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Inclusion is a Strength: Corporate America and the SEC Should Reflect America

Commissioner Luis A. Aguilar

U.S. Securities and Exchange Commission*

March 21, 2013

Recently I have had the privilege to speak at a number of forums to discuss the importance of diversity and inclusion in corporate America and in government agencies such as the SEC. I strongly believe that regulators and corporate America should reflect the broad range of American society. The following remarks are a compilation of my remarks delivered on (i) March 5, 2012, at the Greenlining Institute’s Diversity Summit in Washington, DC,1 (ii) March 5, 2013, at the SEC’s Unconscious Bias Training Seminar in Washington DC, (iii) March 16, 2013, at the Renaissance Gathering Dinner in Atlanta, Georgia,2 and (iv) March 19, 2013, at the Chicago United Annual Meeting in Chicago, Illinois.3

Diversity at the SEC

Before speaking about the many benefits of diversity and inclusion in Corporate America, I need to be upfront about my agency’s own diversity. For those not familiar with the SEC, let me describe our role. The SEC is the agency responsible for overseeing most of Wall Street and the capital markets. This includes oversight of approximately 35,000 entities, including about 12,600 investment advisers, 9,900 mutual funds and exchange traded funds (ETFs), and over 4,500 broker-dealers with more than 160,000 branch offices. In addition, we have the responsibility for administering a disclosure regime that covers more than 9,100 reporting companies.

When all is said and done, the SEC’s core mission is to protect investors. I strongly believe that a diverse workforce at the SEC is critical in order for the SEC to achieve its core mission; however, and, to put my cards on the table, the SEC has much to do in order for its workforce to reflect the communities we live in. The statistics reflect that 31.6% of the SEC’s workforce was comprised of people of color in 2012, and that just 12.9% were at the senior employee level. The most telling numbers are those relating to our senior officers. As of fiscal year 2012, the SEC’s senior officers were approximately 86.7% white, while 5.5% were African-American, 3.9% Hispanic, and 3.1% Asian-American. The gender breakdown among these officers is 68.8% male and 31.3% female. Clearly these numbers can be improved. Unfortunately, though our lack of diversity is well-known and has been publicly discussed, the SEC’s recent hiring activity has not resulted in much improvement in our numbers. The SEC just hired 567 employees for fiscal year 2012 and the first quarter for fiscal year 2013, and, with respect to the attorneys hired by the SEC, 38.5% were women and only 16.6% were persons of color.4 We can, and must, do better.

A recent event also speaks to the SEC’s lack of diversity. At the end of February 2013, I spoke at the annual “SEC Speaks” conference, in which the SEC’s leadership reviews the agency’s efforts over the past year and previews the year to come. Every panelist who spoke was a member of the SEC staff. I was pleased to see that 27 of the 53 SEC representatives that served as panelists at the conference were women. However, I was struck by the lack of racial and ethnic diversity. During the two-day conference, there were only two African-Americans, one Hispanic, and two Asian-Americans on the panels. This failure to reflect the at-large community the SEC serves is simply unacceptable.

I am concerned that the persistent lack of diversity at the SEC is resulting in the exclusion of many qualified women and minorities. The SEC senior staff making the hiring decisions must understand the continuing lack of diversity and they must undertake to break down the barriers to finding 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.”5 In order to achieve a workforce at the SEC that reflects America, there needs to be established internal processes to ensure that diverse individuals are recruited, hired, trained, mentored, and promoted. Attracting diverse candidates is an opportunity not only to add important — and high quality, skilled employees to the SEC — but also to change the face of the SEC to be more representative of the United States.

I am optimistic that a recent mandate in the Dodd-Frank Act will have positive results in effecting policies and process that will promote diversity and inclusion results at the SEC. Section 342 of the Dodd-Frank Act requires that “each agency shall establish an Office of Minority and Women Inclusion that shall be responsible for all matters of the agency relating to diversity in management, employment, and business activities.”6 The creation of this office — sometimes referred to as OMWI — will hopefully result in focused efforts to bring qualified minorities and women to the SEC and to foster an environment where they can be successful.

