[House Hearing, 117 Congress]
[From the U.S. Government Publishing Office]
A REVIEW OF DIVERSITY AND INCLUSION
PERFORMANCE AT AMERICA'S
LARGE INVESTMENT FIRMS
=======================================================================
HYBRID HEARING
BEFORE THE
SUBCOMMITTEE ON DIVERSITY
AND INCLUSION
OF THE
COMMITTEE ON FINANCIAL SERVICES
U.S. HOUSE OF REPRESENTATIVES
ONE HUNDRED SEVENTEENTH CONGRESS
FIRST SESSION
__________
DECEMBER 9, 2021
__________
Printed for the use of the Committee on Financial Services
Serial No. 117-64
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]
__________
U.S. GOVERNMENT PUBLISHING OFFICE
46-509 PDF WASHINGTON : 2022
-----------------------------------------------------------------------------------
HOUSE COMMITTEE ON FINANCIAL SERVICES
MAXINE WATERS, California, Chairwoman
CAROLYN B. MALONEY, New York PATRICK McHENRY, North Carolina,
NYDIA M. VELAZQUEZ, New York Ranking Member
BRAD SHERMAN, California FRANK D. LUCAS, Oklahoma
GREGORY W. MEEKS, New York BILL POSEY, Florida
DAVID SCOTT, Georgia BLAINE LUETKEMEYER, Missouri
AL GREEN, Texas BILL HUIZENGA, Michigan
EMANUEL CLEAVER, Missouri ANN WAGNER, Missouri
ED PERLMUTTER, Colorado ANDY BARR, Kentucky
JIM A. HIMES, Connecticut ROGER WILLIAMS, Texas
BILL FOSTER, Illinois FRENCH HILL, Arkansas
JOYCE BEATTY, Ohio TOM EMMER, Minnesota
JUAN VARGAS, California LEE M. ZELDIN, New York
JOSH GOTTHEIMER, New Jersey BARRY LOUDERMILK, Georgia
VICENTE GONZALEZ, Texas ALEXANDER X. MOONEY, West Virginia
AL LAWSON, Florida WARREN DAVIDSON, Ohio
MICHAEL SAN NICOLAS, Guam TED BUDD, North Carolina
CINDY AXNE, Iowa DAVID KUSTOFF, Tennessee
SEAN CASTEN, Illinois TREY HOLLINGSWORTH, Indiana
AYANNA PRESSLEY, Massachusetts ANTHONY GONZALEZ, Ohio
RITCHIE TORRES, New York JOHN ROSE, Tennessee
STEPHEN F. LYNCH, Massachusetts BRYAN STEIL, Wisconsin
ALMA ADAMS, North Carolina LANCE GOODEN, Texas
RASHIDA TLAIB, Michigan WILLIAM TIMMONS, South Carolina
MADELEINE DEAN, Pennsylvania VAN TAYLOR, Texas
ALEXANDRIA OCASIO-CORTEZ, New York PETE SESSIONS, Texas
JESUS ``CHUY'' GARCIA, Illinois
SYLVIA GARCIA, Texas
NIKEMA WILLIAMS, Georgia
JAKE AUCHINCLOSS, Massachusetts
Charla Ouertatani, Staff Director
Subcommittee on Diversity and Inclusion
JOYCE BEATTY, Ohio, Chairwoman
AYANNA PRESSLEY, Massachusetts ANN WAGNER, Missouri, Ranking
STEPHEN F. LYNCH, Massachusetts Member
RASHIDA TLAIB, Michigan FRANK D. LUCAS, Oklahoma
MADELEINE DEAN, Pennsylvania TED BUDD, North Carolina
SYLVIA GARCIA, Texas ANTHONY GONZALEZ, Ohio, Vice
NIKEMA WILLIAMS, Georgia Ranking Member
JAKE AUCHINCLOSS, Massachusetts JOHN ROSE, Tennessee
LANCE GOODEN, Texas
WILLIAM TIMMONS, South Carolina
C O N T E N T S
----------
Page
Hearing held on:
December 9, 2021............................................. 1
Appendix:
December 9, 2021............................................. 33
WITNESSES
Thursday, December 9, 2021
Clements, Michael E., Director, Financial Markets and Community
Investment, U.S. Government Accountability Office (GAO)........ 11
Gadsden-Williams, Michelle, Managing Director and Global Head of
Diversity, Equity and Inclusion, BlackRock..................... 5
Pan, Eric J., President and CEO, Investment Company Institute
(ICI).......................................................... 6
Parker, Ronald C., President and CEO, National Association of
Securities Professionals (NASP)................................ 8
Taraporevala, Cyrus, President and CEO, State Street Global
Advisors....................................................... 10
APPENDIX
Prepared statements:
Clements, Michael E.......................................... 34
Gadsden-Williams, Michelle................................... 44
Pan, Eric J.................................................. 52
Parker, Ronald C............................................. 62
Taraporevala, Cyrus.......................................... 66
Additional Material Submitted for the Record
Beatty, Hon. Joyce:
Press release from the Diverse Asset Managers Initiative,
dated December 7, 2021..................................... 72
Wagner, Hon. Ann:
June 2021 GAO Report entitled, ``Report to the Ranking
Member, Subcommittee on Diversity and Inclusion, Committee
on Financial Services, House of Representatives, Financial
Services Industry--Factors Affecting Careers for Women with
STEM Degrees............................................... 73
Gadsden-Williams, Michelle:
Written responses to questions posed during the hearing by
Chairwoman Waters, and Representatives Wagner, Pressley,
Lynch, Dean, and Garcia.................................... 101
A REVIEW OF DIVERSITY AND
INCLUSION PERFORMANCE
AT AMERICA'S LARGE
INVESTMENT FIRMS
----------
Thursday, December 9, 2021
U.S. House of Representatives,
Subcommittee on Diversity
and Inclusion,
Committee on Financial Services,
Washington, DC
The subcommittee met, pursuant to notice, at 11:04 a.m., in
room 2128, Rayburn House Office Building, Hon. Joyce Beatty
[chairwoman of the subcommittee] presiding.
