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Keynote Speech by SEC Commissioner:
The Mandate for Fair Inclusion and Opportunity for All


Commissioner Luis A. Aguilar

U.S. Securities and Exchange Commission

Black Economic Council’s 5th Annual Urban Economic Conference
Oakland, California
October 14, 2010

Thank you for that kind introduction. It is my pleasure to be speaking at the Black Economic Council’s 5th Annual Urban Economic Conference. Before I begin, I need to issue the standard disclaimer that the views I express today are my own, and do not necessarily reflect the views of the Securities and Exchange Commission, my fellow Commissioners, or members of the staff.

Let’s start by taking a quick snapshot of the economic challenges facing this country. It has been reported that 1 out of 7 Americans are living in poverty. The U.S. Department of Labor reported last Friday that the nation’s unemployment rate remains at 9.6% with 95,000 jobs being lost in September alone.1 In addition, that rate is significantly higher in certain cities and among many communities of color. It is calculated that unemployment among the African American community is 16%.2 In the Hispanic community it’s estimated at 12.4%.3 The job losses have been exacerbated by sweeping cuts in personnel and programs by state and local governments. It continues to be a very difficult time for many American workers.

Thus, it is essential to have organizations like the Black Economic Council working to expand access to opportunities to all. At a time when so many of our fellow citizens are hurting, this work is that much more important. Today, I want to spend my time with you discussing a few opportunities I see to change the dialogue on diversity from rhetoric to reality.

I will first speak a bit about my background so that you can see why I am so committed to expanding diversity at all levels of the workforce. I’ll then discuss the SEC’s need for greater diversity, as well as new requirements that direct the SEC to work toward ensuring “fair inclusion” of women and minorities in the contracting process. Lastly, I’ll briefly discuss the need for greater diversity in America’s corporate boardrooms.

My Background and Commitment to Diversity

As many of you know, I’ve been a vocal and consistent advocate of greater diversity my entire life — whether it’s greater diversity at the SEC, in corporate boardrooms, or in the legal profession.

At the start, let me tell you a little bit about myself so you can understand what underlies my passion for this subject. I was born in Cuba and at the age of six, my peaceful childhood existence disintegrated. My parents sent my brother and me to the United States alone, as refugees, because they feared for our safety. Fidel Castro had seized control of the Cuban government and Cuban parents, afraid and unsure, were desperately sending their children far away. Thousands of children arrived in the United States without their parents or any resources. In my case, I did not see my parents again for four years. At the time, I did not speak a word of English and arrived with little more than the clothes that I was wearing.

Like so many others, I came to this country with very little and I’m grateful to this country for the opportunities it has provided. I was able to pay my way through college, law and graduate schools by taking on jobs ranging from being a "stock boy" in a yarn store to loading baggage and cargo into airplanes at the Miami airport.

Once I was reunited with my parents, we moved through a few different towns as my father looked for better job opportunities. We moved to Ravenna, Ohio; Little Rock, Arkansas; and Rome, Georgia. I happened to live in Little Rock in the aftermath of the Little Rock Nine, the courageous African-American students who desegregated Central High School in 1957. I was awestruck that a legal process, a court order, could be a catalyst for social change. That’s when I began to understand the power of the law and that’s where I wanted to be.

I have now been a lawyer for over 30 years. I started my career at the SEC as a Staff Attorney and then went into private practice where I focused on securities and corporate law and became a partner at various national law firms. And for almost a decade, I served as the general counsel and head of compliance of a large global asset manager. During my time there, I also served as the president of a broker-dealer and led the company’s Latin American operations.

In addition to my professional work, I have actively participated in many community organizations. In particular, before accepting this appointment to the SEC, I served in the leadership of several organizations that foster diversity, such as the Mexican American Legal Defense and Education Fund (MALDEF), the Hispanic National Bar Association, the Hispanic National Bar Foundation, the Georgia Hispanic Bar Association, the Girl Scouts local council and the Latin American Association. I’ve brought this commitment to diversity to the SEC and I am very supportive of efforts to create a more diverse workforce. I’m proud to serve as the sponsor of various affinity groups at the SEC, such as the Hispanic Employment Committee, the African American Council and the Caribbean American Heritage Committee. I also strongly supported the Commission’s diversity disclosure rule and have raised the issue of diversity with regulated entities, self-regulatory organizations, and public companies alike.

Rooney Rule

Before I speak about the SEC let me flesh out what I mean by moving the dialogue on diversity from one of lip service to one of action? I can give a clear example. Another profession has had significant success working to correct a glaring lack of diversity — the National Football League, the NFL. Although I am often kiddingly mistaken to be a Commissioner of the Southeastern Conference (the other SEC), I do think that the football profession has an important lesson to teach - and can demonstrate the importance of changing the dialogue on diversity from one of talk to one of action. The head coaching position for NFL franchises stood out for decades for its glaring lack of diversity. For example, in 2002, the NFL published a study that said 70% of NFL players were black and yet, only 28% of the assistant coaches and 6% of head coaches in the league were minorities. 4

Over the years, this persistent lack of diversity at the head coaching spot attracted a long list of justifications including:

  • that there were no good minority candidates to be found;
  • that because the top college football coaches were not diverse, no pipeline existed; and
  • that the head coaching position required a kind of thinking that did not lend itself to minority coaches.