Regrettably, the SEC was one of the last agencies to hire a Director for the OMWI Office, so that already has us in a “catching-up” mode. But, I am committed to improving the diversity of the SEC’s workforce and will work closely with the SEC’s OMWI Office, and with the Office of Human Resources, and SEC employees to do just that. A major part of my commitment is reflected in my willingness to serve as chairman of a new Diversity Council being formed at the SEC. It is anticipated that the Diversity Council will serve as a body that will have oversight of all of the SEC’s diversity activities, in order to ensure that there is full transparency and progress in the SEC’s diversity efforts in hiring, retention, and promotion of employees. The ultimate goal of the SEC’s Diversity Council is to have an SEC that is more diverse and inclusive.

Diversity in Corporate America

Sadly, the private sector has done even worse when it comes to the recruitment, retention, and promotion of people of color. Reports show that women and persons of color continue to be severely underrepresented on corporate boards7 and in corporate leadership.8

According to a review of the Fortune 500® companies by the Alliance for Board Diversity (“ABD”), in 2010, white men held 74.5% of the board seats and white women held 12.7% of the seats; in contrast, minority men represented only 9.9% of the directors; and minority women just 3.0%. In 2010, ABD counted 32 Fortune 500® companies without a single woman or person of color on the board.9 That’s a lot of boards ignoring a lot of qualified talent.

The director totals for this group of companies include 7.6% African-Americans (compared to 12.6% of U.S. population), 3.0% Hispanics (compared to 16.3% of U.S. population), 2.1% Asian Pacific Islander (compared to 4.8% of U.S. population), and women held fewer than 16% of the board seats (while comprising more than half the U.S. adult population).10 Clearly, these are disappointing statistics.

These statistics fly in the face of multiple studies that show that diverse boards perform better than non-diverse boards.11 As a result, in recent years, investors,12 academics,13 consultants,14 and some corporate insiders15 have asked for companies to become more diverse. As one investor put it:

Diversity is a critical attribute to a well functioning [sic] board and an essential measure of good governance. In an increasingly complex global marketplace, the ability to draw on a wide range of viewpoints, backgrounds, skills, experience and expertise internally increases the likelihood of making the right decisions. Director and nominee diversity that includes race, gender, culture, age, and geography helps to ensure that different perspectives are brought to bear on issues, while enhancing the likelihood that proposed solutions will be nuanced and comprehensive.16

Diversity also enhances a company’s responsiveness to an increasingly diverse world of customers and stakeholders.17 In 2012, Forbes published the results of a comprehensive survey of more than 300 senior executives from geographically diverse companies that had revenues of at least $500 million and went up to more than $20 billion.18 Their findings were noteworthy: 85% of executives agreed that a “diverse and inclusive workforce brings the different perspectives that a company needs to power its innovation strategy.”19

The benefit of diversity in bringing new perspectives into a group’s discussion is bolstered by academic research. One study found that “there is a lot of evidence that people’s identity groups — ethnic, racial, sexual, age — matter when it comes to diversity in thinking.20” The study states that these cognitive differences help organizational performance because people from different backgrounds have different “tools” or “varying ways of looking at problems.”21 The study argues the sum of these tools is far more powerful in organizations with diversity.22

Unfortunately, publicly-traded companies in the private sector have performed even worse when it comes to diversity in their top management. A recent report 23 that illustrated the lack of diversity in the leadership at Fortune 500® companies provided that as of December 30, 2012, there were only:

  • Six Black CEOs or 1.2% of all Fortune 500® CEOs;
  • Six Latino CEOs or 1.2% of all Fortune 500® CEOs;
  • Seven Asian-American CEOs or 1.4% of all Fortune 500® CEOs; and
  • Twenty-one women CEOs or 4.2% of all Fortune 500® CEOs.

So, in light of the benefits that diversity and inclusion appear to have, the question remains as to why, so many entities fail to have representative diversity on their boards or in senior leadership positions.24 To my mind, there really aren’t any good answers to this question.

Shining a Light on Diversity and Inclusion

However, in response to the demands of shareholders and others seeking greater information about diversity on corporate boards, in 2009 the SEC adopted a new rule that requires U.S. publicly-traded companies to disclose in their annual proxy statements whether, and if so how, a corporate board or nominating committee considers diversity in identifying nominees for director. If the company has a policy regarding the consideration of diversity in identifying director nominees, the proxy statement must disclose how this policy is implemented, as well as how the company assesses the effectiveness of its policy.25 This requirement is not limited to companies with a written policy; and companies with de facto policies regarding board diversity must disclose such policies as well. Although the rules do not define diversity for this purpose, and companies may define diversity in various ways, numerous commenters cited by the Commission have made clear that investors are particularly interested in board policies regarding gender and/or racial diversity, and find such information useful in making voting and investment decisions.26

As a result, there are many that believe that to truly meet the needs of investors, a proxy statement would need to state the gender and racial or ethnic background of incumbent directors and nominees, and whether or not the board or nominating committee takes such aspects of diversity into account in identifying and/or evaluating potential board candidates. The proxy statement should disclose how the board defines diversity. If a company has no women or persons of color on its board, it should state whether or not it has considered addressing this lack of diversity — and if not, why.