Members present: Representatives Beatty, Pressley, Lynch,
Tlaib, Dean, Garcia of Texas, Williams of Georgia; Wagner,
Budd, Gonzalez of Ohio, Rose, and Timmons.
Ex officio present: Representative Waters.
Chairwoman Beatty. The Subcommittee on Diversity and
Inclusion will come to order.
Without objection, the Chair is authorized to declare a
recess of the subcommittee at any time. Also, without
objection, members of the full Financial Services Committee who
are not members of this subcommittee are authorized to
participate in today's hearing.
As a reminder, I ask all Members to keep themselves muted
when they are not being recognized. The staff has been
instructed not to mute Members, except when a Member is not
being recognized by the Chair, and there is inadvertent
background noise.
Members are also reminded that they may only participate in
one remote proceeding at a time. If you are participating
today, please keep your camera on. And if you choose to attend
a different proceeding, please turn your camera off.
Today's hearing is entitled, ``A Review of Diversity and
Inclusion Performance at America's Large Investment Firms.''
I now recognize myself for 4 minutes to give an opening
statement.
When I became Chair of the first-ever Subcommittee on
Diversity and Inclusion, asset management was high on the list
of priorities that I wanted the subcommittee to focus on, not
only because of power, wealth, and the jobs it creates, but
also because of the limited data available in this space
suggesting it was one of the worst performers on diversity and
inclusion within the financial services sector.
Last Congress, as you will remember, we held a hearing on
diverse asset management and heard from: researchers at the
Knight Foundation; the founder of the largest African American-
owned asset management firm, John Rogers; and the Chicago
pension system, a leading institutional investor in diverse
asset management.
While this hearing demonstrated the breadth of the problem,
we need to hear directly from the country's largest asset
managers themselves and give them the opportunity to present us
with their own data. That is why I want to thank our Full
Committee Chairwoman Maxine Waters. Earlier this year, she and
I worked together, and through her leadership, we sent a letter
to the country's 31 largest asset management companies with
more than $47 trillion in asset management requesting their
diversity data, and their policies and practices.
After months of analysis, the committee staff published a
report earlier this week entitled, ``Diversity and Inclusion:
Holding America's Largest Investment Firms Accountable.'' This
wide-ranging report accounts for how America's largest asset
management companies approach diversity and inclusion with
respect to their workforce, their boards of directors,
procurement, asset management, underwriting, and practices and
policies.
Also, it includes several recommendations that Congress,
regulators, and companies can take to help ensure a more
diverse and inclusive asset management industry.
Now, here is what we have been waiting for: This report
found that women and minorities are underrepresented in C-
suites and on the boards of America's largest asset management
firms.
A little data: With women, representing 27.5 percent of the
C-suites and 28 percent of the board seats, and minorities
representing 17.3 percent of the C-suites and 17.5 percent of
the board suites, only a third of the companies reportedly
tracked diversity data with regards to the asset management
firms they do business with, and thus their business diversity.
They reported spending an average of .57 percent of total asset
management services with women-owned businesses and 3.9 percent
on minority asset managers. Only 21 percent of the companies
reporting tracked diversity data with regards to the
underwriting firms with which they do business.
These findings reinforce what we heard from John Rogers,
who sat where you are sitting now to testify, when he said,
``We must tackle inequality through business opportunity.''
