issue that many of the boards aren't wrestling with
so much as much as they want to begin to understand whether
diversity actually can help. They recognize that different
types of diversity may play different roles. So, race,
ethnicity, and gender, social forms of diversity, help to
connect to a wider market base. It is representative of the
people in the economy.
A professionally diverse board can bring different ideas
about how the strategy should unfold in the company, so those
are the complexities that we are wrestling with.
Mr. McHenry. But you also get into this really--more of the
behavioral piece, which is, you have a diverse board on paper,
but they are not functionally diverse, right? Meaning, you go
in, the Chair dominates the board, and it doesn't matter that
you have these metrics of diversity because you may not have
diversity of thought or a willingness to actually, say, object,
right? So, that is a deeper level of conversation.
Let me ask this question, within your research, is there a
threshold by which people are more willing to speak up?
Meaning, I have seen in other research, other behavioral
research that simply having a woman in the meeting with 15
other men actually doesn't mean that you have an empowered
woman. There is a threshold question here by which you then
have women willing to speak up, as an example. Is that
consistent with your research on boards?
Ms. Creary. Yes. I would say there is the side of the
equation that is about if we have a critical mass of people who
are willing to push on the chairman, the CEO, or the lead
director, then voices will be heard. But in all actuality, it
really is the competency and the willingness of that person in
the lead seat to actually ask people what it is that they
believe.
Even if there is only one woman or one African American on
the board, if we actually have a chairperson who goes around
the table and elicits perspectives, that one voice can be
powerful.
Mr. McHenry. Right. So, recruiting based off of race and
ethnicity alone is not sufficient for empowered boards. We need
to have diverse candidates who are well-qualified, and diverse
and diverse thoughts, diverse experience, and it is a
multilayered effect, is one of the takeaways.
Ms. Creary. Certainly. Board dynamics are critical.
Mr. McHenry. A part of the takeaway?
Ms. Creary. Yes.
Mr. McHenry. Thank you.
Chairwoman Waters. The gentlewoman from New York, Mrs.
Maloney, who is also the Chair of our Subcommittee on Investor
Protection, Entrepreneurship, and Capital Markets, is
recognized for 5 minutes.
Mrs. Maloney. Thank you so much, Madam Chairwoman.
I thank you and the ranking member and all of the panelists
today for holding this important hearing which will address a
bill, H.R. 3279, which I have introduced for the past several
Congresses, the Diversity in Corporate Leadership Act.
Back in 2015, I asked the Government Accountability Office
to look at the gender makeup of corporate boards, and the
result of this study convinced me that we need to do much, much
more. Women make up 47 percent of the workforce in America, yet
they hold only 21 percent of board seats at S&P 500 companies.
The most startling finding in the GAO report was how long
they project it will take to achieve gender parity on corporate
boards. They found that even if we assume that equal
proportions of women and men started joining boards right now,
it would take more than 40 years for there to be an equal
number. Clearly, something needs to change.
And let's be clear, increasing diversity on corporate
boards is not just a social issue; studies show that it is
very, very good for business.
Study after study has shown that companies with greater
gender, racial, and ethnic diversity on the boards outperform
other companies financially. McKenzie found that companies with
the highest racial diversity on their boards were 33 percent
more likely to have above-average profits. And a study by
Credit Suisse found that companies with at least one woman on
the board, just one, outperformed their competitors by at least
3.5 percent a year for the last decade.
With these kinds of numbers, investors actually want the
companies they invest in to increase the diversity of their
boards. And, actually, I introduced the legislation and the GAO
study at the request of investors, pension fund investors, and
others who want to know this information because their clients
say that they want to invest in diverse boards.
My bill would help investors accomplish this by requiring
public companies to report the gender, racial, and ethnic
composition of their boards in their annual proxy statements.
The GAO found that this one very simple metric is actually
very, very important to investors. And by putting this
information in one place that is easily accessible without
requiring them to go look at pictures of board members or guess
the gender, race, or ethnicity of board members based on their
names, the bill would enable investors to quickly sort the
companies that do and do not have diverse boards.
And my bill would also establish a diversity advisory group
at the SEC which would support best strategies, best practices
to increase gender, racial, and ethnic diversity on corporate
boards annually.
My bill would not be burdensome on companies. I worked
closely with the business community on this bill, and it is
supported, actually, by the U.S. Chamber of Commerce and many
other businesses. I would like to put in the record letters
from the Chamber of Commerce, CalPERS--without objection--
Catalyst, and LPL Financial, just to name a few.
Chairwoman Waters. Without objection, it is so ordered.
Mrs. Maloney. I have one brief question, if I have time for
a question. I wanted to go down the line and ask all the
witnesses, do you think requiring companies to disclose the
gender, racial, and ethnic diversity of their boards to their
investors every year would help investors make more informed
and better decisions and would enable investors to put more
pressure on companies to improve the diversity of their boards?
Because of time, just a yes or no answer and submit in
writing any other ideas you have on this question.
First, Ms. Gurkin, yes or no?
Ms. Gurkin. Yes.
Mrs. Maloney. Okay. Mr. Visconti?
Mr. Visconti. Yes.
Mrs. Maloney. Mr. Lumbra?
Mr. Lumbra. Yes.
Mrs. Maloney. Ms. Akutagawa?
Ms. Akutagawa. Yes and yes.
Mrs. Maloney. Yes and yes. Okay.
Ms. Martinez?
Ms. Martinez. Yes.
Mrs. Maloney. And, Dr. Creary?
Ms. Creary. Yes.
Mrs. Maloney. Well, I think it is unanimous. We need to
pass this legislation. We need to get more diverse boards. It
is good for the economy, it is good for the country, and it is
the right thing to do. It has taken us a long time to get to
this point.
And I want to congratulate the chairwoman for having a
hearing on this important issue. I have been trying for well
over 10 years to get a hearing on this issue. Thank you.
Chairwoman Waters. Thank you very much.
The gentlewoman from Missouri, Mrs. Wagner, is recognized
for 5 minutes.
Mrs. Wagner. Thank you, Madam Chairwoman.
Dr. Creary--and by the way, I am just overwhelmed by your
expertise and the research that you have done--found that
diversity in the boardroom leads to better outcomes when the
board's cultures, as we have been talking about, is such that
all, all directors, in fact starting at the top, are empowered
to engage and apply their experiences.
In her study, she states that--and I want to quote this,
because I found this to be something that I just totally agreed
with: ``To make diverse boards more effective, boards need to
have a more egalitarian culture, one that elevates different
voices, integrates contrasting insights, and welcomes
conversations about diversity, welcomes conversations,
encourages conversations about diversity.''
I couldn't agree more, Dr. Creary.
Dr. Creary has also identified numerous companies that have
broadened their candidate pool to increase boardroom diversity
and enjoyed all the advantages that come with a diverse board.
Dr. Creary, we have seen laws enacted in other countries,
such as Norway, Spain, France and Iceland, that require--
require--that women comprise at least 40 percent of boards at
publicly listed companies. Can you describe the effects of some
of those laws with respect to the culture of the board?
Ms. Creary. That is unclear. We have had quite a few
studies in both academia and the practical arena looking just
at the direct relationship between diversity and performance.
What we have not been doing, which is what my study hopes to
contribute, is examining what is actually going on in the
boardroom to help us understand whether, and under what
conditions, the diversity might matter.
It is still an open question as to what getting us to 40
percent women actually does to change the board's ability to do
the work that it does.
Mrs. Wagner. In your research, can you tell yet? Do you
believe that these laws have created an environment where
diversity of ideas can flourish, or is that unclear yet?
Ms. Creary. It is unclear, because what we haven't
accounted for is the type of board. The reason why in the
research we specify hierarchical versus egalitarian is because
it gives us one dimension to think about.
The idea would be, if we are looking at egalitarian boards
that are 40 percent diverse in some capacity, we would imagine
that those would be the boards that would actually be
performing better and contributing to firm performance. But
because we don't know whether these are hierarchical or
egalitarian, we can't measure that, it is hard to make sense of
the findings.
Mrs. Wagner. What policy initiatives can we develop to
bring greater transparency into women and minorities being
represented on corporate boards while not creating a burdensome
and costly disclosure process?
Ms. Creary. While I think it is important to make the
numbers known, because any time we can acknowledge that there,
in fact, is an issue, it actually motivates people to begin to
solve it, I think we have to continue to dig deeper.
From my perspective as an academic, it is hard for me to
speak as to what policies, particularly at the governmental
level, might be helpful, but I can speak to what policies at
the board level might be helpful. And that is actually for the
board to implement policies that speak to utilizing the skill
sets that are there. How do they begin to engage? How do you
use your board members most effectively, is really the
important issue here.
Mrs. Wagner. How can companies cast a wider net to identify
applicants with diverse backgrounds and experiences, do you
think?
Ms. Creary. From my research, the issue is not that there
aren't resources. There are many organizations. We have heard
about the Executive Leadership Council. Another group that I am
familiar with is The Athena Alliance based out of California
that looks at gender diversity, and certainly companies that
are represented here. The issue is not that there aren't pools;
the issue is actually the board directors who are selecting the
nomination and governance committees and vetting the board
members.
Mrs. Wagner. And this is something that I want to delve a
little deeper into, because we have heard some testimony with
regard to this idea about those that are interviewing and
things. Would having gender, racially, or ethnically diverse
interviewers lead to a more successful recruiting process? We
have heard about how we need to have candidates who are
diverse, but it seemed like a lot of the testimony we received
said that interviewers have to have that culture and be diverse
in their backgrounds and expertise.
Ms. Creary. There is evidence, based on recruitment for
other positions in companies, that having a recruiter who is
somewhat similar in some dimension is important.
Mrs. Wagner. I think I am out of time. Anything else that
you could send us in that regard, I would very much appreciate.
Thank you, Dr. Creary.
And thank you, Madam Chairwoman.
Chairwoman Waters. Thank you very much. The gentleman from
New York, Mr. Meeks, who is also the Chair of our Subcommittee
on Consumer Protection and Financial Institutions, is now
recognized for 5 minutes.
Mr. Meeks. Thank you, Madam Chairwoman. And first, I want
to thank you for your visionary work in making sure that in
this Congress, we have a Diversity and Inclusion Subcommittee.
It is tremendous work and vision on your part, and I want to
thank you very much for doing that.
I also want to thank Chairwoman Beatty, who has been
extraordinary as the Chair of the subcommittee, and the
individuals who come before that subcommittee. I hear
everywhere when they come before that subcommittee, the kinds
of questions and how she is holding people accountable to try
to make sure that we have diversity in our corporate boards. It
is extraordinary at this time that that is happening, and it is
because of your leadership, and I want to thank you for that.