I know that many public companies already provide good disclosure on board diversity and diversity policies. Moreover, a recent study has shown that over half (54) of S&P 100 companies disclose some level of diversity data, such as the percentage of women employees or number of new minority hires.27 However, many companies can, and must, do better.

To that end, I would like to highlight those groups that are engaged in efforts to promote diversity in the boardroom. Many institutional investors, as well as non-profit organizations, business leaders, and government officials, continue to advocate vigorously for greater diversity in senior management and corporate boards. These groups have found various ways to engage constructively with public companies. These efforts include voting against the election of any slate of directors nominated by management, if the slate would result in a board that has no women or minority members.28 Diversity advocates also write letters to management and ask direct questions regarding diversity policies at annual meetings of shareholders. In the last 12 months, a group of advocates and investors — whose members include asset managers with over $1.2 trillion under management — wrote letters to 168 public companies with no women on their boards, and this year investors affiliated with that group have filed shareholders’ resolutions with more than 20 of these companies.29 The shareholder resolutions urge companies to adopt charter language supporting board diversity and to institute a practice of including women and minority candidates on their boards.30 Such coordinated action makes a powerful statement, and has been instrumental in promoting real change. Some investors report that their portfolio companies are more responsive to discussing board diversity, as compared to five years ago.

There are also many resources available to public companies as they endeavor to achieve greater racial, ethnic, and gender diversity on their corporate boards. A number of organizations devote considerable time and effort to train and identify potential diverse candidates.31 Some executive search firms are also noted for their expertise in diversity searches.32 In addition, there are databases that act as clearinghouses for potential director candidates, with emphasis on a more diverse range of backgrounds, perspectives, skills, and experience.33

I encourage those here today that work for public companies, to look at their proxy statements and determine if their disclosure adequately meets the needs of investors, and I ask the shareholders in these companies to do likewise. I look forward to the day when corporate boards reflect the diversity of our communities.


It is clear that the SEC and the private sector can do better. Obviously, there is much that needs to be done to develop proactive and effective programs to identify and recruit existing qualified minorities and women. They have much to contribute.

As President Obama has put it:

Our nation derives strength from the diversity of its population and from its commitment to equal opportunity for all. We are at our best when we draw on the talents of all parts of our society, and our greatest accomplishments are achieved when diverse perspectives are brought to bear to overcome our greatest challenge.34

I completely agree with the President. Throughout my career, I have been supportive of efforts to create a diverse workforce and ensuring that opportunities are available to everyone regardless of race, gender, ethnicity, or national origin. As we can all see, a lot of work still needs to be done to achieve this goal. There is no doubt in my mind that women and minorities have a lot to contribute to our nation — and that includes enhancing how companies perform. Better performing companies grow larger, hire more workers, and make our economy stronger. That’s a goal we can all agree on.

* The views expressed by Commissioner Luis A. Aguilar are his own and do not necessarily reflect the views of the U.S. Securities and Exchange Commission (“SEC”), his fellow Commissioners, or members of the staff.

1 The Greenlining Institute is a national policy, organizing, and leadership institute working for racial and economic justice. See,

2 The purpose of the Renaissance Gathering Dinners is to form personal relationships and facilitate word of mouth that helps diverse leaders advance in top leadership across all sectors of America.

3 Chicago United is an advocacy organization made up of racially diverse CEOs and executive level management who increase economic opportunity for all races by promoting multiracial leadership development in corporate governance, the leadership pipeline and business partnerships. See,

4 In aggregate, 70% of the SEC’s new hires (which includes professional and support staff) for the fiscal year 2012 and the first quarter of 2013 were Caucasian, 13.9% were African-American, 2.8% were Hispanic, and 12.3% were Asian-Americans. Thirty-nine percent of the SEC’s new hires during this period were women.

5 Luis Aguilar, Commissioner, U.S. Securities and Exchange Commission, “An Update on Diversity and Financial Literacy,” Washington, DC (April 30, 2011), available at

6 See, Dodd-Frank Wall Street Reform and Consumer Protection Act, Pub. L. 111-203, § 342(a)(1)(A) (2010) (Title III, Subtitle D, Other Matters).