While this report and this hearing will not transform the
industry overnight, we seek to bend the arc of progress and
expand employment and business opportunities for both men and
women, and minorities, by opening eyes and drawing attention to
the glaring inequities in this corner of our society.
And as I wrap up, let me simply say thank you to the
witnesses today, and thank all of the firms that participated
in the data submission for this report, and I look forward to
hearing the testimonies of our witnesses today.
Now, it gives me great honor to recognize the ranking
member of the subcommittee, a colleague, a friend, and someone
who takes diversity very seriously, and I am pleased to now
yield to the Honorable Ann Wagner for 5 minutes for an opening
statement.
Mrs. Wagner. Thank you, Chairwoman Beatty. You have been a
tremendous friend and colleague in this space and so many
others.
I want to thank our witnesses also for appearing before
this subcommittee to discuss diversity within the asset
management industry.
Studies have shown that across the financial services
industry, companies with a diverse workforce out-perform their
less-diverse peers. A study conducted by Sheen Levine, a
professor at Columbia University, found that, ``ethnically
diverse trader teams priced assets more accurately, therefore
yielding higher returns; while ethnic homogeneity promoted
conformity and mispricing.''
Despite strides in diversity and inclusion across the
banking sector, women and minorities within America's asset
management sector are still underrepresented. Progress is being
made, however, and today's witnesses will provide us with their
strategies that have proven successful, and also the challenges
their firms face in hiring and retaining a diverse workforce.
When looking at the report and the data gathered from 31
U.S. firms, it is important to remember that every firm has its
own story to tell. While an initiative or a program may yield
positive results for one firm, it may not for another. As Mr.
Pan, the President and CEO of the Investment Company Institute,
said in his testimony, some of their members have been engaged
in this area for many years and are leaders. But he also has
members who have more recently begun to engage on this issue.
Today's hearing should remain focused on what is working,
what needs improvement, and also learning about the overall
benefits of a diverse workforce.
In 2019, I requested a GAO study to assess how firms are
supporting increased participation among women in STEM programs
at the secondary, the undergraduate, and the graduate levels,
and what best practices firms are using to recruit and retain
women with STEM degrees.
Earlier this year, the GAO published this study, which I
would request be submitted for the record, Madam Chairwoman.
Chairwoman Beatty. Without objection, it is so ordered.
Mrs. Wagner. The study found that several factors affect
women's participation in STEM degree programs, along with a
career in the financial services industry. After over a year of
research and interviews with stakeholders, this report outlined
factors that include young girls' early exposure to STEM
topics, access to resources such as computers and high-speed
Internet, and even a sense of whether they belonged in the STEM
degree programs.
This report also found that in order to encourage
elementary or high school girls to learn about STEM, many
financial services firms provide funding and other support to
non-profit organizations that focus on increasing girls'
participation in STEM, such as ICI's partnership with Girls Who
Invest. With this support, non-profit organizations introduce
girls to coding and basic programming and other activities that
may inspire an interest in STEM education.
We also learned that firms offer scholarships to women in
STEM, sponsor conferences, and work with colleges and
universities to recruit women with STEM degrees.
We should be encouraging more partnerships such as those
mentioned in this GAO report that I requested. Firms that make
the effort to promote interest among women in both STEM and
financial services will reap the rewards.
I look forward to our further discussions, Madam
Chairwoman, with our witnesses, about how we can include more
women in the financial services industry talent pool, and the
work that they are already doing in this space.
Thank you, and I yield back.
Chairwoman Beatty. Thank you.
Now, I have the opportunity to recognize the Chair of the
full Financial Services Committee, a national leader in
diversity and inclusion who is committed to making a
difference, and who is also a founder of this first-ever
Diversity and Inclusion Subcommittee, none other than the
gentlewoman from California, Chairwoman Maxine Waters.
I yield to you for 1 minute.
Chairwoman Waters. Thank you so very much, Chairwoman
Beatty. I am so proud that your efforts have culminated in yet
another groundbreaking report, this time on the diversity of
our nation's largest investment firms.
In March 2021, Chairwoman Beatty and I sent letters to 31
firms that manage more than $400 billion in assets and
requested their diversity and inclusion data, practices, and
policies. The firms in this report oversee assets totaling more
than twice the size of the United States' gross domestic
product (GDP). They invest the retirement savings of millions
of Americans and drive investment in companies and communities.
The committee's report makes it clear that these firms have
much work to do in transparency, and accountability is the path
to progress.
So, I look forward to discussing the findings of this
report. And again, I thank you so very much, Chairuwoman
Beatty, for the progress that you are making in this whole area
of diversity and inclusion.
I yield back the balance of my time.
Chairwoman Beatty. Thank you, Madam Chairwoman.