Let me also thank these witnesses. I have been sitting here
listening to you intently. You all are tremendous. Many of the
questions that I initially was going to articulate or ask, you
have covered in your statements. And it is tremendous. And even
with the ranking member of the subcommittee, Mrs. Wagner, and
the ranking member of the Full Committee, Mr. McHenry, it just
seems that we really need to get at this question of board
diversity to make our corporate America reflect our country.
And it makes us all better. It is better for business, and it
is how to do that.
And my colleague from New York, Mrs. Maloney, who has a
bill and I have a bill; it just shows how we are trying to move
in the right direction to get things done. It is tremendous.
And so let me ask, because one of the things--you all
touched on it, because one of the things that concerned me all
the time is the number of folks who get on a board, it seems to
me, particularly, I think, with African-American males, you get
one and you put that one on every board, and then you say you
have met your requirement because you have that one person who
is on several different boards. And everybody on all of those
boards are scoring that one person as their diverse candidate,
to show that they have diversity on their board.
I am trying to figure out, as far as best practices are
concerned, what do we do to defeat that? One of the things that
we were thinking about and I know I had in my bill was to have
the Director of the Office of Minority and Women Inclusion
(OMWI) publish, the SEC to publish every 3 years best practices
for compliance with disclosure requirements, and also to have
OMWI at the SEC establish an advisory council that includes
issuers and investors to advise on best practices. What do we
do? How do we do it so that we can try to eliminate that? I
will start with Mr. Visconti.
Mr. Visconti. I think if you looked at Congresswoman
Maloney's bill and you think about what committees those board
members are on--and anybody who has been on a nonprofit board
or a board knows that if you are on governance, if you are on
the important committees, compensation, you don't have time to
serve on many boards. You have time to serve on one or two.
I think identification of who is on what committees in
these boards will have its own factor in limiting the number of
people who are counted on several boards.
Mr. Meeks. And with that same question, let me go to Mr.
Lumbra. Do you want to add anything to that?
Mr. Lumbra. Representative Meeks, I am happy you raised the
issue, because I am a little surprised it hasn't come up yet in
the conversation. There is a strong preference for experienced
directors. First-time directors, regardless of race, regardless
of gender, have a difficult time coming on boards, because
there is a preference for people who have been there and done
that.
There is a theme in the room about how best boards are run:
Egalitarian, inclusive. There is a developmental part of that.
We talked about assessment and effectiveness. Having boards
that think about, how do I bring on a first-time director and
mentor that person, teach them how to be a director, et cetera,
that is a really important part of the solution to both casting
the wide net as well as getting people on the board and making
them successful. So, that first-time director issue is the one
that you have hit on very clearly.
Mr. Meeks. And one of the things that you mentioned too
and, people talk about is it seems as though at times the only
folks that they want on a board is a CEO or a former CEO as
opposed to other individuals who might have come from the field
of technology or others. Even when I think HR, some HR
executives sometimes can be the person, because they understand
the industries and how you can have better folks in there.
Dr. Creary, in the limited time I have, can you comment on
that?
Ms. Creary. Yes. I think we actually do see today--I
believe Bed Bath & Beyond is one company that recently
overhauled its board and actually does have representatives
from some of these more diverse professional backgrounds on it.
So, there is a move to move in that direction, to expand the
capacity of boards to do their work by recruiting people who
are from, for example, HR and academia. It just hasn't happened
to the extent that we would like to see.
Mr. Meeks. Thank you.
Chairwoman Waters. The gentleman from Oklahoma, Mr. Lucas,
is recognized for 5 minutes.
Mr. Lucas. Thank you, Madam Chairwoman, and I thank you and
the ranking member for holding this hearing today.
In one of my other roles in this body in Congress, I am
ranking member of the Science, Space, and Technology Committee.
And we held a hearing on promoting a diverse workforce in the
science/engineering/mathematics fields. We highlighted the lack
of diversity in many STEM fields and how it prohibits the
United States from reaching its full economic potential and
hinders American competitiveness. It would seem that the same
can be said for the lack of diversity in our corporate boards.
My first question is to Ms. Gurkin. In your written
testimony, GAO identifies strategies that stakeholders and
corporate boards are currently implementing to increase
diversity. Can you elaborate on how some companies are taking
steps to prioritize diversity, particularly diversifying that
pool of candidates?
Ms. Gurkin. I think one of the common themes that we heard
from all of the industry officials that we spoke with is that
there are a number of different strategies that can be
employed, but what is most critical is that there is a
commitment to ensuring greater representation on the board.
And so the stakeholders we spoke with talked about a lot of
different strategies in terms of looking beyond the CEO
pipeline, being in kind of a continuous recruiting system
where, as you identify great candidates, you bring them on,
even if maybe you aren't actually having an active search and
have an active opening, or expanding the number of board
positions. But the stakeholders we spoke with commented that
while there are a number of great strategies out there, it is
that commitment to diversity among the board that was the most
effective and important strategy.
Mr. Lucas. For my next question, I think I will turn to Dr.
Creary. You explain in your testimony that even though a board
is diverse, the company still may not reap the rewards that
diversity brings. Can you elaborate on that challenge for us,
please?
Ms. Creary. Yes. So, for example, we have people in my
sample who do represent that one African-American board member
who is on multiple boards, who has commented on the fact that
they have tried to raise, for example, issues of diversity, and
no one listens. That is an example of the fact that just by
increasing the diversity does not mean we are going to get to
the results that we want to, particularly if the result is to
tackle issues of diversity in the leadership pipeline.
Mr. Lucas. Lastly, I know this issue exists across
industries. As I mentioned earlier, women are underrepresented
in the engineering, science, and math fields. To anyone on the
panel, how does the diversity of the financial services
industry compare across industries, and are there any fields
that are leading in their efforts to create a more diverse
workforce? How does the financial services industry, when it
comes to board participation, compare to other boards across
different industries?
Please.
Mr. Visconti. I had a journalist who reports to me count
heads. And the financial services, the top 100 banks are
average compared to other industries. The top 10 banks are
slightly above average compared to other industries. This is a
common problem across-the-board.
Mr. Lucas. Anyone else wish to address that? Please,
Ambassador?
Ms. Martinez. Yes. I was going to add that having served on
two bank boards that were quite diverse, for foreign-owned
companies, in fact, one Japanese, the other French, and the
regulation is so intense that you actually need quite a diverse
skill set among the board directors. And it was an area where
the board directors really taught each other whatever it was
they brought to the table. I think that has had a very
beneficial impact on that industry.
Mr. Lucas. Absolutely. Anyone else?
Mr. Lumbra. To your other question, not about financial
services but broadly speaking, we are seeing more progress in
consumer. Those companies tend to be more sensitive to the
marketplace, who they are selling to, what their employee base
looks like. So, I would say they are inching ahead in terms of
this being top of mind.
Mr. Lucas. Thank you. If no one else wishes to address
that, I will yield back the balance of my time, Madam
Chairwoman.
Chairwoman Waters. Thank you very much.
The gentleman from Missouri, Mr. Cleaver, who is also the
Chair of our Subcommittee on National Security, International
Development and Monetary Policy, is recognized for 5 minutes.
Mr. Cleaver. Thank you, Madam Chairwoman. Let me express my
appreciation to you for this hearing. I was reading someplace
about criticizing somebody else and you have a plank in your
eye. The Federal Government has a bad record as well. There is
a recent article in Politico talking about the lack of
diversity in the Department of the Treasury, even at a time
when they are denying a $20 bill in the memory of Harriet
Tubman.
So, there are some components of our Federal Government
that are embarrassingly absent of any diversity. Having said
that, I am fascinated by this nation's heterogeneity, but I am
frustrated by the homogeneity of the higher ranks of
homogenized corporate America. And it is really an issue that
we have to keep up front.
I just spent some time with one of these high-tech
companies, these new high-tech companies where these
billionaires are born every 5 minutes. And I would go in and
the CEO would be 13 and the director of the production was
still in the crib and made decisions after he would suck on the
bottle. But there were no brown and black babies in the cribs
in those places.
And I think we cannot have this discussion without
discussing the ever-growing high-tech industry and a very, very
visible absence of diversity. And I am wondering if any of you
have had any views, based on the things that you are concerned
about, of what is going on in the high-tech world and how we
can impact them other than maybe starting to regulate them and
making some requirements. Any ideas on how we can pierce this
barrier that has been there with high-tech companies and the
lack of diversity?
Ms. Martinez. I would suggest that it is really important
to try to get them to link in with K through 12 educators,
because in most school districts they do have magnet schools or
similar institutions where they emphasize STEM or high-tech
fields, and there are invariably students and there are many
students of color in the public school system. So that linkage,
I think, could be made stronger. It exists in bits and pieces
here and there, but I think that is a good area to look at.
Mr. Cleaver. Yes.
Ms. Akutagawa. I also want to suggest that I think that
there are also issues around unconscious bias as well too that
is going on in a lot of these areas, especially when you look
at the leadership ranks of these high-tech companies. And I
think that despite the media's portrayal that Asian men are
overrepresented, they are overrepresented perhaps in the early
to mid-career levels, but you certainly do not see them in the
leadership ranks.
But within that, you do see then that the folks who are
making these decisions have stereotypes I think of what
constitutes a good tech worker. And oftentimes, I think that
unconscious bias leads to people not necessarily searching out
the diverse talent that is out there and is highly capable of
working in many of these high-tech companies.
Mr. Cleaver. Thank you. Yes, please?
Mr. Visconti. Sheryl Sandberg wrote, ``Lean In.'' She was
the only woman on the executive committee of Facebook. She is
still the only woman on the executive committee of Facebook 6
years later. It doesn't work. The tech industry is the worst in
this country, in my opinion, on this subject of diversity, the
worst, bar none.
Mr. Cleaver. I agree. My youngest son would point at things
and say, ``It is worser.'' And so, I agree that they are
``worser.'' But we have to figure out a way to penetrate or it
is going to get worse. Thank you.
I yield back, Madam Chairwoman.
Chairwoman Waters. Thank you very much.
The gentleman from Colorado, Mr. Tipton, is recognized for
5 minutes.
Mr. Tipton. Thank you, Madam Chairwoman, and I appreciate
your holding this hearing today.
Ms. Akutagawa, I would like to follow up a little bit on
Mr. Cleaver's comments in terms of some of the workforce
development as well in relation to board diversity. And maybe,
Dr. Creary, you would like to comment on this as well.
We have had a study that has come out from Glassdoor that
found that two-thirds of job seekers said that workplace
diversity is important to them when evaluating employers and
job offers. Another from PricewaterhouseCooper found that 61
percent of women specifically considered diversity of an
organization's leadership team in deciding where to take a job.
It is obviously clear that when people are looking for a
job, they take in some of the leadership roles, obviously, for
where they would like to actually be able to pursue, because
they see upward mobility opportunities for them.
