Complying with the Dodd-Frank Diversity and Inclusion Standards

Transcription

1 Complying with the Dodd-Frank Diversity and Inclusion Standards Association of Corporate Counsel Arizona Chapter Tuesday, November 17, 2015 Dee Spagnuolo Partner Ballard Spahr LLP

2 Agenda Introduction Section 342 of the Dodd-Frank Act Overview of the Standards Focus Areas and Compliance Approaches Voluntary Nature of the Standards Why Comply? Questions and Answers 2

3 Dee Spagnuolo, Esquire Partner, White Collar Defense/Internal Investigations Ballard Spahr LLP Dee Spagnuolo s practice focuses on internal investigations and compliance and regulatory matters. She represents clients in the development and implementation of their diversity and inclusion programs, and is a member of Ballard Spahr s Diversity Council. 3

4 Section 342 of Dodd-Frank 4

5 Section 342 of Dodd-Frank: Background The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 Pub.L.No (2010) was signed into law July 21, 2010, in the wake of the 2008 financial crisis Dodd-Frank s regulatory and compliance objectives are to: - Increase financial marketplace transparency and stability - Identify, monitor, and reduce systemic risks Section 342 contains Dodd Frank s Diversity and Inclusion Objectives 5

6 Section 342 of Dodd Frank: Objectives Objectives of Section 342 Address the under-representation of women and minorities in the financial services industries and public companies by focusing on transparency and awareness of diversity and inclusion policies within: - Federal financial services agencies, including the SEC - Entities that are regulated by these agencies - Entities that contract with these agencies 6

7 Section 342 of Dodd-Frank Mandated the creation of an Office of Minority and Women Inclusion (OMWI) in each Agency Each OMWI is responsible for all agency matters relating to diversity in management, employment, and business activities Directed the OMWIs to: - develop standards for... assessing the diversity policies and practices of entities regulated by the agency. 7

8 The Numbers 8

9 Section 342 of Dodd-Frank: The Numbers Underrepresentation of minorities and women at executive and senior level positions in finance/insurance industries: White Males: 31% of total workforce - but 64% of executive and senior level positions Women: 59% of the total workforce - but only 29% of executive and senior level positions African Americans: 12% of total workforce - but only 3% of the executive and senior level positions Hispanics: 8% of total workforce - but only 3% of the executive and senior level positions 70% 60% 64% Workforce and Executive/Senior Level Position Comparison by Race and Gender 59% Total Workforce 50% 40% 30% 31% 29% Executive/Senior Level Positions Other: Other POC 20% 10% 0% 12% 8% 7% 3% 3% 4% White Men Women African Americans Hispanics Asian Americans Other POC Source: EEOC 2013 Job Patterns for Minorities and Women in Private Industry (EEO-1), 2013 EEO-1 National Aggregate Report by NAICS-2 Code (Finance and Insurance) (2013). 2% 1% 9

10 The Standards 10

11 The Standards Published June 10, 2015 The Standards apply to all entities regulated by: - Board of Governors of the Federal Reserve System - Consumer Financial Protection Bureau (CFPB) - Department of the Treasury, Federal Deposit Insurance Corporation (FDIC) - National Credit Union Administration (NCUA) - Officer of the Comptroller of the Currency (OCC) - Securities and Exchange Commission (SEC) 11

12 The Standards Standards span four focus areas - Organizational commitment to D&I - Workforce profile and employment practices - Procurement and business practices - Promoting transparency of organizational D&I Self-assessments play a critical role Compliance is not a one-size-fits-all approach 12

13 The Standards Standards address: - Diversity of minorities and women, but may include other communities (e.g., veterans, people with disabilities, LGBT) - Inclusion, defined as a process to create and maintain positive work environment that values individual similarities and differences Generally designed for companies of 100+ U.S. employees 13

14 Focus Areas 14

15 Organizational Commitment Assessment Factors Approaches Strategic Plan Supplier diversity and employment practices (hiring, recruiting, retention, and promotion) D&I Policy Approved and supported by senior leadership Progress Reports Board of directors Senior management Public report Training Regular training and educational opportunities on D&I Senior Level Official Chief Diversity Officer Internal Diversity Council Diverse candidate pools (including Board) Senior leadership pipeline succession planning Board pipeline nominating criteria 15