We will now recognize and welcome the testimony of our
distinguished witnesses: Ms. Michelle Gadsden-Williams,
managing director and global head of diversity, equity and
inclusion with BlackRock; Mr. Eric Pan, president and CEO of
the Investment Company Institute; Mr. Ronald Parker, president
and CEO of the National Association of Securities
Professionals, better known to many as NASP; Mr. Cyrus
Taraporevala, president and CEO of State Street Global
Advisors; and Mr. Michael Clements, Director of Financial
Markets and Community Investment at the Government
Accountability Office (GAO).
Please, to all of the Members and those watching, we are
having a hybrid hearing, so there are people seated with us in
the room, and I will direct your attention to the screen.
Witnesses, you are reminded that your oral testimony will
be limited to 5 minutes. You should be able to see a timer on
your screen that will indicate how much time you have left, and
a chime will go off at the end of your time. I would ask that
you be mindful of the timer, and quickly wrap up your testimony
if you hear the chime, so that we can be respectful of both the
witnesses' and the subcommittee members' time.
And without objection, your written statements will be made
a part of the record.
With that said, Ms. Gadsden-Williams, you are now
recognized for 5 minutes to give an oral presentation of your
testimony.
STATEMENT OF MICHELLE GADSDEN-WILLIAMS, MANAGING DIRECTOR AND
GLOBAL HEAD OF DIVERSITY, EQUITY AND INCLUSION, BLACKROCK
Ms. Gadsden-Williams. Chairwoman Beatty, Ranking Member
Wagner, Chairwoman Waters, Ranking Member McHenry, and
distinguished members of the subcommittee, my name is Michelle
Gadsden-Williams, and I am the global head of diversity, equity
and inclusion at BlackRock. Thank you for the opportunity to
testify on BlackRock's behalf in terms of our diversity, equity
and inclusion (DEI) initiatives.
DEI is core to our purpose, and I am pleased to appear
before you today to discuss our commitment and our ongoing
efforts in this critical area.
I have spent over 30 years of my career leading DEI
strategies for several multinational organizations in different
industries in the U.S. and abroad. So, I understand the
complexities and nuances, as well as the challenges of this
work across businesses and cultures.
I chose to join BlackRock in September of last year because
I was convinced the organization truly wants to accelerate
progress in DEI holistically. From our perspective, DEI is a
critical business imperative that will position us and all of
our key stakeholders for greater success in the long term.
Now that I have been with BlackRock for 15 months, I
continue to be impressed, but more importantly inspired, by our
unwavering leadership and steadfast commitment, our movement
with a real sense of purpose and urgency around issues
pertaining to our people and our culture, and our relentless
focus to ensure that DEI is not simply about doing the right
thing or limited to talent and culture only.
To be clear, we still have a lot of work to do at
BlackRock. But through our continued commitment and focus, I
know that we are on the right path to making meaningful and
sustained progress.
We have instituted a multi-year DEI strategy which closely
aligns with our business imperatives, and has three distinct
pillars. I will briefly touch on those areas where we have made
progress, and also on our areas of opportunity. My written
testimony includes more detail on each of these things, as well
as other aspects of our DEI strategy.
First, at the core of our DEI strategy is our most
important asset, our people. At the start of each year, we set
public representation targets and build goals into each
business' objectives. In the summer of 2020, we committed to
increasing our overall workplace representation of Black and
Latinx employees by 30 percent, to doubling the number of Black
and Latinx senior leaders, and to increasing our senior female
representation to 32.5 percent by 2024. We are hiring women at
almost parity and also achieved our initial goal of 30 percent
of senior BlackRock employees being women globally. We have
substantially increased the diversity of our new hires to the
firm over the past year.
Second, BlackRock has increased our supplier and vendor
diversity efforts from historically underrepresented groups,
including companies owned by and operated by minorities, women,
military veterans, disabled veterans, people with disabilities,
and members of the LGBTQ+ community. We started dedicated
diverse broker and manager programs to increase connectivity
and engagement with firms owned by minorities, women, and
disabled veterans while helping them to grow their businesses.
We also established a partnership with the Thurgood
Marshall College Fund where we are donating a portion of the
net revenues from BlackRock's management fee of a $7.5 billion
money market fund to support students of Historically Black
Colleges and Universities (HBCUs) and predominantly Black
institutions.
Third, our diversity strategy also focuses on the positive
impact that we can have on the long-term success and
sustainability of underserved communities through policy and
philanthropic efforts. We strive to lead the industry on
transparency on our diversity disclosures such as by releasing
Sustainable Accounting Standards Board (SASB) and EEO-1
disclosures. In 2020, the firm announced a $10 million
philanthropic commitment to advance racial equity as part of
the firm's long-term social impact initiatives.