Would you comment on the PricewaterhouseCooper's studies,
and the Glassdoor studies? How can that really play a role in
terms of helping create jobs for people and opportunities?
Ms. Akutagawa. I think if you can't see it, you sometimes
can't be it. And I think that having that diversity in and
amongst the different ranks of a company is going to be highly
important. And we are looking at a highly diverse millennial
generation who is looking for people who look like them and
want to see the opportunities that they too can become someone
who is going to be leading a company, someone who is going to
be on a board of a company. And I think with that said, there
are lots of different things that companies can continue to do,
I think, and that are being done right now.
And just for the sake of the record, I would also encourage
consideration of not just corporations, but when you look at
all employers, not only the government but also nonprofits as
well too and higher education institutions. And when you look
at the leadership ranks of those areas, also lacking in diverse
leaders as well too.
Mr. Tipton. Just to follow up on that, are you starting to
see companies starting to alter hiring practices, or is it
still a work in progress?
Ms. Akutagawa. I think it is a work in progress. And as was
said earlier, I think you have certain companies, particularly
those that are looking to serve consumers that are diverse.
They are certainly much more conscious about that. I think we
are also seeing ones in which they do need to have a really
deep talent pool, that they need to, they are forced to cast as
wide of a net. And I think that many of them are discovering
that that is what they are finding.
Mr. Tipton. Dr. Creary?
Ms. Creary. Yes, I think this is an important question.
Certainly, years of research has told us that people are
attracted to places, particularly workplaces, where the people
who are there in positions of success mirror somehow their own
experience.
It goes without saying, I think, that all of us in academia
and the government and corporate America are doing a lot of
work to make sure that our positions of power are represented
by all people who come from our country. At the same time, what
we know is that just because you are given access to the
position doesn't mean that you will stay in it. And what is
happening in corporate America in many sectors is that people
who are being recruited for diversity or for any reason are
leaving their positions. For many reasons, they are not having
the best experience.
And so I think it is important to make sure that when we
have this conversation about boards, we understand and learn
from the lessons of corporate America and all other sectors
that just concentrating on getting people in the door doesn't
mean that we won't have a revolving door.
We need to concentrate on the experiences of people in
organizations if we actually want them to stay and contribute
meaningfully.
Mr. Tipton. And would you maybe expand? We talked on this a
little bit, but some of the best strategies to be able to
expand some of that diversity that are yielding positive
results?
Ms. Creary. Yes. I think certainly, on the workforce side,
we have employers at my campus. They come and they visit and
they host different sessions for people who are, for example,
from underrepresented groups, to introduce them to the company
and to introduce them to mentors very early on.
The whole recruiting process is one that is inclusive. If
you think about it, some of these practices could actually be
used at the board level. It is a courting possess, if you will,
of helping people to understand that they can be--that that is
a good fit for them as an individual and that they could be
effective.
It is not just about, I think for many of our young people
today, particularly people at my institution, wanting to go to
an organization that is diverse. It is that diversity to them
signals opportunity and that someone like them can be
successful there. And I think it is important to keep that in
mind.
Mr. Tipton. Great. Thank you.
My time has expired, Madam Chairwoman. I yield back.
Chairwoman Waters. Thank you very much.
The gentlewoman from Ohio, Mrs. Beatty, who is also the
Chair of our Subcommittee on Diversity and Inclusion, is
recognized for 5 minutes.
Mrs. Beatty. Thank you, Chairwoman Waters. Please excuse my
voice today. And thank you to all of the witnesses.
This is an exciting and amazing day for me. As chairwoman
of the Subcommittee on Diversity and Inclusion, I want to
applaud you for your honesty and for helping us as we shape
this vision under Chairwoman Waters. We have talked about a lot
today. And what came to my mind was, and the first time I said,
I have to give credit to Skip Spriggs with the ELC, because
what he said is, ``If you fish in the same pond all the time,
you catch the same thing.''
If we are only looking for seated CEOs or COOs when we talk
about corporate leadership, putting people in the room, we need
a bigger pool.
Now, I don't think that we have heard or that there is
anything that has happened in the past that has gotten us there
100 percent or we wouldn't have Chairwoman Waters taking this
national/international leadership for everybody in this room
and everybody on both sides of the aisle to become a part of
history, because that is what is happening today.
We talked about the Rooney Rule that started in 2003. Dan
Rooney, I believe, had a great idea, and chaired the diversity
committee for the NFL, because it was a start. It at least got
people in the NFL talking about what they had not done, and yet
they were making all this money on black players. And so we got
great results, because it wasn't just putting a minority in the
interview; it was a qualified great minority of thought, of
gender, of race. And you can have diversity of thought and
environment and end up with a black person. And that is what
happened.
Chairwoman Waters mentioned Raphael Bostic, and thank you.
It was about that same time that with my legislation patterned
after the Rooney Rule, the ``Beatty Rule'', we went after the
Federal Reserve and we got Raphael Bostic.
My question is to you, Ms. Akutagawa. Can you tell me, how
does having a diverse slate of candidates positively impact the
outcome of diverse candidates fielding the position?
Ms. Akutagawa. Thanks for asking that question,
Congresswoman Beatty. One thing that I want to just bring up is
that when you have diverse board members, when you have diverse
leaders or executives, I think that there is that perspective
that they bring. And one of the things is that sometimes they
can always also recognize leadership that may not show up in
the normal way.
I think that in this country there is a prevailing
perspective of what leadership is supposed to look like, and
that if you can't see beyond it then it may be difficult to
then see someone who is diverse that they too can also--
Mrs. Beatty. To Mr. Lumbra: According to your most recent
Board Monitor report, women fill 183 of the 462 open boardroom
positions at Fortune 500 companies. However, racially diverse
candidates did not seem to get the same gains.
Was your company retained to source diverse candidates or
do you know how many diverse candidates were on the slate?
Mr. Lumbra. To be clear, do we measure the slates and the
amount of diversity on those slates?
Mrs. Beatty. Yes.
Mr. Lumbra. Indeed, we do. We made a commitment at the
beginning of this year that we would, on a global basis in the
aggregate, have diverse slates of at least 50 percent diversity
introduced to clients around the world. What we have discovered
in our business is, if you have a very small number of diverse
candidates on a slate, it is almost a very low probability
anyone will be chosen. If you have an amply diverse slate, then
the probability of a diverse candidate being selected is much,
much higher. So, we have endeavored that.
Mrs. Beatty. Thank you. I have one last question that I am
going to ask everybody to say yes or no to.
Do you see the relevancy of why many of us--and I have been
doing this ever since I have been in Congress--trying to
advocate for getting Harriet Tubman, a woman, a woman of color,
on the $20 bill? Do you see the value when we talk about
diversity and inclusion here in this Financial Services
Committee? Would you support that initiative?
We will start with you, Ms. Gurkin. It is a yes or no.
Ms. Gurkin. I don't think GAO has a position on it, but the
symbolism of women in leadership--
Mrs. Beatty. Is that a yes? Okay, we need to go. I only
have 70 seconds.
Mr. Visconti. Yes.
Mr. Lumbra. Yes.
Ms. Akutagawa. Yes.
Ms. Martinez. Yes.
Ms. Creary. Yes.
Mrs. Beatty. Thank you, and I yield back.
Chairwoman Waters. Thank you very much.
The gentleman from Arkansas, Mr. Hill, is recognized for 5
minutes.
Mr. Hill. Thank you, Chairwoman Waters. I appreciate the
opportunity to have this panel. And I agree with my friends on
the other side that this is a good day to have this very broad
and good discussion on this topic.
Over my years in business--I am 40 now. I was looking at my
college graduation notice. That is a little frightening. But in
that time, I have spent a lot of time both in public companies
and private companies over the years and have been the C-Suite
officer responsible for HR in a public company.
And then in my own business, I was reflecting on forming it
back in 1999, and we had 7 directors and 3 of those were women.
And we had an outstanding outreach across our business on
trying to recruit both employees and officers of color as well
as having diverse leadership.
This is an important issue and I have studied it really
even when I was going back to my days at the Treasury
Department in the early 1990s, working on corporate governance
issues. It led me to go to UCLA and become a certified
corporate director, and I was a long-time member of the
National Association of Corporate Directors. So, I am very
familiar with the issues we are talking about today.
And I do think this issue that Dr. Creary talks about,
which is a matter of intention, is critical. Think of the
burdens these boards have. Let's look at post Sarbanes-Oxley
corporate America. Let's say we have 11 people. We have people
saying you should have a smaller board, not a bigger board,
because it is more in line with Dr. Creary's point of view. We
can build cohesion.
So, we move a board from 15 to 11 now. We want an odd
number so we can't have an even vote split, right? Now, we are
9 to 11. One of those people has to be a financial expert,
according to the Sarbanes-Oxley Act. One is probably the CEO.
So now, we are down to 6 or 7. Mr. Lumbra testified and
Ambassador Martinez did that we don't have a lot of turnover in
those people. Ambassador Martinez herself serves on multiple--I
can't remember how many--three or four corporate boards.
Now, we are down to this turnover issue. This is a hard
job, is my point. All of the people here are working very
diligently on it. One way that I think is a good way for
corporate America to expand--and I want to thank my friend
Joseph Vaughan at the Corporate Diversity and Inclusion Forum
for helping me work on this in my district--was our HBCUs.
Alma Adams is not here, but she co-Chairs our Historically
Black College and University (HBCU) Caucus here in Congress. It
is something I have been very involved in since I was elected
to Congress. And I had an HBCU Summit in my district, and it
was all about bringing all the corporate and philanthropic
people in our district to Little Rock and to think about our
HBCUs as a very robust recruiting forum for diverse recruiting
for corporate business.
So, Mr. Lumbra, if I could start with you, obviously, you
are an expert in recruiting and retaining diverse talent, you
have been doing it for a living for 2 decades. What is your
best strategy when you recommend to your clients on that bench
strength? You have a limited number of slots. You have to build
expertise. What is your best--not employees now, but just stick
with corporate governance now. What is your best way to build
that bench that you recommend?
Mr. Lumbra. There are a couple of things. You framed up the
structure of a board really perfectly in terms of the world we
are seeing today, smaller, tighter. Every seat matters even
more. Being incredibly disciplined about what skill set do you
need in that seat really. You need CEOs on the board, but you
may not need seven of them. You need financial experts on the
board. You may need people who do business internationally or
know manufacturing or whatever the company's--
Mr. Hill. And 50 percent of the S&P 500's revenues are
international.
Mr. Lumbra. Right.
Mr. Hill. That is another diverse issue. Let's say you are
an S&P 500 company and you have 50 percent of your revenue
internationally, let's take one of our 9 to 11 slots and say it
should be somebody from abroad. We are down another slot. How
do you build those lists for IT, cyber, human resources, who
are not C-Suite people and recommend them for boards? How many
are on that list?