How often have we heard these spurious arguments? It is often said that one would love to hire a minority candidates except that they do not exist. As I have said before, this argument is completely bogus and the NFL proved it to be so.

In 2003, the NFL instituted the Rooney Rule, which requires all NFL teams to interview at least one minority candidate when filling a head coaching position or risk being fined. The goal of the rule was to put qualified candidates that may not have been thought about in the first instance in front of the team owners conducting the hiring. Since the rule was adopted, 22% of the head coaching spots have been filled with minorities- and, most notably, during the 2006 league season, 7 of the league’s 32 head coaches were African-American (this was a high water mark — currently there are 6 head coaches, or 18.75%).5 This effort to expand the candidates considered for the head coaching job was the right thing to do, and it also helped teams find the very best people for the job. The results speak for themselves — two of the last five Super Bowls have been won by teams with African-American head coaches.

The NFL moved from lip service to action and the results are self-explanatory. It is time for others to do the same.

Lack of Diversity at the SEC

To that end, let me focus on the lack of diversity at the SEC. While 32 percent of the SEC work force comprised people of color in 2007, only 19% of our attorneys were people of color, and just 7 percent were at senior employee level. The most telling numbers are of our senior officers. As of fiscal year 2009, the SEC’s senior officers were approximately 89% white, 4% African-American, 3% Hispanic and 2% Asian. The gender breakdown among these senior officers is 67% male and 33% female.

Unfortunately, the recently published Partnership for Public Service Annual Survey of the Best Places to Work in the federal government provides more evidence that the SEC needs to improve.6 The SEC dropped significantly in the "Best Places to Work" rankings, a report compiled from information obtained directly from federal employees. In the latest rankings, the SEC fell from 11th to 24th place. In developing the rankings, the Partnership looked at many factors, including employee skills, effective leadership, training and development, and support for diversity. While the numbers were disappointing across the board, I was struck by the fact that the SEC ranked 24th out of 28 agencies in support for diversity.

It is absolutely clear that the SEC needs to do a lot more to recruit, retain, and advance minority candidates at the professional and senior leadership levels. It is equally clear that an enormous opportunity to do this confronts the agency in the next year. As a result of new resources related to regulatory reform, the SEC is slated to hire 800 people — a tremendous influx of new talent for an agency of just 3,600 people.7

It is important that women and minority candidates know about these opportunities at the SEC. We are looking to hire attorneys, economists, and senior level market experts in a number of areas including Credit Rating Agencies, Hedge Funds, and Municipal Securities. Too often I hear a lack of diversity justified with the reasoning that the candidates do not exist. I know this is not true. Recently, I moderated an SEC-sponsored recruiting event targeting senior minority attorneys. The event, called the SEC Attorney Career Roundtable, attracted over 280 interested attorneys. A similar event was held at the beginning of October which targeted attorneys, accountants, economists and industry professionals and it attracted over 600 professionals.

Given the SEC’s tremendous opportunity, the SEC senior staff making the hiring decisions must understand the persistent lack of diversity and they must undertake to interview the best and the brightest by conducting a comprehensive search. In my mind, no search can be comprehensive if the talent pool is homogenous and artificially limited. Let’s face it — the staff may need their own Rooney rule because I know the candidates exist.

Section 342 of the Dodd Frank Act — Office of Minority and Women Inclusion

In addition, Congress has made clear that the SEC, and all other financial regulators, must undertake efforts to recruiting and promote employees from all backgrounds. In particular, Section 342 of the Dodd-Frank Act contains a clear Congressional mandate for the SEC to establish a new Office of Minority and Women Inclusion. This Office of Inclusion will be responsible for all SEC matters relating to diversity in management, employment, and business activities. The Director of this Office is tasked with a broad mandate to develop standards:

  • for equal employment opportunity and racial, gender, and ethnic diversity of workforce and senior management;
  • for increased participation of minority-owned and women-owned businesses in programs and contracts of the agency; and
  • for assessing diversity policies and practices of regulated entities.

Congress has directed that when the SEC enters into contracts with private companies and law firms, the Office of Inclusion must develop and apply a policy that is designed to ensure that “to the maximum extent possible the fair inclusion” of women and minorities in the contracting process. The legislation requires that applicants for contracting jobs must provide a written statement as prescribed by this Office that it has fairly included women and minorities in its workforce and subcontractors. If the Director of the Office comes to the conclusion that a contractor has not made a good faith effort to include women and minorities in its work force and subcontracts, the Director can recommend to the Chairman that the contract be terminated.

Currently, you can track how federal contracting dollars are allocated, including at the SEC, by going to a publicly available website — www.usaspending.gov. Instantaneously, you can see who the SEC awards its contracting dollars too. Not surprisingly, for the SEC a large portion of contract dollars go to technology, software firms and litigation document service firms. This website arms you with the information and knowledge of the needs of government agencies.