Importantly, success across DEI strategies requires
leadership commitment from the top, and I am proud of the
support and the focus coming from our CEO, Larry Fink, our
Board of Directors, and other senior leaders across BlackRock.
Thank you again for the opportunity to testify today and to
allow me to share more about BlackRock's strategy. We have made
meaningful progress, but we certainly recognize that there is
so much more work that lies ahead to realize meaningful and
substantive change. We appreciate the committee's focus on
these important issues, and I look forward to answering your
questions. Thank you.
[The prepared statement of Ms. Gadsden-Williams can be
found on page 44 of the appendix]
Chairwoman Beatty. Thank you so much, Ms. Gadsden-Williams.
Mr. Pan, you are now recognized for 5 minutes to give an
oral presentation of your testimony.
Members, please look to the screen.
STATEMENT OF ERIC J. PAN, PRESIDENT AND CEO, INVESTMENT COMPANY
INSTITUTE (ICI)
Mr. Pan. Chairwoman Beatty, Ranking Member Wagner,
Chairwoman Waters, Ranking Member McHenry, and distinguished
members of the subcommittee, thank you for the opportunity to
testify on behalf of the Investment Company Institute (ICI).
My name is Eric Pan, and I joined ICI as president and CEO
in November of 2020. I am very pleased to be here today to
share with you both ICI's and our members' commitment to
increasing diversity and inclusion in the asset management
industry.
ICI applauds the work of this committee to make diversity
and inclusion a core pillar of ensuring that our financial
system works for all Americans.
As the leading association representing regulated funds,
ICI's members include mutual funds, exchange-traded funds, unit
investment trusts, money market funds, and other funds publicly
offered to investors in jurisdictions worldwide. With more than
$40 trillion in assets under management, our members provide
the investment vehicle choice to more than 100 million
Americans, all seeking to create financial security and save
for major financial milestones such as education, a home, and
retirement.
Now, I would like to take this opportunity to actually
thank you, Chairwoman Beatty, for your participation this past
October in joining the ICI and industry leaders, including our
Board Chair and CEO of New York Life Investment Management,
Yie-Hsin Hung, when you came to discuss the importance of
increasing diversity and inclusion in the asset management
industry. This event was part of ICI's broader initiative to
making diversity and inclusion a key priority for us as an
organization and for the industry.
At this event, Chairwoman Beatty, in addressing some of the
challenges the asset management industry faces in making real
progress, you said that the best thing we could do is, ``be
transparent, be accountable, and most importantly, be proud
that you are part of making a difference, making a change, and
growing this wonderful America that we live in.''
I fully support your statement. Across our membership, we
are seeing a growing momentum in the discussion and, most
importantly, in the actions of our members to make diversity
and inclusion a top priority. I am seeing a commitment to
intentionality and a focus on making progress.
This is reflected in the activity of ICI's own Board of
Governors, which has set the tone for how important it is for
us as an industry to make progress, and it is helping ICI
launch initiatives to facilitate change across the industry. I
would note that a discussion of diversity and inclusion is a
regular agenda item at all ICI Executive Committee and Board
meetings.
Now, as has been noted, some of our members have been
engaged in this area for many years and are leaders in the
industry in this area, demonstrating the types of initiatives,
programs, and measures that work. But we also have members who
have only more recently begun to engage on this issue and are
trying to identify ways to make changes within and outside of
their organizations.
All of this is to say that we as an industry are a work in
progress in developing the strategies, practices, and actions
that will achieve enduring results. In my written testimony, I
discuss three core themes about the industry's work on
diversity and inclusion, which also happen to track with the
subcommittee's focus on examining the financial services
industry more broadly. Given time constraints, let me just
highlight them here.
The first theme is disclosure, which ICI believes enables
the industry to have a fact-based dialogue on diversity and its
impact on the industry and its investors.
The second theme discusses the industry's efforts around
measurement and benchmarking to make meaningful progress toward
creating a more diverse and inclusive industry in fund
management and in fund governance.
The last theme is an overview of the initiatives that ICI
and the industry have launched to make meaningful progress
toward ensuring that women and people of color are fully
represented at every level of the asset management industry.
In closing, I want to reiterate that the asset management
industry plays a significant role in improving the financial
well-being of investors by helping them build security. We are
well-positioned to support women and people of color, and also
to break down the barriers within the industry. Clearly, the
industry must improve in this area, and we are working toward
that goal, including at ICI.
Thank you for the opportunity to address the subcommittee
today, and I look forward to answering your questions.
[The prepared statement of Mr. Pan can be found on page 52
of the appendix.]
Chairwoman Beatty. Thank you very much, Mr. Pan, and thank
you for quoting me at the conference. I greatly appreciate it.
