Yesterday it was announced that two financial firms, Goldman Sachs and MetLife, will start publicizing their diversity statistics – specifically, they will make public information regarding the gender and racial make-up of their workforce, including that of senior management.
The announcement comes following pressure by New York City Comptroller John Liu, who serves as investment adviser, trustee and custodian of five the city’s largest pension funds: New York City Employees’ Retirement System, Teachers’ Retirement System, New York City Police Pension Fund, New York City Fire Department Pension Fund, and Board of Education Retirement System. The funds hold 1,236,363 shares of Goldman Sachs and 2,342,129 shares of MetLife.
In recent times, companies have faced increasing outcry from investors to increase diversity, as research shows companies with more diversity tend to perform better. Liu said, “Studies have shown the benefits of a diverse workforce on company performance and long-term shareowner value, and many companies say they are making serious efforts to recruit, retain and promote women and minorities.”
He added, “But without quantitative disclosure, shareowners have no way to evaluate the effectiveness of these efforts. We appreciate Goldman Sachs and MetLife taking this important step to demonstrate their commitment to equal employment opportunities.”
According to the Office of the Comptroller, several firms have been asked to provide these statistics – and Goldman Sachs and MetLife are leading the way.
Transparency and Diversity
Large firms already provide this information to the federal government as part of the 1964 Civil Rights Act. Making it public goes one step further – holding companies publicly accountable, and accountable to investors, regarding their work toward diversity and inclusion.
“Transparency is key for ensuring equal pay as well as equal opportunity for workers of all backgrounds,” said Beverly Neufeld, President of New York Women’s Agenda and Director of the Equal Pay Coalition NYC. “This agreement creates that and underscores just how much willing and interested leaders in government and in business can do together to address inequality in the workplace.”
The disclosure will also provide insight into which diversity programs are working and which need to be retooled. And it’s clear that some efforts are not working – particularly those aimed at strengthening the pipeline women and minorities into leadership roles. In the past fifteen years, the percentages of women and minorities in leadership has not changed much. According to a press release, “In 2008, white men held 64% of these jobs, or more than twice as many jobs as white women, which held only 27%. Together, minority men and women held less than 10% of executive positions at financial firms, with African-Americans holding 2.8%, Hispanics 3%, and Asians 3.5%.”
According to Chloe Drew, Executive Director of the Council for Urban Professionals, the move toward transparency is welcome, if unexpected. “I’m happily surprised,” she said. “And I think recent research, like McKinsey’s recent study on diversity, shows that this is not just a ‘nice to do.’ It’s good business sense.”
According to the study, “for companies ranking in the top quartile of executive-board diversity, ROEs were 53 percent higher, on average, than they were for those in the bottom quartile.”
Statistics like this are not rare and they make a good case for corporate efforts to increase diversity within their ranks. It also provides pension funds with a reason to require disclosure of this kind of information – they want to invest in smart companies.
But despite the research, diversity tends to thin out at the middle and upper levels of firms. Drew suggested that some companies may not be doing enough when it comes to leadership and development for women and minorities. She discussed a new program that CUP is launching called Leader Engagement and Development (LEAD). The initiative was designed in response to a survey of CUP members, which showed that diverse professionals felt that their companies were not providing enough leadership development opportunities for them. LEAD will provide access to mentoring and sponsorship for these individuals, as well as external guidance and feedback that can help diverse professionals remain in the pipeline to the executive suite.
Diversity is also quickly becoming a recruiting tool, Drew pointed out. “I think transparency is always better because it can be used as an attractive quality for a firm.”
By leading the way on diversity transparency, Goldman Sachs and MetLife will encourage other companies within the financial industry as well as other sectors to publicize their own diversity statistics, while positioning themselves as employers of choice for top performers. Both companies will make the statistics available later this year. On the other hand, advertising group Omnicon declined to make their information public. The advertising industry is frequently called out for its lack of diversity.