Keynote Speech by SEC Commissioner:
Still Fighting for Inclusion and Equal Opportunity
Commissioner Luis A. Aguilar
U.S. Securities and Exchange Commission
Latin American Association's 22nd Annual Compaņeros Award Luncheon
April 21, 2011
Thank you for that kind introduction. It is my pleasure to be speaking at the Latin American Association’s 22nd Annual Compaņeros Award Luncheon. Before I continue, however, 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.
It’s a particular pleasure to be back among friends honoring an organization that I hold in such high esteem. Over the last two decades, my significant involvement with the Latin American Association led my wife to affectionately refer to the LAA as my second home. Over the years, I enthusiastically served as the chair of almost every LAA Board Committee as well as a term as the LAA’s Chairman. I am very proud of my contribution to the LAA and of all that the organization has done to improve and serve the community.
What has also become clear is that the LAA’s mission and the services it provides have never been more critical than right now.
The economic challenges facing many citizens of this country are significant and dire. It has been reported that 1 out of 7 Americans is living in poverty.1 According to a recent report by the U.S. Department of Labor the unemployment rate for African Americans is a staggering 15.5% and the unemployment rate for Hispanics is 11.3%.2 Those numbers are significantly higher than the overall 8.8% unemployment rate.3 Also, it is important that I clarify that these reported numbers I have just cited do not include or account for the millions of Americans who “wanted and were available for work” but have stopped looking because “they believe no jobs are available for them.”4
While it is a tough time for all American workers, workers in communities of color are disproportionately impacted. In fact, a recent poll found that “African American and Hispanics were more likely to lose jobs, face foreclosures and lose health insurance coverage.”5 Thus, it is essential to have organizations like the Latin American Association providing basic social services right now.
The LAA, through its vital work, has consistently embodied the themes cited in the brochure for today’s luncheon: to inspire, to empower, and to make a positive impact. As we have just discussed, the need for these core services has never been greater.
I want to spend my time today discussing the importance of diversity, and, in particular, the need for the financial services community to embrace the nation’s growing diversity. I believe that in order for this to be achieved there must be greater inclusion and equal opportunity- and I believe that concerted action is required right now. In fact it is past due.
Commitment to Diversity
As many of you know, I have been a vocal and consistent advocate of greater diversity my entire life — and certainly that is true of my time in Atlanta, having served in the leadership of several organizations that foster diversity.
I have become more convinced than ever of the benefits of diversity and throughout my tenure as a Commissioner I have been quite vocal about the need for a diverse workforce at the SEC, in the financial services industry, and in corporate boardrooms. I was recently humbled when one of the nation’s leading Asian American organizations wrote that “No federal commissioner has been a greater supporter of diversity and the opportunities it creates for corporate America than [me].”6
I am also a strong supporter of expanding financial education and literacy in the Hispanic, African American and other minority communities. I believe that the lack of financial education has resulted in the small number of investments made by Hispanics and African Americans. A recent survey indicated that only 46% of African Americans and 32% of Hispanics indicated that they participated in an individual retirement account or any similar retirement plan. The same survey indicated that only one in six Hispanics and one in four African Americans reported owing stocks, bonds or mutual funds. By contrast, 50% of whites indicated that they own stocks, bonds or mutual funds and two-thirds indicated that they held IRAs, 401(k)s or had other similar holdings.7
Additionally, minority communities still lag far behind whites in another staple financial instrument: holding a checking or savings account. Over 21% of black households are “unbanked” meaning that they do not have a checking or savings account. Further, over 19% of Hispanic families and 15% of Native American families are also “unbanked.” Compared with the approximately 3% of white households who are “unbanked,” this gap reflects a significant problem in our basic financial literacy education, especially in our minority communities. We clearly must do a better job to provide all Americans with a comprehensive education in sound personal finance.8 Their future financial well-being is at stake.
The SEC has a role to play in basic investor education and I have urged the staff to pay particular attention to the needs of minority communities.