Mr. Parker, you are now recognized for 5 minutes to give an
oral presentation of your testimony.
STATEMENT OF RONALD C. PARKER, PRESIDENT AND CEO, NATIONAL
ASSOCIATION OF SECURITIES PROFESSIONALS (NASP)
Mr. Parker. Thank you, and good morning. First, I would
like to thank the U.S. House of Representatives Financial
Services Subcommittee, and particularly Chairwoman Maxine
Waters, Chairwoman Joyce Beatty, and Ranking Member Ann Wagner,
for having me testify today.
My name is Ronald C. Parker, and I serve as the president
and CEO of the National Association of Securities
Professionals, a trade association that advocates for and
supports the development of ethnic minorities within the
financial services industry. We work on behalf of over 600
members across the country, with our members coming from large
and small firms, and covering all asset classes.
I am here today to share some information about the current
state of the industry when it comes to ethnic minority
representation, to share some facts around the realities of
minorities in the industry and some solutions that the NASP
organization supports to bolster inclusion and equality in the
financial services industry.
I would like to make four points in my remarks.
Point one. There are substantial resources, over $100
trillion, that are under the control of governments,
endowments, companies, and other institutions that are managed
by third-party investment professionals. While minority- and
women-owned asset management firms make up 8.6 percent of this
sector, they only manage about 1.8 percent of all assets under
management.
Point two. We all understand that the consultants, asset
managers and others owe a duty of fiduciary care when selecting
asset managers and must pick top-performing, trustworthy
managers. However, we know that the minority-owned firms
produce some of the best results in the industry, often with
fewer resources. Yet, according to the magazine, Institutional
Investor, and research done by the Knight Foundation, as
mentioned earlier, these organizations are stuck managing
pennies on the dollar.
Point three. We also find that the request for proposal
(RFP) process requires high levels of assets under management
to even consider minority-owned smaller firms for investment
opportunities. According to that GAO report that Congresswoman
Wagner mentioned, the minimum size requirements for assets
under management could potentially exclude smaller minority-
and women-owned firms. This process needs to be addressed.
Point four. While these two patterns note the impact of the
financial services industry directly, we also believe that the
overall support of business supplier diversity will be a key to
minority asset managers' success as well. It is imperative that
public, private, and non-profit enterprises embrace business
diversity by increasing the utilization of business diverse-
owned professional services firms in addition to working within
diverse businesses of their traditional procurement.
Now, for solutions.
NASP supports the passage of the Diverse Investment
Advisors Act, spearheaded by Chairwoman Beatty and championed
by the NASP Legislative Committee, that was put forth in 2019.
By establishing this, ``Rooney Rule,'' or, we would suggest,
``Beatty Rule,'' these firms will be guaranteed the opportunity
to make their case alongside other firms in the process that is
less about longstanding relationships and more about bringing
new investment philosophies and strategies to the table.
This legislation would specifically address the issues of
fiduciary care by ensuring that the top-performing minority-
and women-owned firms, regardless of ownership, have access to
the same RFP process and competitive processes of those firms.
NASP also stands behind the legislation to amend the Dodd-
Frank Act, Section 342, by requiring that the diversity and
inclusion efforts be tracked and added to the Uniform Financial
Institutions rating system. This legislation would require that
firms track their diversity efforts and performance, and hold
accountable the person who is in the office of the CEO.
We also realize that NASP has worked very closely with the
U.S. Securities and Exchange Commission, and we would like to
compliment Gilbert Garcia and Garcia Hamilton & Associates for
their work in recommending changes as it relates to the Office
of Minority and Women Inclusion (OMWI) of the SEC.
It is our hope that through legislation, rulemaking, and
data collection and analysis, we can frame and execute creative
ways to address this issue. We must move from promises to
practice to process.
I thank you, and I yield back my time to the Chair.
[The prepared statement of Mr. Parker can be found on page
62 of the appendix.]
Chairwoman Beatty. Thank you, Mr. Parker, for your
testimony.
Mr. Taraporevala, you are now recognized for 5 minutes to
give an oral presentation of your testimony.
STATEMENT OF CYRUS TARAPOREVALA, PRESIDENT AND CEO, STATE
STREET GLOBAL ADVISORS
Mr. Taraporevala. Chairwoman Beatty, Ranking Member Wagner,
Chairwoman Waters, Ranking Member McHenry, and distinguished
members of the subcommittee, thank you for providing me the
opportunity to testify today.
I am Cyrus Taraporevala, the chief executive officer of
State Street Global Advisors, the $4 trillion investment
management arm of State Street Corporation, headquartered in
Boston, Massachusetts.
The evidence is clear that greater diversity--racial,
ethnic, cultural, and gender--contributes to better corporate
performance.