Mr. Lumbra. First of all, you look for multidimensionality.
You look for people who can do more than one thing. As an
example, to use your notion, someone who has grown up in a
Fortune 500, who has had international stints, who knows global
business, who may be a woman or a minority.
You get all of those things you are looking for in one
person. So, research is very, very key, and knowing that market
is critical to be able to achieve that.
Mr. Hill. We want diverse boards that reflect--we want them
with the skill sets to have the fiduciary obligations to meet
the mission of a board of directors. And we thank all of you
for your contributions to better boards.
I yield back.
Chairwoman Waters. Thank you. The gentleman from Illinois,
Mr. Garcia, is recognized for 5 minutes.
Mr. Garcia of Illinois. Thank you, Madam Chairwoman. I also
thank the Chair of the D&I Subcommittee for this hearing and,
of course, I thank all of the panelists who have testified this
morning.
Walmart is America's largest employer and, according to the
firm, 43 percent of its U.S. associates are people of color and
55 percent are women.
Is the panel aware of the racial and gender composition of
Walmart's board of directors? Let me help you. There are two
people of color and three are women. Given the makeup of
Walmart's workforce, do you believe that reforming corporate
governance laws to include worker representation boards would
dramatically increase board diversity? Any of you?
Mr. Visconti. Regulation is key. It has to be regulated. It
is not working the way it is right now. And the impact of a
company the size of Walmart on the average American is so
outsized, we have a right to be represented on their board and
in their senior management, we the people in our composition.
So, yes.
Mr. Garcia of Illinois. Anyone else? Ambassador?
Ms. Martinez. I am going to make the point that mandates
are, by definition, very hard to swallow, and I am sure you are
familiar with this phenomenon. One of the thoughts that has
been running through my head as I listen to all of you asking
questions and answering them is you have now heard from people
like us here, but what about inviting CEOs to get them to
comment on all of the recommendations that your committee has
put together and let's see what they would do with that,
because ultimately they are the decision-makers. They are going
to hire the high-driven struggles. They each have their own
board culture to deal with. And trust me, as a person who has
served on lots of corporate and nonprofit boards, every board
has its own very distinct culture.
Mr. Garcia of Illinois. Thank you. Not only do I think that
worker representation would enhance gender and racial
diversity, I also think that it would result in higher wages
for workers. Beginning in the 1970s, for example, wages for the
average American worker stopped growing in pace with worker
productivity, and corporate boards began pursuing the business
model that prioritized paying out their shareholders above all
other considerations.
Boards even began paying their executives more and more
through stock, and that led to an increase in stock buybacks,
where firms juiced their own stock price by purchasing their
own shares on the open market.
When firms adopt a shareholder-first mentality, they
neglect other considerations: long-term business growth;
research and development; and especially, worker pay.
Yesterday, I introduced the Reward Work Act, which bans
stock buybacks and requires that one-third of each public
company's board be directly elected by its own board. Research
shows that wages in countries that require worker
representation on corporate boards are 18 to 25 percent higher
than wages in the United States.
For the panel, do you agree that worker representation
would help lift wages and get companies to think beyond their
wealthiest executives and shareholders? Anyone?
If not, I would just close by noting that Walmart has
authorized to spend $20 billion on stock buybacks in 2018 and
2019. According to the Roosevelt Institute, if Walmart had
ended its stock buybacks and spent $10 billion on increasing
wages instead, one million low-wage Walmart workers would enjoy
an hourly wage increase of $5.66.
Moving to another topic, an analysis of Fortune 1000
company boards found that 75 percent of those companies did not
have a single Latino/Latina director. Ambassador Martinez, do
you have any insight into why the number of Latino/Latina
directors is declining?
Ms. Martinez. It was never very big to start with,
unfortunately. And I think, unlike other groups--I am thinking
of women's groups. The women have been very creative,
assertive, and they have developed many entry points.
And I think this new organization that I am representing
here today is an effort to correct that. Added onto the work
of, say, HACR, the Spanish Association for Corporate
Responsibility, I think this new group is going to be very
helpful in that effort.
Mr. Garcia of Illinois. Thank you.
I yield back, Madam Chairwoman.
Chairwoman Waters. Thank you.
The gentleman from Georgia, Mr. Loudermilk, is recognized
for 5 minutes.
Mr. Loudermilk. Thank you, Madam Chairwoman. Thank you all
for being here. It is a very interesting topic.
Dr. Creary, I appreciate the research you have been doing.
And from what I understand of your research, what is showing as
diversity in boards is positive, but it seems to be more so in
the diversity of ideas and perspective more than just the
demographics of race and gender, et cetera.
Does that summarize kind of what your findings have found,
is more ideas and perspective?
Ms. Creary. It is not suggesting that one form of diversity
is better than another. It is suggesting that when we think
about diversity of perspective in addition to thinking about
demographics, that is when we actually begin to see, according
to the people whom I have interviewed, positive effects.
It is hard to say. We are not doing that kind of research,
where we are saying which one is better and which one is
contributing to the effect. I want to make sure that is clear.
It is not like a horse race.
Mr. Loudermilk. But sometimes perspective can transcend
into gender or different communities, because of the needs of
different communities or the customers who are in those areas.
So, I can understand that.
One of the things that I was trying to do is to categorize
this into different industries, especially in financial
services. Georgia has a lot of fintech and payment businesses,
and we have seen a significant rise in these companies. And
some in the traditional banking industry feel somewhat
threatened by these new automated type industries. They feel
that they are going to take some of their market share in the
future, which very well could be.
And it appears to me that it is because they are bringing
in people with different ideas outside the status quo, bringing
in ideas, bringing innovation, perspective, hitting certain
customer bases that traditional banking may not be serving. Do
you feel like that is kind of what drives these industries to
innovate, is that they do go outside the status quo?
Ms. Creary. Definitely. But I think the point that you are
hitting on here is there is a level of discomfort with
diversity. And so if we are trying to explain why there isn't
diversity, it is because we have traditionalists who are
concerned about what effect that will actually have on their
firm. That is actually the issue we need to address, to help
people who are traditionalists to understand why things need to
change.
I think at the same time, it is also important to think
about the fact that diversity of thought, which is an idea that
has captured I think the minds of many people in corporate
America, is not necessarily the only piece of the story here.
When we think about what we are trying to achieve as a board or
as a company more broadly, we are actually trying to access
talent and we are actually trying to access markets. And so, we
do need different types of diversity in order to do that,
including the social forms of diversity.
What we are trying to accomplish, I think, through the
research on boards and workforce, is to put all hands on deck,
all forms of diversity on deck in order to target those two
goals around accessing the best talent so that our companies
will perform well and accessing the market so that our company
will also and our economy will perform well as well.
Mr. Loudermilk. Okay. And I appreciate that. When we look
at these boards, especially with the technology era we are in,
it seems like diversifying on the board to bring in people from
different communities than what you would traditionally see in
a banking industry or something can bring a perspective from
that particular community of needs of those customers. What can
companies do to foster this new thought of diversity, of
bringing in new ideas and perspectives?
Ms. Creary. I have an example for you. Recently, Shaquille
O'Neal, famed basketball player, was appointed to the board of
Papa John's after Papa John's had some issues with its chairman
saying a racial slur on a conference call. And I think many
were concerned about Shaquille O'Neal being on this board, what
is he going to do, not knowing that Shaquille O'Neal has been a
master investor in fast food restaurants, including 27 Five
Guys in the last several years. But he is also somebody who is
really connected to the urban community.
And I think it is that narrative that is helping people to
understand who might not at a surface level see his value that,
in fact, he actually does have business value and he actually
is connected to this community that you are actually trying to
regain or to seek out in your efforts to diversify your market
base.
Mr. Loudermilk. I see I am about out of time. It is very
fascinating. Thank you for your responses. I yield back.
Chairwoman Waters. Thank you.
The gentlewoman from Texas, Ms. Garcia, is recognized for 5
minutes.
Ms. Garcia of Texas. Thank you, Madam Chairwoman, and thank
you for bringing this topic to the table. It is one that I have
followed for years. And it is very distressing that some of the
numbers that we are seeing are not really significant
improvements. In fact, they are barely improvements.
By way of background to the panel, I served as the elected
city controller in Houston. In fact, it was my first elected
position. And one of the things that always surprised me was
that any boardroom that I was invited to, and especially
whenever I went to Wall Street for any of the pricings that we
did in our bond deals, I was faced with nice-looking white men
in dark suits and a red tie maybe, but mostly blue ties. And
there were no people who had my Spanish surname or women who
looked like me. And it seems like we have not made much
progress.
And it was really interesting to look at the handout that
you had, Ambassador, that clearly paints the picture of, while
the percentage looks like it has improved, the actual numbers
are really small.
I just wondered, what is it going to take to really get
some movement in this direction? Is it going to have to be this
legislation? Is it more legislation? What do we have to do? And
I wanted to start with you, because, as the only Latina at the
table here--and Latinas have the worst record and, of course,
all women of color have challenges in this area--what can we do
so that when we look at diversity, we look at all of it?
Ms. Martinez. I think what we need to do--and I think you
want to especially focus on Latina diversity, if I understand
your question. The Latino Corporate Directors Association is a
very new organization. I think they have a very--
Ms. Garcia of Texas. Right. My office has met with them. By
reference, I was involved with that, I said at the very
beginning. I attended one of the Harvard programs that was
there at the business school.
Ms. Martinez. Yes. What I think would be really beneficial
is for them to grow as quickly as possible and as strategically
as possible, but also to leverage the other institutions. And
certainly when it comes to women, there are catalysts. There
are women corporate directors. There are so many different
organizations. And I know that the Latino Corporate Directors
Association has some very strategic plans in its near future,
in terms of things that they have--
Ms. Garcia of Texas. But are you all getting the meetings
with the CEOs who make the decisions on that to be able to
implement the strategies, because we can have a great list of
things to do, but if we don't have the meetings to effectuate
that strategy, it might as well sit around collecting dust?
Ms. Martinez. I agree. When you look at the membership
roster, which I was just doing last night, it does seem to me
that they have the connections, if you will. And as we all know
in this room, it is all so much about connections and who do
you know and who trusts you, who is going to vouch for you, who
is going to say, ``She is not crazy, she is going to be able to
walk in and ask questions in the proper manner'', sort of
thing. That, I think, is the way for us to go at this point in
time.
Ms. Garcia of Texas. Mr. Visconti, I will follow up with
you, then. One of the things that I also saw was that there was
recruitment sometimes for some of us to sit on what they call
community advisory boards, which was really not the board. Is
that still happening? Is that just another trick that is played
with some of these numbers, or are all these numbers reflective
of full board paid memberships?