7 See, “ Examining the Cracks in the Ceiling: A Survey of Corporate Diversity Practices of the S&P 100” Calvert Investments (March 2013), available at (the study provides that since 2010, the overall percentage of women serving on S&P 100 boards rose just 1% from 18% to 19%).

8 See, DiversityInc, “Where’s the Diversity in the Fortune 500 CEOs?” available at

9 The statistics in this paragraph are from “Missing Pieces: Women and Minorities on Fortune 500 Boards,” 2010 Alliance for Board Diversity Census (revised, July 21, 2011), available at

10 Id.

11 See, “Examining the Cracks in the Ceiling: A Survey of Corporate Diversity Practices of the S&P 100,” Calvert Investments (March 2013), available at; and “Is There a Payoff from Top-Team Diversity: Between 2008 and 2010, Companies with More Diverse Top Teams were also Top Financial Performers,” Thomas Barta, Markus Kleiner, and Tilo Neumann, McKinsey Quarterly (April 2012).

12 See, e.g., SEC File No. S7-13-09, letters from: Calvert Group, Ltd (September 16, 2009); California Public Employees’ Retirement System (September 16, 2009); General Board of Pension and Health Benefits of The United Methodist Church (September 15, 2009); and Boston Common Asset Management, LLC (September 14, 2009), available at

13 See, e.g., James A. Fanto, Lawrence M. Solan, and John M. Darley, Justifying Board Diversity, 89 N.C. L. Rev. 901, 930-934 (2011); and Renée B. Adams & Daniel Ferreira, Women in the Boardroom and Their Impact on Governance, 94 J. Fin. Econ. 291, 308 (2009).

14 See, e.g., Board Diversification Strategy: Realizing Competitive Advantage and Shareowner Value, Virtcom Consulting (2009), available at

15 See, Lissa L. Broome, John M. Conley, and Kimberly D. Krawiec, Dangerous Categories: Narratives of Corporate Board Diversity, 89 N.C.L. Rev. 759, 760 (2011).

16 See, SEC File No. S7-13-09, letter from Calvert Group, Ltd, (September 16, 2009).

17 See, SEC File No. S7-13-09, letter from Trillium Asset Management (September 15, 2009).

18 Forbes Insight Innovation Through Diversity (2011), available at

19 Id.

20 Scott E. Page, The Difference: How the Power of Diversity Creates Better Groups, Firms, Schools and Societies (Princeton, NJ: Princeton University Press, 2007).

21 Id.

22 Id.

23 See, DiversityInc, “Where’s the Diversity in the Fortune 500 CEOs?” available at

24 Supra Note 8. Well over half (56%) of S&P 100 companies have no women or minorities in their highest-paid senior executive positions. While women make up 19% of S&P 100 board of director positions, they represent only 8% of the highest-paid executives.

25 17 C.F.R. 229.407(c)(2)(vi).

26 Release No. 33-9089, notes 116-117, note 193.

27 Supra Note 8.

28 See, e.g., Domini Social Investments, “Shareholder Activism:  Your Dollars at Work for Change,” available at

29 Press Release, Thirty Percent Coalition, “Institutional Investors file Shareholder Resolutions Encouraging Diversity in Company Charter Language and in the Corporate Boardroom” (February 28, 2013), available at

30 Id. This initiative was led by The Thirty Percent Coalition Institutional Investor Committee, co-chaired by Janice Hester-Amey, portfolio manager with the California State Teachers Retirement System (CalSTRS), and Timothy Smith, senior vice president with Walden Asset Management. Resolutions were also filed by Calvert Investments and Trillium Asset Management.

31 See, e.g., Catalyst (; InterOrganization Network (; Watermark Institute Board Access (; Executive Leadership Council (; Hispanic Association on Corporate Responsibility (; New America Alliance (; and Director Diversity Initiative (

32 See, e.g., The Prout Group (, Diversified Search (

33 See, e.g., Diverse Director DataSource ( The Diverse Director DataSource, or “3D,” was commissioned by the California Public Employees’ Retirement System (CalPERS) and CalSTRS, and is operated by GMI Ratings.

34 See, Executive Order 13583 — Establishing a Coordinated Government-wide Initiative to Promote Diversity and Inclusion in the Federal Workforce, available at

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