While I am proud of State Street's actions and achievements
to date, increasing diversity and inclusion remains a work in
progress for all of us, and there is clearly a lot more work
ahead of us. Hence, I support the committee's efforts in this
area.
In July of 2020, we announced our 10 actions to address
issues of racism and inequality, which have now become an
important part of our corporate culture and governance and go
to the core of how we operate. I provide more details in my
written statement, but here are a few highlights of some of our
progress, which falls under three broad pillars.
First, for our Board and workforce, we have increased the
racial diversity of our corporate board from 9 percent to 25
percent. We have adopted a global diverse candidates slate
requirement for hiring of middle management and above, the U.S.
version of which I am going to refer to as the Rooney Rule. We
have committed to the MLT Black Equity at Work certification,
and we recently announced that we will undertake a full civil
rights audit to gain additional perspective and strengthen our
programs and initiatives, and we now recognize Juneteenth as a
corporate holiday.
Second, for our industry and other stakeholders, we enhance
the diversity and effectiveness of the syndicates underwriting
our corporate debt by introducing Black-, Latinx-, women-, and
veteran-owned firms in issuances of $1.3 billion over the past
year. We conducted an audit of our charitable foundation,
resulting in our formally including racial equity as a funding
focus. We have announced strategic partnerships with industry
groups and non-profits A Better Chance, the National
Association of Securities Professionals, the Toigo Foundation,
and the Association of the Luxembourg Fund Industry, to
increase representation of Black and Latinx talent in our
industry.
And third, for the companies in which we invest, in 2017 we
launched our, ``Fearless Girl'' campaign to draw attention to
gender diversity in boardrooms. You may be familiar with the
statue we placed on Wall Street which identified 1,500
companies lacking women on their boards, 900 of which have
since added at least one woman director. In 2020, we expanded
that campaign to include racial and ethnic diversity.
We have urged our portfolio companies to disclose the
racial and ethnic composition of their boards, and over time,
to add at least one director from underrepresented communities,
and we have also called for companies to disclose their EEO-1
data on employees, which is something we do.
We have made significant progress, but, as the committee's
report reveals, there remains much more to be done.
Sustainable, meaningful advancements in diversity and inclusion
require enduring changes to the way we all operate, and State
Street, and I personally, are committed to staying that course.
Once again, thank you for the opportunity to testify today.
[The prepared statement of Mr. Taraporevala can be found on
page 66 of the appendix.]
Chairwoman Beatty. Thank you, Mr. Taraporevala, for your
testimony today.
And now, Mr. Clements, you are recognized for 5 minutes to
give an oral presentation of your testimony. Please look to the
screen.
STATEMENT OF MICHAEL E. CLEMENTS, DIRECTOR, FINANCIAL MARKETS
AND COMMUNITY INVESTMENT, U.S. GOVERNMENT ACCOUNTABILITY OFFICE
(GAO)
Mr. Clements. Chairwoman Beatty, Ranking Member Wagner,
Chairwoman Waters, Ranking Member McHenry, and members of the
subcommittee, I am pleased to be here today to discuss our
prior work addressing key practices to increase opportunities
for minority and women asset managers in Federal retirement,
insurance, and endowment programs.
The financial services industry provides services that help
families build wealth, and is essential to the economic well-
being of the country. However, GAO's prior work has shown that
the financial services industry has made limited progress in
increasing diversity.
Federal retirement, insurance, and endowment programs
control significant financial resources which could provide
opportunities for minority- and women-owned asset managers.
Yet, we previously found limited participation among diverse
asset managers in Federal programs.
We identified four key practices that can be used as part
of an institutional investor's asset management selection
process to help ensure that qualified minority- and women-owned
firms are considered. We identified these key practices through
a review of industry reports and interviews with State, local,
and private retirement plans and foundations, and we
subsequently validated these practices by obtaining feedback
from experts and industry stakeholders.
The first key practice is top leadership commitment. Top
leadership can demonstrate commitment to increasing
opportunities for minority- and women-owned asset management
firms.
The second key practice is to remove potential barriers.
Investors should review policies and practices to remove
barriers that limit the participation of smaller, newer firms.
For example, investors could adjust thresholds for assets under
management, insurance, and length of track records to ensure
that requirements are proportional to the size of the firm.
The third key practice is outreach. Investors should
conduct outreach to inform minority- and women-owned asset
managers about investment opportunities and the selection
process. For example, investors could meet with industry
associations and participate in networking events with
minority- and women-owned asset managers.
The fourth key practice is to communicate priorities and
expectations. Investors should explicitly communicate
priorities and expectations about inclusive asset management
practices to staff and consultants to make sure that those
expectations are met.
It is important to note that these practices do not require
investors to develop allocations for minority- and women-owned
asset management firms, or to change performance standards.