Mr. Visconti. I am not an expert in that area, but what I
will say is it is the accountability that drives home results.
So, if a CEO or chairman of the board is holding people
accountable, and firing people who cannot perform, that is when
you see the numbers change, without excuses.
Ms. Garcia of Texas. Right.
Ms. Gurkin, when folks get on these boards, are they being
pigeonholed, if you will, to serve on the committee on
community relations or the committee for--I forget what other
committee there was, but there were committees that were not
the finance committee. They are not the decision-making
committees on the major issues impacting those banks.
Ms. Gurkin. We actually didn't look at where women and
minority board directors, which committees they were on, but
one of the strategies that we actually heard was strategically
putting women and minority board members on the governance or
on the nominating board committee, to ensure that they were put
into a position of power to increase the commitment to
diversity and continue to recruit for more diverse board
members. So, it is kind of the flip side.
Ms. Garcia of Texas. All right. Thank you.
And I yield back, Madam Chairwoman. I think I am out of
time.
Chairwoman Waters. Thank you.
The gentleman from Ohio, Mr. Davidson, is recognized for 5
minutes.
Mr. Davidson. Thank you, Madam Chairwoman. I thank you all
for your devotion to this cause and your efforts to make the
public more aware about it and to inform me and my colleagues.
I want to ask something that hasn't come up yet. And I don't
know for sure if any of you are prepared from looking through
your comments to address it, but how diverse are our boards in
America compared to corporate boards around the world?
Ms. Martinez. May I address that, because--
Mr. Davidson. Please.
Ms. Martinez. --when I served as Ambassador to Argentina,
there are 500 American companies doing business there, and
there is an Argentine-American Chamber of Commerce, and I did a
lot of work with that Chamber. And it was very interesting to
me that the Argentine companies really valued the interaction
they had with the American companies; and they especially were
interested in the American companies' commitment to corporate
social responsibility, to professional development of its
employees, and they were starting to really look at board
composition.
In Argentina, I don't know if it has a law with respect to
corporate board service per se, but they do have a law with
respect to their Congress, that X percentage of the Congress
has to be women.
Mr. Davidson. Thank you for that. And that is one comment
you were quick on. And some people would talk about Europe, and
they do have a mandate in the European Union for sex and really
male and female, I believe. And here, I have I haven't heard
the word ``sex'' used a single time. I have heard ``gender.''
So if I could just go down the line, maybe starting with
Ms. Gurkin, do you differentiate between ``sex'' and
``gender?'' Just yes or no.
Ms. Gurkin. For the purposes of our work, we looked at male
and female board members.
Mr. Davidson. Mr. Visconti?
Mr. Visconti. Yes, the phrase ``gender'' is the one that is
used commonly.
Mr. Davidson. Okay. So, no differentiation. You just blur
the two.
Mr. Visconti. I haven't used the word ``sex'' to describe a
board member, so ``gender'' is the one that we use commonly.
Mr. Davidson. Okay.
Mr. Lumbra. ``Gender'' is also the word that we use.
Ms. Martinez. ``Gender'' has been the commonly accepted
term used, and I have used it.
Mr. Davidson. All right.
Ms. Creary. Same.
Mr. Davidson. Okay. Some of the datasets are blurring sex
and gender because we spent a lot of time talking about gender
here lately and the concept of a social construct where
biologically male and female are different. Does that kind of
diversity matter?
Ms. Martinez. Yes. Diversity is diversity, and it takes all
shapes and forms. Curiously, some of the diversity that I
provided on some of the boards on which I served was political
diversity, that I was one of the few Democrats on the board.
Mr. Davidson. We spent a lot of time on some of our things
in the military talking about this. It came up as--clearly,
there has been a difference in the current Administration and
the past Administration on transgender and transsexual people,
but you also have historically looked at sexual difference,
male and female categorically versus gender. Only recently did
we start to use gender to differentiate people other than male
and female for some of these categories.
And that is my concern on the dataset. When you look at
racial and ethnic diversity, our country really is different
than most of the world. We have become the melting pot, truly
the world's land of opportunity. Everyone around the world has
people who are leaving their places and coming to our places.
And to be fair, some Americans do leave here and go elsewhere.
We have a large expat community, but truly this is the world's
land of opportunity.
Our companies flourish, and I would say part of the reason
we have flourished is we do actually have diversity in America.
And so I am encouraged by the amount of progress that I have
seen in diversity in my lifetime. I know, as a kid growing up,
first, you don't know any difference about anything and then
you see how people treat you differently. And then when you are
with one group of friends, you will see how things happen
differently with this group of friends, and when you are in a
homogeneous group how things happen differently there. And
sometimes that is with peers. Sometimes that is with people
from an older generation. Sometimes, unfortunately, that is
with people from law enforcement and other communities.
With respect to corporations, I think you have done a nice
job highlighting some of it. I think we should do more to
celebrate how strong the United States of America is, and, in
fact, partially because of our diversity.
I yield back.
Chairwoman Waters. Thank you.
The gentleman from Texas, Mr. Green, who is also the Chair
of our Subcommittee on Oversight and Investigations, is
recognized for 5 minutes.
Mr. Green. Thank you, Madam Chairwoman. I thank the ranking
member, I thank the witnesses for appearing, and I would
compliment the Chair for hosting this hearing and I acknowledge
that the Chair is probably the hardest working--maybe I will
just say one of the hardest working Chairs in Congress. She
sits through these hearings, if you have noticed, and I think
that sends a very strong message about the concern that she
has. So, I compliment you, Madam Chairwoman.
Dear friends, I believe that a picture is worth a thousand
words, and as a result I have a couple of pictures that I would
like to show you. Ambassador Martinez, it is my belief that you
have indicated that we should quiz the captains of industry
about their circumstances with reference to having persons who
are minorities, women.
Ms. Martinez. As a diplomat, I would say invite them for a
conversation. Yes, sir.
Mr. Green. All right. Let me just share this with you. We
did that, and I would like to just share some of the
conversation with you. But I did make a mistake when I had this
opportunity. I mentioned women, and I mentioned persons who are
of color, but I did not mention LGBTQ. I think we have to be
inclusive in all ways. I don't think we can leave out any
segment of society.
With this as my confession, I posed a question to the
captains of industry, the heads of major lending institutions.
The names need not be made available at this time, but I would
like to show you this picture, because in this picture with
these captains of industry, you will note that they are all
seated and looking quite like the captains of industry they
are. They all happen to be white men, all white men. I found
that to be something worthy of noting at the hearing, and I
did.
But I posed the question to these captains of industry, all
of whom are white men. You ought not be afraid to state facts.
There are some people who don't want to hear me say, ``white
men'', but you have to state facts. These were all white men,
captains of industry.
The question that I posed was one that dealt with their
successes: ``If you believe that your successor is likely to be
a woman or a person of color, raise your hand.'' This is the
response. Raise your hand. Not one hand. Captains of industry,
brilliant people all, not one hand.
Well, understanding that maybe that was just a circumstance
for the immediate future, I then posed the question to all of
these white men--remember, we cannot avoid facts. I then said,
in the next 10 years or decade, are you likely to have a woman
or a person of color to succeed in your position? One, two,
three, four hands, five hands. But notice, two of the captains
of industry are indicating that in the next 10 years, they are
not likely to have a woman or a person of color.
That is why I am so grateful that the chairwoman is having
this hearing. We have to be concerned about not only the
lending that takes place in these institutions, but the
leadership that takes place in these institutions. There is no
empirical evidence to support the fact that doesn't exist, a
fact that women, members of the LGBTQ community, and people of
color, no empirical evidence supporting a notion that they
cannot lead these organizations. There is none. We are beyond
that old premise that we can't find any who are qualified.
There are cable, competent, and qualified persons, and we have
to change the circumstance.
Thank you, Madam Chairwoman. I yield back.
Chairwoman Waters. Thank you.
The gentleman from Ohio, Mr. Gonzalez, is recognized for 5
minutes.
Mr. Gonzalez of Ohio. Thank you, Madam Chairwoman, for
holding this important hearing. And thank you to our witnesses
for your participation.
One of the things I am most proud of and enjoying the most
in my time in Congress is my time on the Diversity and
Inclusion Subcommittee here inside of the Financial Services
Committee. Chairwoman Beatty, who spoke earlier, is doing a
phenomenal job, as is Ranking Member Wagner, and I just can't
be more appreciative of that. And I know that Chairwoman Waters
is largely responsible, so I thank her.
Another thing that I work on a lot is diversity/inclusion
inside of STEM fields on the Science, Space, and Technology
Committee, as I mentioned earlier. And I will tell you, of all
the work that I am doing here in Congress, when I am back home,
which is the Cleveland area for me, when I am back home in
northeast Ohio, the work we are doing here is probably that
which folks are most excited to talk about. KeyBank, in
particular, which is in many branches in my district, is doing
a great job. I think, Mr. Visconti, you may have cited them in
your testimony, so I am really pleased that we are having this
hearing.
Dr. Creary, I want to kind of turn to you for my question,
my first question. You talk a lot in your testimony about the
difference between hierarchical and egalitarian board
structures, and it is not in a diversity--just a check-the-box
form of diversity that drives business performance, but really
it is how you conduct yourself in the board environment.
How are those studies going? And are you finding direct
causal relationships between the egalitarian version of a board
meeting versus the hierarchical?
Ms. Creary. We are not yet to the place where we can
establish causality, so the report that I shared that was
recently published on March 27th, is as far as I have gotten.
Mr. Gonzalez of Ohio. Got it.
Ms. Creary. We have conducted a larger survey, although it
has been extremely hard, as you can imagine, to get board
directors to participate. We do have about 100 board members
who have participated in that. And so we are looking at
analyzing the data, which will only establish correlational
effects, which is, essentially, what we have to deal with at
this time. I think it is not easy, in general, to do science
and certainly on this population, I think they are busy, but
also there is a lot of concerns around anonymity and
confidentiality. So, while I would love to have these answers,
and I am sure we all would, it goes a long way to say that even
getting 20 people to participate is good information.
Mr. Gonzalez of Ohio. Right. You said we can't--right now,
the best we can do is the correlation component as opposed to
the causation. What is holding us back? How could we get to
causation?
Ms. Creary. It requires a critical mass of people
participating--we need data. We need lots of data.
Mr. Gonzalez of Ohio. Got it. Well, I encourage you to keep
pushing forward on that. It is a great initiative, certainly.
Dr. Martinez, I am a son of Cuban immigrants. My father
immigrated here from Cuba in 1960. And when I am home and I am
speaking to the Latino community specifically, in many
instances, they feel left behind, like we are not getting the
attention that we deserve back in the community.