Additionally, the new legislation specifically directs the agency to take affirmative steps to promote diversity in the workforce at all levels and includes steps that the SEC must undertake as a part of its outreach efforts. This new Office must be established within six months after the legislation went into effect — which means that this Office of Inclusion will have to be up and running by January. The first order of business will be hiring the new Director of the office who will have a lasting impact on the creation and effectiveness of this office. I look forward to the job description being posted and encourage you all to recommend strong candidates for the job. The SEC must by law undertake to increase diversity at every level of the agency’s workforce. I look forward to this new Office leading the charge and I promise you that I will provide it with all the support that I can.

Diversity in the Boardroom

Lack of Diversity in Corporate Boardroom

Another area that needs attention is the persistent lack of diversity in our corporate boardrooms. Many studies indicate that diversity in the boardroom results in real value both for companies and their shareholders. 8

Notwithstanding these studies, there is a persistent lack of diversity in corporate boardrooms across this country — women and minorities remain woefully underrepresented. In 2008, for example, the Alliance for Board Diversity compiled statistics about the composition of the boards of directors of Fortune 100 companies and found that the majority of board members, 71.5%, were white men, and that only 28.5% of the board seats were held by women and minorities.9

Given the apparent lack of diversity and the many studies that indicate the real economic benefits of diverse boards, it should be no surprise that many investors — from individual investors to sophisticated institutions — have requested that companies provide information about the diversity of their corporate boards and about their policies related to board diversity.

New SEC Rule Regarding Diversity Policy Disclosure

To that end, in 2009 I worked with SEC staff to seek formal input as to whether investors and other market participants required greater information regarding diversity in the boardroom. In response,10 we were deluged with letters. These letters were overwhelmingly supportive, with approximately 90% expressing support for disclosure of information related to race and gender diversity on the board.

We received letters from persons and organizations representing over $3 trillion dollars in assets emphasizing that information about board diversity is important in the assessment of companies that they own. When such a sizeable portion of the U.S. capital markets tells the Commission that they seek diversity-related information for their decisions, it is incumbent on the SEC to respond.

Accordingly, last December, the Commission, for the first time, adopted a rule to assess a company's commitment to developing and maintaining a diverse board. Specifically, public companies are now required to disclose

  • whether diversity is a factor in considering candidates for nomination to the board of directors;
  • how diversity is considered in that process; and
  • how the company assesses the effectiveness of its policy for considering diversity.

A review of the filings already made indicates that although some companies have done a good job and provided useful information, many companies could do better. I have asked our staff to consider how this situation can be improved and I expect better disclosures in the future.


The disheartening statistics and persistent lack of diversity that we see across the financial regulators and corporate boardrooms speak volumes; there is much work to be done. I look forward to working together to changing the dialogue on diversity to one of action. There are significant opportunities for change in front of us including the 800 new people to be hired by the SEC and the establishment of new Offices of Women and Minority Inclusion at all of the financial regulators. We cannot afford to let these opportunities slip through our hands. I promise to do my part.

Thank you.

1 Michael Fletcher. “Economy continues shedding jobs, posing challenge for Obama, Democrats.” The Washington Post. (October 8, 2010), available at http://www.washingtonpost.com/wp-dyn/content/article/2010/10/08/AR2010100802491.html

2 Id.

3 Id.

4 Greg Garber. “Thanks to Rooney Rule, doors opened.” ESPN.com. (February 9, 2007), available at http://sports.espn.go.com/nfl/playoffs06/news/story?id=2750645.

5 Id. See also, Antonio Gonzalez. “NFL gets ‘A’ for racial hiring; slow hiring women.” Associated Press. (September 29, 2010), available at http://www.thegrio.com/sports/nfl-gets-a-for-racial-hiring-slow-hiring-women.php.

6 “2010 Best Places to Work Rankings.” available at http://www.bestplacestowork.org/BPTW/rankings/.

7 Annalyn Censky. “SEC needs to add 800 jobs due to reform law.” CNNMoney.com. (July 19, 2010), available at http://money.cnn.com/2010/07/19/news/economy/

8 “Board Diversification Strategy: Realizing Competitive Advantage and Shareowner Value. See http://www.calpers.ca.gov/index.jsp?bc=/about/press/pr-2009/feb/diverse-boards-higher-performance.xml.

9 See Alliance for Board Diversity. “Women and Minorities on Fortune 100 Boards.” (January 17, 2008), available at http://www.catalyst.org/press-release/55/new-alliance-for-board-diversity-report-finds-little-change-in-diversity-on-corporate-boards.

10 Proxy Disclosure and Solicitation Enhancements, Securities Act Release No. 33-9052, Exchange Act Release No. 34-60280, 74 Fed Reg. 35076 (proposed July 17, 2009), available at http://www.sec.gov/rules/proposed/2009/33-9052.pdf.



Modified: 10/14/2010