The SEC’s Basic Structure and Leadership
Let me take a moment to talk about the SEC and my current role. I am one of five members who compose the leadership of the United States Securities and Exchange Commission. The Commission is an independent federal agency that oversees our nation’s capital markets. The SEC’s well-established mission is to protect investors, maintain fair and orderly markets, and facilitate capital formation. SEC regulations help to ensure that investors receive the information they need to make informed decisions about public companies and other investments. In addition, the SEC also oversees key participants in the securities industry, including securities exchanges, securities brokers and dealers, investment advisers, and mutual funds, just to name a few. Of course, the SEC garners the most headlines for its role as a law enforcement agency. SEC enforcement actions against people who engage in insider trading and other kinds of fraud and misconduct are essential to strong capital markets. I have often said that rules on the books are not meaningful unless they are backed by a strong enforcement program.
The events of the last several years have provided a sobering reality check that the SEC’s mission and regulatory activities are more important now than ever. In many ways, the financial meltdown and my responsibilities as an SEC Commissioner have made me even more aware of the benefits of diversity. I believe that a diverse workforce makes us stronger and that a diverse and inclusive SEC will in turn be a stronger and more effective regulator.
In particular, I want to focus on the work that the SEC, the financial industry and corporate America need to do to reflect America’s diverse communities.
Lack of Diversity at the SEC
To that end, let me focus on diversity at the SEC — or should I say the lack of diversity at the SEC. While 32 percent of the SEC work force comprised people of color in 2010, only 19% of our attorneys were people of color. The most telling numbers are of our senior officers. As of fiscal year 2010, the SEC’s senior officers were approximately 90% white, 3% African-American, 2% Hispanic and 2% Asian. The gender breakdown among these senior officers is 69% male and 31% female.
Unfortunately, the 2010 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.9 While the numbers were disappointing across the board, I was particularly struck by the fact that our staff ranked the SEC 24th out of 28 agencies in support for diversity.
Moreover, I find it puzzling that the SEC, an agency known for championing full and fair disclosure, does not publicly release its EEOC data on its workplace diversity. All covered federal agencies, of which the SEC is one, are required to file an annual report with the Equal Employment Opportunity Commission, entitled the “Federal Agency Annual EEO Program Status Report.” Many federal agencies, including ones with much larger workforces — most notably, the United States Army, the Department of Veterans Affairs, and the Department of the Interior — publically disclose these reports which include data on the gender, racial, and ethnic makeup of their respective workforces. I think it is time that the SEC should do the same.
The more I think about the SEC’s needs for qualified staff, the more I believe that the staff needs its own Rooney Rule.
The Rooney Rule has been instrumental in helping another organization correct a glaring lack of diversity — the National Football League, the NFL. 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.10
In 2002, 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 diversify the pool of qualified candidates and in turn, position qualified candidates that may not have been thought about in the first instance in front of those doing the hiring. Thus, the Rooney Rule guarantees that a given candidate pool for a head coaching position has at least one minority candidate — insuring a minimum level of diversity in the pipeline.
To put the lack of diversity among NFL head coaches in perspective, there were only two minority head coaches in the NFL prior to the Rooney Rule being enacted. After the Rooney Rule that number rose dramatically and currently, 7 head coaches or approximately twenty-two percent of the league’s 32 coaches are individuals of color.11 This effort to expand the pool of 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 six Super Bowls have been won by teams with African-American head coaches — and one of the two coaches in this year’s Super Bowl was African American.
The NFL moved from lip service to action and it is time for the SEC to do the same. Given the SEC’s tremendous responsibility in regulating the nation’s capital markets, the agency can only be strengthened if its workforce reflects the America we live in. No search can be comprehensive if the talent pool is homogenous and artificially limited.12
Diversity in the Capital Markets and in the Boardroom
So, how is the rest of America doing?
Lack of Diversity in the Securities Industry
The SEC is not alone in needing to better reflect the America we live in. The lack of diversity in the securities industry is particularly acute. A recent report found that the percentages of African Americans and Hispanics in senior-level management positions were just 2.8% and 3%, respectively.13 Clearly, the industry must do substantially better.
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.14
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.15
Given the 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.