Are you seeing that? Yes or no? And if you are, what can we
do to make sure we are more inclusive of the Latino community
as well?
Ms. Martinez. Get involved. Just stay involved, as you are,
and encourage others to do the same. There is no substitute for
involvement at whatever level interests you, you are especially
interested in the STEM issues and diversity and inclusion, but
education is going to be such a key, and there are more and
more Latino advocacy groups near you in Cleveland and to get
involved with all of them.
Mr. Gonzalez of Ohio. Thank you. And for my final minute, I
want to turn to Mr. Visconti. You had one part of your
testimony that was interesting, to say the least. You said the
NFL is a de facto plantation. I have some experience. I played
in the NFL for 5 seasons. I think that is patently false, first
of all. But let me ask you a question, have you ever watched
the NFL draft? Have you ever watched it?
Mr. Visconti. No.
Mr. Gonzalez of Ohio. Never?
Mr. Visconti. No.
Mr. Gonzalez of Ohio. Okay. Just to kind of catch you up,
the way it typically works is, you are sitting there for hours,
and if you are lucky, your name gets called. And typically,
what happens is you see a scene where family is all around the
individual--this is my own story--family is all around the
individual, and it is a joyous celebration.
Normally, the individuals cry or they are giving hugs to
whomever it is because it is a joyous occasion. It is literally
the fulfillment of a lifetime of work and dedication. The
average salary in the NFL is over a million dollars--$1 million
average salary. This gives people an opportunity to take care
of their family and a community in a way that they have never
imagined. And I think words are really important and how we
label things is really important, and to call the NFL a
``plantation'', which evokes the worst original sin of our past
as a nation, I think is false, and I hope you will correct the
record.
Mr. Visconti. May I respond?
Mr. Gonzalez of Ohio. I yield back.
Chairwoman Waters. The gentlewoman from Michigan, Ms.
Tlaib, is recognized for 5 minutes.
Ms. Tlaib. I would like to allow you to respond.
Mr. Visconti. How do you describe a system where almost 100
percent, except for one person, of owners are white, and 70
percent of the players who earn those people their money are
black? It is called a ``plantation'', and that is what it is.
Mr. Gonzalez of Ohio. Can I get 30 seconds?
Ms. Tlaib. No. I reclaim my time.
Mr. Gonzalez of Ohio. Thank you.
Ms. Tlaib. Thank you so much for--I love it, because I have
a chairwoman who believes in allowing, especially women of
color, to have access and a voice in this committee.
I do want to tell you a story. When I first decided to run,
it was like in February of last year, and there was a woman who
comes up to me, and she is Palestinian like me, she also shares
my faith, Muslim faith, and she kind of just, like, hugged me
and looks at me and she said, you have to win. And, of course,
the pressure. And I said, well, we have already won. The fact
that I am running as is as a proudly Palestinian Muslim, as a
woman, and all of these, important identifiers to me. And I
paused and I look at her, and she says, ``No, you don't
understand, you have to win, because if you win, that means we
belong.''
And it was a powerful moment because I thought to myself,
as I was running, it was for me fighting against corporate
greed, the fact that I represent the third poorest
congressional district and I wanted to fight back, but to me, I
understood there was so much more to me being in this space.
And it is very telling of why this committee hearing is so
important.
And one of the things that I remember in the nonprofit
sector is foundations would ask us the makeup of our board when
we applied for grants to combat poverty. They wanted to make
sure that the nonprofit boards and the folks who are serving
those communities reflected the community. And I am wondering,
in the corporate world, like, if I go to Walmart's website, if
I go to these corporation websites, am I going to get that
chart that many of these foundations ask these nonprofit
agencies to do, the chart that said this is how many women,
this is how many African Americans, Latino, all those, I think,
important factors.
Do you see a move and some corporate responsibility in
sharing that on their websites and very publicly? And I would
like each of you to have time to answer that.
Ms. Gurkin. We actually didn't look to see if the
information was available on their websites, but we did look,
and we talked to a number of industry officials about sharing
that information with their investors. And a number of industry
officials said that the most powerful force of change is the
demand of investors as shareholders to see increased levels of
diversity on their board.
Mr. Visconti. It should be there, but it is not. More and
more, you are seeing boards being pictured and executive
leadership being pictured, and I think that is a very positive
step in the right direction. You could look on the company's
own website and see who they position as leadership. That's
very important.
Mr. Lumbra. In my experience, it is uneven. For some
companies, it is quite easy to find out and you can see; for
others, you have to do some research, so it is not consistent.
Ms. Akutagawa. Yes. As someone who looks at a lot of this,
it is inconsistent. But I also want to say as someone who is
also looking a lot at nonprofits and foundations, they are not
showing their data either, and that is why--especially the
bigger ones. The power dynamic there is a lot different, so--
Ms. Martinez. I have the same experience as Ms. Akutagawa.
Ms. Creary. I just want to remark on the question earlier,
were we inferring gender and sex and using those
interchangeably? We have a long history of doing research in
academia that is inferring gender and sex and making
conclusions about its effect on anything, including board
performance, based on the pictures that we have seen. It would
be interesting to know that if we actually started asking
people about their gender identity, how would any of these
effects pair out.
Ms. Tlaib. No, it is important. And lastly, one of the
things, and again, in the nonprofit sector, we did these
diversity trainings. What is diversity training to you all?
Because some of the trainings I have gone through, to me, they
were not diversity. Can you shed some light into that? And I
just want to get it on the record for this committee. I think
there needs to be a discussion about what is defined as--people
easily put ``diversity'' in front of something and say that is
the training, diversity training, diverse board, and it is not
reflective.
Mr. Visconti. When Starbucks got into trouble, they decided
they could fix their whole issue in 6 months. It is going to
take them 4 years to get rid of plastic straws. It is garbage,
most diversity training.
Ms. Tlaib. Thank you so much. And I yield back the rest of
my time, Madam Chairwoman.
Chairwoman Waters. Thank you.
The gentleman from Kentucky, Mr. Barr, is recognized for 5
minutes.
Mr. Barr. Thank you, Madam Chairwoman.
And I would like to yield to the gentleman from Ohio, my
friend, Mr. Gonzalez.
Mr. Gonzalez of Ohio. Thank you.
So, Mr. Visconti, you mentioned the Rooney Rule as a
failure, and I want to just kind of go through some stats. From
1921 to 2003, there were 7 minority coaches--1921 to 2003. From
2003 to the present, 18. I think broadly, the NFL is like most
of society, in my opinion. It is imperfect. There is a lot of
work to do. There is a lot of progress still to be made, but to
deny the opportunity that is created for the families and the
athletes and call it a ``plantation''--again, I think words
matter.
I think we can talk about this and talk about the progress
that we need to make and that will be a healthy productive
dialogue, which I think has been the case for 99 percent of our
time here in this hearing today, but I think we need to be very
careful with how we are labeling things. And that is all I want
to say.
But with that, I will yield back to my friend, Mr. Barr.
Mr. Barr. Thank you. And I appreciate your perspective,
your personal perspective with the NFL. Not many of us have had
the privilege or the talent to have played in the NFL, and I
trust people with personal experience, and I appreciate your
perspective.
The good news is that the number of Fortune 500 companies
with boards that consist of more than 40 percent women and
minorities has doubled since 2012, and I think we can all
celebrate that increased progress in diversity.
Dr. Creary, can you speak to the recent trends regarding
the diversity of boards, and what factors have contributed to
that improvement over the last few years?
Ms. Creary. That is a great question. Certainly, I think
many would characterize the first wave of focusing on the
business case for diversity, and we were there for a very long
time just trying to establish some semblance of a relationship
between the composition of a board and outcomes for the firm.
We have moved recently, in the past 5, 10 years, into a
wave of, I would say, peer pressure, where institutional
investors and asset managers are beginning to understand, not
only that this is important, but they actually have to engage
in peer-to-peer tactics to help boards understand that this is
an important issue.
I would say that is where we are now, pressurizing boards
to begin to take the responsibility for allowing the--all of
the investment that we have done in research and in practice to
actually be realized.
Mr. Barr. Dr. Creary, were any of the factors since 2012 in
terms of enhanced diversity government-imposed diversity
mandates?
Ms. Creary. This would be where the corporate arena is
actually leading in implementing practices without regulation.
Certainly, when you think about the evolution of the diversity
and inclusion conversation in corporate America, there are only
mandates right now in the U.S. as to engage in strategies that
say that they are looking. And so much of the work that has
been done has been done because firms have taken the
responsibility, certainly with pressure from outsiders, to
engage in this work.
Mr. Barr. There obviously is evidence that board diversity
can enhance company competitiveness and profitability, and that
the market itself is rewarding diverse firms.
My final question to you, Dr. Creary, is, I was very
impressed with your testimony about the importance of culture
and the fact that you might have tokenism, which is not real,
meaningful diversity; it is more about boards actually
utilizing the diversity, utilizing those diverse views as
opposed to what I would say is superficial diversity.
I am concerned, and I would like your feedback, that
government-imposed diversity quotas, as opposed to these
market-based incentives, would actually contribute more to
tokenism, would contribute more to a superficial diversity, as
opposed to that culture that you describe in which people are
valued, not based on the color of their skin or their gender or
their sexual orientation or immutable characteristics or their
age, but actually the content of their character, actually
things that matter, like their talent, like in the NFL, where
it is really not about your race, it is about your talent. Can
you win the Super Bowl? Can you catch the pass? Can you score a
touchdown? I could not do that. My friend could.
So, to me, a government-imposed quota on racial diversity
within the NFL is really not ultimately what matters. What
matters is raising a trophy over your head. What matters is
profitability.
And so, what I would worry about is not having the right
culture but imposing artificial diversity.
I yield back.
Chairwoman Waters. The gentleman from Georgia, Mr. Scott,
is recognized for 5 minutes.
Mr. Scott. Thank you very much, Madam Chairwoman.
First of all, this is a very powerful and much-needed
hearing. Second, we have some very informed witnesses. And
third, Madam Chairwoman, you are providing great leadership in
a very important area.
Now, there are, right now, only 3 black CEOs running
Fortune 500 companies, and that is down from 8 just 3 years
ago. The number of women serving as CEOs went down 25 percent
from 2017 to 2018. I discussed this issue at a hearing a couple
of weeks ago on diversity with the need to get financial
literacy, and I think it is very important that we continue to
raise this point. Those are the facts. That is the picture out
there right now.
Some can run, but they surely cannot hide from just 3
African-American CEOs, down from 8 just 3 years ago, and the
decline in women over the last year by 25 percent.
Now, Mr. Lumbra, given that there are so few women and
African Americans represented at the CEO level, how can board
diversity increase more than marginally if boards do not expand
their search pools beyond the CEO ranks? In other words, if you
are truly apt to doing this, there are so many areas to reach
into.