16 Workforce Profile and Employment Practices Assessment Factors Approaches Policies and Practices Diverse slates (not quotas) Talent & leadership development programs Mentorship and sponsorship programs Employee resource groups (affinity groups) Self-identification policies: people with disabilities; veterans; LGBT EEO Compliance Training: Mandatory workforce and supervisory programs with D&I focus Outreach: Diverse Pools Diverse recruiting events Partnerships/sponsorships with diverse organizations, e.g., internship, scholarship, fellowship programs University relations program Community-specific outreach, e.g., veterans hiring program, accessibility programs Metrics Quantitative and qualitative measurements of progress Employee surveys, focus groups Accountability Benchmarking; bonuses; performance evaluation system 16

17 Procurement and Business Practices Assessment Factors Approaches Supplier Diversity Policy Commitment to creating opportunities for diverse-owned businesses to compete Create and publish a Supplier Guide RFPs: include diversity & inclusion Create web portal for diverse-certified businesses to register Establish Tier II program for prime contractors to report Metrics Track annual spend and/or number of diverse vendors Measure as percentage of spend against majority vendors Set goals Include metrics in progress reports Outreach Partner with diverse supplier organizations and chambers of commerce Sponsor, host and/or attend events Publicize procurement opportunities 17

18 Promoting Transparency Assessment Factors Approaches Strategic Plan Publish strategic objectives through D&I report D&I Policy Publish commitment to diversity through website Create and disseminate public diversity report Include D&I as part of Corporate Social Responsibility Report Metrics Include metrics in published reports on D&I to demonstrate progress Opportunities Promote opportunities for diversity both internally and externally: o Employment opportunities o Procurement opportunities o Availability of internship or mentorship programs o Leadership development opportunities 18

19 Self-Assessment Assessment Factors Annual Self- Assessment Monitoring & Evaluation Approaches Conduct self-assessment of D&I policies, practices, progress Include interviews and program reviews with various departments, including HR, procurement, operations, ERGs, compliance, etc. Create and disseminate formal report of progress Create metrics to measure workforce and supplier diversity initiatives Monitor and evaluate performance on ongoing basis Include year-over-year metrics in annual self-assessment report Disclosure to Agency Voluntary: Disclose diversity policies and practices to OMWI Director or primary federal financial regulator Caution: It is unclear whether information submitted to agencies will be subject to disclosure under the Freedom of Information Act (FOIA) Public Disclosure Consider public disclosure of assessment information Standards confer discretion to decide type of information and level of detail 19

20 Other Considerations: Community Engagement Not specifically addressed in the Standards Track and analyze support of minority-led and minorityserving organizations Include data in D&I reporting Opportunity to celebrate successes, but not a replacement for other assessment factors 20

21 Why Comply? 21

22 Dodd-Frank Standards Are Voluntary Standards provide that they do not create new legal obligations and that use of Standards is voluntary Luis Aguilar (SEC Commissioner) dissented to voluntary nature of Standards, finding them woefully inadequate based on severe underrepresentation of minorities and women in the executive and senior level ranks of the financial services industry Stuart Ishimaru, Executive Director of CFPB s OMWI, stated that Standards are first step and that CFPB is developing plans to use Standards to engage with regulated entities and to encourage increased levels of diversity and inclusion 22

23 Why Comply? Value Added Companies that are more diverse regularly outperform companies that are not - Correlation with financial performance, market share, relative profits, stock prices, revenues, net income, and net profit margin - Key ingredient in a successful business strategy designed to maintain and enhance competitive advantage 23

24 Why Comply? Value Added Diverse teams are more productive and generate more innovative solutions to problems - Sparks debate around a task and results in different people bringing the wealth of their backgrounds to address the problem - Problem-solving improves due to new ideas and more careful information processing 24

25 Why Comply? Talent Acquisition Demographic changes are inevitable Understanding those changes is critical to maintaining and increasing market share A diverse and inclusive workforce is key to attracting and retaining top talent - Recruiting, retaining, and promoting diverse employees essential to success - Workforce strategy must include measures aimed at attracting and retaining the best, regardless of ethnicity, gender, or other diverse characteristics 25

26 Why Comply? Regulatory Perspective - Firms do not want to stand out as opting to ignore D&I when asked by regulators It s the Right Thing to Do - From a corporate social responsibility perspective in world that is increasingly diverse and global 26

27 Questions and Answers 27