Accordingly, in late 2009 the Commission adopted a rule requiring companies to disclose whether diversity is a factor in considering Board candidates and how the company assesses how effective the policy has been. The SEC staff has reviewed how companies are complying with this rule since it was adopted and, while some companies are providing informative disclosures, it is clear that many companies can do better. As you can expect, it appears that the companies with a good story to tell are telling it, while those embarrassed by their story tend to say little. I have asked the staff to continue to monitor this situation.
I know corporate boards can be improved by the inclusion of women and minority candidates and I look forward to the day corporate boards reflect our communities.
The disheartening statistics and the persistent lack of diversity that we see at the SEC, in the financial markets and in corporate boardrooms are unacceptable. Clearly, for things to improve we must all do our part.
I am glad that the LAA is here to do its part. In fact, the LAA is needed now more than ever. According to the 2010 Census, one in six Americans is now Hispanic, and over 25% of children under ten are now Hispanic. In addition, the Hispanic community accounted for an astounding 56% of the nation’s population growth over the past decade. Organizations like the LAA are vital to keeping up with the needs of the growing community.
To return to today’s themes, I urge all of you to continue your efforts to inspire, to empower our communities, and to make a positive impact in the lives of our fellow citizens.
I promise to continue to do my part. Together, we will leave a legacy of positive change.
1 U.S. Census Bureau. “Census Bureau Releases Alternative Income and Poverty Estimates.” (January 4, 2011), available at http://www.census.gov/newsroom/releases/archives/poverty/cb11-06.html. It should be noted that the number of Americans living in poverty is much higher (1 in 6) as measured by the alternative income and poverty estimates released by Census Bureau on January 4, 2011.
2 Bureau of Labor Statistics Data. (April 1, 2011), available at http://www.bls.gov/news.release/empsit.nr0.htm.
4 Id. (Indicating that 2.4 million Americans were only marginally attached to the labor force). The unemployment rate soars to 16.7%, when it includes these persons and those who are working part-time for economic reasons. See, http://www.bls.gov/news.release/empsit.t15.htm.
5 Michael Fletcher. “Black, Hispanics hold few investments, poll shows.” The Washington Post (February 21, 2011), available at http://www.washingtonpost.com/wp-dyn/content/article/2011/02/21/AR2011022104350.html. See The Washington Post/Kaiser Family Foundation/Harvard University Race and Recession Survey, available at http://www.kff.org/kaiserpolls/upload/8159-T.pdf.
6 Faith Bautista. The National Asian American Coalition (formerly known as the Mabuhay Alliance) Letter to Commissioner Aguilar. (August 10, 2010).
7 Id. Michael Fletcher article in The Washington Post.
8 Catherine Rampell. “‘Unbanked’ America.” The New York Times. (December 4, 2009), available at http://economix.blogs.nytimes.com/2009/12/04/unbanked-america.
9 “2010 Best Places to Work Rankings.” available at http://www.bestplacestowork.org/BPTW/rankings/.
10 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.
11 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 and http://espn.go.com/sportsnation/rank?versionId=2&listId=709.
12 The United States Congress has made it clear that the SEC, and all other financial regulators, must undertake significant efforts to recruit and promote employees from all backgrounds. In particular, Section 342 of the Dodd-Frank Act requires that the SEC establish a new Office of Minority and Women Inclusion. This Office will be responsible for all SEC matters relating to diversity in management, employment, and business activities. The Director of this Office will be 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.
Moreover, Congress has directed that when the SEC enters into contracts with private companies and law firms, this Office must apply a policy that is designed to ensure, to the maximum extent possible, the fair inclusion of women and minorities in the contracting process. 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 that the contract be terminated.
13 Government Accountability Office. “Financial Services Industry: Overall Trends in Management-Level Diversity and Diversity Initiatives, 1993-2008.” (May 12, 2010), available at http://www.gao.gov/new.items/d10736t.pdf.
14 Virtcom Consulting. “Board Diversification Strategy: Realizing Competitive Advantage and Shareowner Value.” available at http://www.calpers.ca.gov/eip-docs/about/press/news/invest-corp/diversification-strategy.pdf.
15 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.