I did a lot of recruiting in my day. I worked for a while
for a firm called Recruiting Management Consultants. We went
out and we would help major corporations--because it was one
thing to tell the corporations to do this, and if you don't
develop a mechanism to help them find where these qualified
African-American women are, they quickly will come back and
tell you, ``We tried but we just couldn't find them.'' They
didn't have any plan to do that.
And so I wanted to hear from you, Mr. Lumbra, am I right
about that? There were opportunities in other areas. We would
go and take advantage of the fine training and executive
talent, decision-making, and understanding how to handle
pressure by looking at former military officers--a lot of that
is still done--who had command over huge numbers of people,
risky at the time, having the capacity of sending huge numbers
into war. There are a lot of places you can go to find that.
Am I right about that, Mr. Lumbra? I think you mentioned
that in your deal.
Mr. Lumbra. In my experience, you are right. The fact of
the matter is, and you said it beautifully, if you focus on
sitting Fortune 500 CEOs, by definition, you do not have a
diverse pool to look at. The talent that is senior
sophisticated coming out of the military, out of academia,
people who have been in service firms, who have run big
businesses for big corporations, it is much, much more ample.
In our experience, clients who have the courage to go and
look and the discipline to look in those pools, much, much more
easily and readily find diversity for their boards.
The other point you make is an important one, which is, who
makes decisions about CEOs? Boards. So, if we are concerned
about diverse CEOs, we should be concerned about diverse boards
who are choosing the next CEO and thinking about succession
planning. That is another benefit and a plus for having a
diverse board to look further down the chain at a succession
plan in a company.
Mr. Scott. Absolutely. We must expand our territory if we
are going to expand the number of African Americans and women
as CEOs on our boards. Thank you very much.
Chairwoman Waters. Thank you.
The gentleman from Wisconsin, Mr. Steil, is recognized for
5 minutes.
Mr. Steil. Thank you.
I thank you, Madam Chairwoman, for bringing today's hearing
together. I served on--at two large companies, one a publicly
traded company, and spent time advising in the boardroom, and I
understand the importance of diversity in the boardroom and the
value that that can add to our corporations.
Dr. Creary, in an article entitled, ``When and Why
Diversity Improves Your Board's Performance'', you wrote about
how boards should expand their view of diversity and how they
can make the most of diversity's benefits.
Can you comment on how companies can successfully build
more meaningfully diverse boards while avoiding, I think your
phrase is, ``tokenism?''
Ms. Creary. Yes. I think it is certainly about, first of
all, having criteria for what an effective board member does
and who they should be, and then hiring people or recruiting
people onto the board according to those criteria. That would
require the board actually understanding and interrogating
itself to know what makes for an effective board member based
on what makes for an effective board.
And I know this sounds pretty rudimentary, but that, in
fact, is the issue that we heard coming up with time and time
again is people are being picked or recruited for board
positions based on arbitrary criteria and like having been a
CEO or CFO, but when pressed, there isn't a lot of
understanding as to why that is the most effective board
member. I think it is about establishing criteria, holding to
those criteria, assessing for skills and expertise is really
would move us in a good direction.
Mr. Steil. I appreciate that. And I would like you to
contrast that approach with what we have seen from several
European countries that have enacted requiring public company
boards to have a certain percentage of female or of other
diverse groups. You have written about the importance of
fostering a board culture that encourages more diversity and
collegiality.
Can you comment on how these politics impacted board
cultures in the countries in which those types of policies have
been enacted?
Ms. Creary. Unfortunately, I can't comment on that
particular issue. What I can say is that outside of the U.S.,
there are actually more and more boards. I think where our
country, I think we are up to 17 now that are actually
following the European way of mandating required representation
on boards. We really haven't done the research to understand
how that is working, other than it is actually getting them
diversity. In the end, if we think about what is happening, we
are increasing diversity, but we don't know what the diversity
is actually doing, is sort of where we are stuck.
Mr. Steil. Thank you. Maybe I will go back then and note
that in your previous article that I referenced, you wrote that
to make more diverse boards more effective, you need to have a
more egalitarian culture. What are some of the key strategies
that companies employ to benefit the most from diversity and
foster an egalitarian culture?
Ms. Creary. It goes back to this CEO who is hired by the
board themselves. Having a CEO who understands that the most
effective way to run the board--I say CEO, but I also mean
chairperson or lead director, the person who is actually
leading the meeting--having them understand that the process of
eliciting perspectives from different people in the room is
really one of the most important strategies that can be put in
place to change the culture of what is happening in the
boardroom.
Mr. Steil. Thank you very much.
I thank you, Madam Chairwoman, for holding today's hearing
on this important topic. And I yield back the balance of my
time.
Chairwoman Waters. Thank you very much.
The gentlewoman from Pennsylvania, Ms. Dean, is recognized
for 5 minutes.
Ms. Dean. Thank you, Madam Chairwoman. And thank you to all
of you who are here today. I apologize for being between two
committees here, fortunately on the same floor, but don't
mistake my in and out for an indifference towards this issue. I
am pleased to be on the Subcommittee for Diversity and
Inclusion.
I held a roundtable at my office in my district--I am from
suburban Philadelphia, so hello, Dr. Creary, from UPenn--and it
was really fascinating. It was people from government, it was
people from law, it was people from education, from industry,
just all over--nonprofits, all over the board. And it was
fascinating to hear the conversation because we prize
diversity, we know it is the right thing. We know it is good
for businesses and organizations.
Here are quick takeaways that I had, and I would love any
one of you to comment on some of them. Education was number
one, from pre-K on. We have to have quality education and
expose young people to multiple careers from an early age. High
school is a great time, but man, oh, man, we ought to actually
be showing them in the early years and in the middle schools
career exposure. Relationships and mentorships,
apprenticeships, those kinds of things are so invaluable.
In my district in Montgomery County, we have pockets of
real need and pockets of--for example, our county seat,
Norristown, has a very big school system, but they don't have
enough resources to see some of these opportunities.
In the hiring piece, one of the things that one of the
educators said, a superintendent said to make sure that the
people who are sitting there doing the hiring are diverse,
because otherwise they kind of just relate to people who look
like them or have their similar backgrounds. That's very
obvious, but really important.
In seeking resumes, don't just seek from the ordinary
pools. Pull from institutions or other partnerships that you
have grown. Look for nontraditional backgrounds, and don't call
experience the first thing. I heard one of you talk about the
idea that people keep rising to the top because they have
previous experience. Make sure that we are giving people the
opportunity for experience.
One of the most important things--and maybe I will end with
this, and there were so many others. One of the most important
things was a woman who is lead public defender in Montgomery
County, now in Philadelphia County, an African-American woman
said, ``When I became the head of the department, there was no
leadership training. So, there I was. I had reached that level,
but how do we retain leaders? We need leadership training.''
I say all of that to say, when organizations figure out
that they have a gap in diversity, what are some of the most
important key takeaways as they set their goals that we should
know about, and maybe it has to do with, if you could focus a
little bit on the notion of leadership training. Maybe I will
start with Mr. Lumbra, and then I will go to Mr. Visconti.
Mr. Lumbra. The developmental pieces--I loved your analogy
with the person in Montgomery County, in the role, who had no
training. One of the challenges that we are seeing in
leadership development is executives are being trained to be
leaders, not being trained to be directors. Giving them
exposure to governance before they are ready to go on a board
helps create a board-ready pipeline for diverse talent. And
that is one of the things we are talking about today is, how do
you build that pool, a pool of people who are to become board-
ready?
So, effectiveness in terms of training and developing
executives to be ready to go on boards is really important and
something we are part of.
Ms. Dean. And is it something that you do in a sustained
way that once somebody gets to that kind of a position, that
you stay with them, or you have places where they can go for
different kinds of training?
Mr. Lumbra. There are a multitude of ways. Some educational
institutions, like Wharton and Stanford and Harvard and others.
Other firms, like ours, who are involved in that. Boards--some
boards have great onboarding and development programs
themselves to help their own executives and their own boards
and new directors to become effective.
Ms. Dean. Okay. Mr. Visconti?
Mr. Visconti. To leverage what he said, it is
accountability for failure of process that matters in making
progress. And to give an example, PricewaterhouseCoopers was
the first big four accounting firm to have a non-HR person in
charge of diversity. When that person, a senior partner, in the
firm rolled off of that job, he became responsible for the
committee that took people who are accountants and made them
partners. And when he would come to--they would have a board
meeting and the peoples' files would be on the screen. When he
would come to a person--and he said it was most likely a non-
white person or a woman--who didn't have the right experiences
to be promoted to partner, he would stop the meeting, call up
that person's boss, and say, why didn't Kathleen have the right
experience? Her file is in front of this committee and she is
not ready. You are her boss, why didn't it happen? That changes
the conversation when there is accountability from the top.
Ms. Dean. That is great.
And, Dr. Creary, in your research, we talk about diversity
and sometimes--oh, my goodness, I'm so sorry, my time has
expired. Thank you.
Chairwoman Waters. Thank you.
The gentlewoman from New York, Ms. Ocasio-Cortez, is
recognized for 5 minutes.
Ms. Ocasio-Cortez. Thank you, Madam Chairwoman.
Before I enter my mainline of questioning, there are just a
few things I would like to clarify from some statements made
across the aisle. One, there were some odd and bizarre comments
made about sex and gender, and I just want to clarify. Would
our transgender candidates for corporate boards welcome and
celebrate being included as part of diversity on your board? I
will just go down the line, yes or no?
Ms. Gurkin. Yes. That would be within the definition of
diversity.
Ms. Ocasio-Cortez. Mr. Visconti?
Mr. Visconti. Yes, it would.
Ms. Ocasio-Cortez. Thank you.
Mr. Lumbra. Yes.
Ms. Akutagawa. Yes.
Ms. Martinez. Yes.
Ms. Creary. We didn't ask.
Ms. Ocasio-Cortez. Okay. Thank you. I just want to make
sure that that was clarified.
Second, there was some conversation here about the NFL, and
one of my colleagues across the aisle said the NFL is like most
of society. And I would actually agree with him because the NFL
is where white billionaires govern the majority of power, and
women and people of color work for them and give them their
margins.
Mr. Visconti, would you say that that is what you were
getting at?
Mr. Visconti. It goes even further, because the players get
to have their brains beaten in and have long-term healthcare
problems that are not covered by the billionaires.
Ms. Ocasio-Cortez. Right. And also, when we say the NFL is
like most of society, we were talking about average wages and
average salaries. So, the average is a million dollars, right?
Maybe that is because the highest-paid player, Aaron Donald,
has signed a 6-year contract for $135 million, and the lowest
paid--one of the lowest paid first-year rookies is $480,000.
So, we get to claim those salaries and it appears as though
salaries are much higher than what is lived and enjoyed by the
majority of people. Would you say that is correct?
Mr. Visconti. It is a short lifespan as a career, too.
Ms. Ocasio-Cortez. Okay. Thank you. And I will move on to
my main source of questions.
We are here talking about corporate boards. And to clarify
and recenter, corporate boards, would you say, Ms. Martinez,
are the main source of governing power over a given
corporation, correct?
Ms. Martinez. Yes, I would say that. They are legally the
main power, yes.
Ms. Ocasio-Cortez. And who sits on a corporate board?
Corporate boards have power, predominant power over a company,
and we are talking about massive companies as well--Walmart,
McDonald's, et cetera. And so would it be fair to say that who
sits on the board is who has large-scale power in a company, in
a corporation?
Ms. Martinez. Yes, I would say that is true. And in the
past--and I have been privileged to have served on a corporate
board starting in 1983, so I have seen some evolution there.
And when I first went on a corporate board, it was basically
the friends of the CEO, people who knew each other. Over time,
the concept of board assessment came into play, and that plays
a very important role because it speaks to Dr. Creary's point
about, what does this board really need? So, there are changes
that have taken place and continue to take place.
Ms. Ocasio-Cortez. Thank you. And I find it fascinating
that even in your experience, corporate boards were more of a
friends and family situation. So if you were a CEO, you could
put your friends and family in strong decision-making
positions, correct?
Ms. Martinez. Absolutely.
Ms. Ocasio-Cortez. Okay. Thank you. So really, this is
about power. And if a board is predominantly wealthy people,
then it is wealthy people who have power in our private sector
governance structure. If it is predominantly men, then it is
men who have economic power. If it is predominantly white
people, then it is white people who have economic power and
decision-making over a company.
And, in fact, in the first 6 weeks of 2019 alone, the
Walton family of Walmart made $14 billion in 6 weeks, with a
``B'', after its corporate board artificially inflated the
price of its stock by authorizing buybacks. And the practice is
extraordinarily controversial, but a lot of people believe that
in making $14 billion, especially while paying its workers
poverty wages, this could end if workers actually had power, if
workers sat on corporate boards.
Mr. Visconti, if you could guess, what would McDonald's or
Walmart's corporate board look like if their boards actually
reflected their workers? What percentage do you think would be
women and people of color?
Mr. Visconti. It would be the appropriate percentage.
Ms. Ocasio-Cortez. And if you could just take a stab at it.
I know you may not have the number right in front of you, but
if you could guess what percentage of women and people of color
would make up McDonald's board?
Mr. Visconti. The majority of the seats would be women and/
or people of color.
Ms. Ocasio-Cortez. I have a figure here, 73 percent.
Mr. Visconti. That doesn't surprise me.
Ms. Ocasio-Cortez. McDonald's board would be 73 percent
women and people of color if it actually represented the
workforce that makes up its company.
Thank you very much.
Chairwoman Waters. The gentleman from California, Mr.
Sherman, is recognized for 5 minutes.
Mr. Sherman. I have been listening back in my office, and
much of what needs to be said here has already been said. If we
have boards that are diverse, that will inspire young people to
seek the highest positions in the corporate world. It will lead
to better corporate governance because we will have boards that
can understand the market that they are focused on, understand
their workers, understand society. And I think that information
about board diversity is going to be relevant to investors
because a company that has diversity on its board is probably a
better long-term bet.
But we should also keep in mind that while officers of a
corporation have power, directors have power, the ultimate
power is with the shareholders. And if a corporation doesn't
meet shareholder needs, either the board will be replaced or,
more likely, the company will be acquired, because if
shareholders don't bid high for the stock compared to the value
of the company, some other company will be able to buy them
inexpensively. Ultimately, the power is with the shareholders.
There are two other elements of diversity that I don't
think have been discussed much here; although, I think our
colleague from New York brought up the importance of having
labor leaders and representatives of workers on the board.
Did any of the witnesses address the desirability of having
a leader from one of the unions that represents workers from a
particular corporation being on the board? I know that is
required in some European countries.
If those witnesses want to address that with supplemental
material, they should do that.
And then, the second issue on diversity is people with
disabilities. I wonder whether any of the witnesses has, in the
materials they have submitted or otherwise as a comment,
discussed including people with disabilities on the board?
Yes, the gentleman--the gentleman who raised his hand?
Mr. Visconti. I am Vice Chair of the National Organization
on Disability. The Chair is Governor Tom Ridge, so there can be
Democrats and Republicans agreeing and having conversations on
this subject. But absolutely, people with disabilities are the
highest percentage of unemployed people in this country with
college degrees. It is a travesty that they stay at home and
are not productive in our society and don't have the
fulfillment of the individual desire to go to work and
accomplish something.
So, yes, it would be absolutely a very positive move to
count heads of people with disabilities on boards.
Mr. Sherman. And it would make sense, as we take these
steps with regard to gender diversity and ethnic and racial
diversity, to also report on persons with disabilities?
Mr. Visconti. Yes, sir.
Mr. Sherman. Does anyone else on the panel have a comment
on that?
Yes, Dr. Creary?
Ms. Creary. Yes. I want to comment on both of the questions
because I think it is an important one about having workers
represented. This is not the same as a union representation,
but I will tell you that we are having a challenge just getting
the chief human resources officer represented on a board, and
those, arguably, are the people in organizations who know a lot
about talent. And so I would say the reason why it is not
coming up is because the pushback against having anyone other
than a CEO or a CFO represented is very strong, so it makes it
very hard to even talk about unions being represented, but also
human resources being represented.
To the point about people with disabilities, I think for us
it is the same question of LGBTQ. What we know is, we are not
in a place yet, particularly in America, where we can ask these
questions without fear of repercussions for the individuals who
are asking to check boxes.
As researchers, one of the things that we are cognizant of
is that these are not protected classes in the same way that
women and minorities are, so we can do research a lot more
confidently on women and underrepresented minorities because we
have some semblance of how to handle issues of discrimination
in that process.
We do not have the same provisions or the same protections
for people who are LGBTQ, so it makes it really hard to want to
invite those questions for the sake of the people on the other
side who are being asked to answer that question.
Mr. Sherman. If I can have 10 more seconds?
Apparently not. Thank you.
I yield back.
Chairwoman Waters. Thank you.
The gentlewoman from North Carolina, Ms. Adams, is
recognized for 5 minutes.
Ms. Adams. Thank you, Chairwoman Waters and Ranking Member
McHenry, for convening this timely hearing. I have been running
back and forth chairing a committee, so I apologize.
I do want to thank Chairwoman Beatty and Ranking Member
Wagner for their leadership on the Diversity and Inclusion
Subcommittee.
As many of your testimonies have outlined, making an
investment in diversity and inclusion is not only the right
thing or the moral thing to do; it makes good business sense.
Companies and organizations function more effectively, and
experience increased productivity, and greater profitability.
When I first came to Congress, I was concerned about the
lack of focus on Historically Black Colleges and Universities,
so I launched the bipartisan HBCU Caucus. We have been focused
on raising national awareness, educating Members of Congress,
and increasing Federal investments in these schools. When I
meet with companies and financial institutions, I always tell
them, if HBCUs are not a part of the industry's diversity and
inclusion strategies, then you are not doing it right. So, I
look forward to this particular panel.
For each of you, with such overwhelming evidence around the
financial benefits of investments and racial and gender equity,
why has it still not been achieved across-the-board, and why
are companies still struggling with or, in some cases,
resisting diversifying and building inclusive workplaces and
boards?
I am going to open that up to any of you who want to
answer.
Yes, Mr. Visconti?
Mr. Visconti. I would say there is, in some cases, a benign
neglect of the reality of our demographics and who is
graduating from universities and, in some cases, it is over
racism and sexism.
Ms. Adams. Okay. Would anyone else like to comment?
Yes, sir?
Mr. Lumbra. We have talked about a few things today: one is
the need to look outside of traditional networks; and one is
the need to have turnover and think carefully about what is
needed on boards and use that turnover to bring on diverse,
contemporary talent.
Ms. Adams. Okay. Thank you.
Let me ask Mr. Visconti and Mr. Lumbra, in your
observations of companies and organizations that are doing D&I
effectively, what are they doing to ensure their boards are
diverse?
Mr. Lumbra. A couple of examples jump to mind.
Intentionality is really important, to take a close look at the
board, to look at what the company needs, what are the
challenges, what is the strategy, and to find directors who can
address those issues. If you do it with purpose, you will find
terrific, diverse talent. I worked for a company in Washington
recently, where the last four directors were all women, and two
were minorities. I worked for a company in the Midwest, the
last three, two African Americans, one woman, all fitting
exactly what those companies need. So, this is achievable, but
it takes intention and purpose to get there.
Ms. Adams. Mr. Visconti?
Mr. Visconti. I would tell you that the CEOs we deal with--
and we don't deal with boards, we deal with CEOs--are supported
by boards that provide a support to the CEO, that emphasizes
diversity and inclusion in a measurable, accomplishable way.
The boards that are already supporting their CEOs and
making progress on this subject tend to be very diverse boards,
and that is borne out in the data that is on our website about
the top 10, the top 50, the S&P 500, Fortune 500. It is a
purposeful intent of top leadership.
Ms. Adams. Great. More specifically, what are the best
practices that every organization could implement right now to
begin meaningfully building an inclusive workforce?
Yes. Go ahead, Mr. Visconti?
Mr. Visconti. Structured mentoring that is measured and
accountable so that people who are working their way up the
corporate chain of command have the tools and learn the ropes
that they need to be successful. Resource groups where people
with disabilities, black people, Latinos can get together and
share good ideas and business processes and business
information. That is very important. And then executive
diversity--
Ms. Adams. Okay. Ms. Martinez?
Ms. Martinez. Yes. And the Latino Corporate Directors
Association endorses the Improving Corporate Governance and
Diversity Act, which would require public companies to disclose
data based on self-identification of the racial, ethnic, and
gender composition of their boards of directors, nominees for
their boards, and corporate officers.
Ms. Adams. Okay. Great. I have a few more seconds, but what
role do boards play in helping to develop the strategy for the
organizations?
Mr. Visconti. Accountability.
Ms. Adams. Anybody else? One word would be good.
Ms. Akutagawa. Yes. I was going to say I think it is really
them holding the CEO's feet to the fire on that.
Ms. Adams. Okay. Anybody else?
All right. Madam Chairwoman, I yield back. Thank you very
much.
Chairwoman Waters. Thank you very much.
So, I would like to thank all of our distinguished
witnesses for their testimony today.
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.
And with that, this hearing is adjourned.
[Whereupon, at 12:53 p.m., the hearing was adjourned.]
A P P E N D I X
June 20, 2019
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