Further, many non-Federal plans and foundations, after being
interviewed, have implemented these practices to increase
opportunities for minority- and women-owned firms and told us
that using these practices does not conflict with their
fiduciary responsibilities where the firms are selected based
on their track record of performance and that they may benefit
their clients.
Since our 2017 report, we have examined to what extent
seven Federal retirement, insurance, and endowment programs use
these practices. The Federal Reserve System, the Pension
Benefit Guaranty Corporation, and the Smithsonian Institution
used all four practices. In contrast, the Federal Retirement
Thrift Investment Board used none of the key practices, and
other Federal vendors only used some. We recommended that the
Board and other entities fully implement the key practices.
In the intervening year, the Board and other entities have
taken action to address our recommendations. For example, the
Trustees of the Army and the Air Force Exchange Service Pension
Plan issued a letter to plan consultants stating it was the
trustees' intent to increase opportunities for minority- and
women-owned asset managers, and requested that the consultant
take action to increase opportunities for those asset managers.
Our work has shown that implementing a more inclusive
selection process for asset managers can widen the pool of
candidates, which can help ensure that retirement plans are
identifying the best asset managers and better manage
investment personnel.
Chairwoman Beatty, Ranking Member Wagner, and members of
the subcommittee, this completes my oral statement. I would be
pleased to respond to any questions you may have. Thank you.
[The prepared statement of Mr. Clements can be found on
page 34 of the appendix.]
Chairwoman Beatty. Thank you so much, Mr. Clements, for
your testimony and comments.
I now recognize myself for 5 minutes for questions.
The first question is for you, Ms. Michelle Gadsden-
Williams. As a professional with more than 25 to 30 years of
experience, how important is it for someone in your position to
be empowered to have a buy-in with the CEO, and with the Board?
And what is your actual level of interaction with both at
BlackRock?
Ms. Gadsden-Williams. Thank you, Chairwoman Beatty, for the
question. I think it is critically important that I have access
and exposure to the right leaders in the organization in order
to accelerate progress on DEI. I report to the Chief Human
Resources Officer at BlackRock, Manish Mehta, who reports to
our CEO, Larry Fink. I report regularly to our Board of
Directors. I just presented to them in March when we unveiled
our strategy to the entire firm and to the Board, and 6 months
later, I gave them an update in terms of where we are relative
to our progress.
To answer your question, it is incredibly important for me
to have access and exposure, and also feel a sense of
commitment from these entities that we are committed to doing
the right thing.
If I may, one of the many reasons why I decided to join
BlackRock--there are a couple of things. There are several
things that I look for in my conversations with CEOs and other
leaders when it comes to diversity, equity and inclusion. It is
the courage to act, the commitment to lead, and the conviction
to change. And if any of these things are missing from that
conversation, I tend to look elsewhere because I have seen the
movie before where there are organizations that are not quite
as committed, and I was convinced when I was being courted by
BlackRock a year-and-a-half ago, and even more so now that I am
on the inside, that we are committed to DEI and to doing all of
the things and have consistently demonstrated actions that
convince me as their head of diversity globally that we are
committed to accelerating the pace of change going forward.
Chairwoman Beatty. Thank you. Thank you so much. And we
will be following that commitment to change, so I have made a
special note of that, and you may tell your president and CEO I
said so.
The next question is for you, Mr. Pan. From the findings of
the report, only 32 percent of the firms that reported tracking
asset management spent only about 21 percent reported in
tracking underwriting spending. I am a firm believer in what
does not get counted does not get measured, and what does not
get measured does not get done.
As a trade association that represents many of these firms,
how can you commit to assisting these firms to standardize
tracking these metrics and encouraging your members to
implement data collection? I only have a short time, because I
am trying to get to everybody, so if you could give me the
abbreviated answer?
Mr. Pan. I think the short answer is it has to start from
the top, right? As I said in my opening statement, there is a
commitment at ICI to improve diversity and inclusion. When the
Board of Governors, who are the leaders of the industry, get
together, they talk about D&I, and there is clearly a change in
tone. A lot of the desire for better metrics and better
information has to start off first with recognition of the
issue, and we are there.
I think when you talk more granularly about what can be
provided, these are discussions that are ongoing right now.
Chairwoman Beatty. Thank you very much.
Mr. Parker, this question is for you. Chairwoman Waters
worked very hard and allowed me to work with her to get the
SEC's Asset Management Advisory Committee to focus more on D&I.
I know that NASP also joined in support of writing a letter.
As you may know, on November the 4th the SEC's Asset
Management Advisory Committee disbanded. Do you believe this is
a misstep by the SEC to not re-constitute an advisory committee
to ensure more diversity representation?
Mr. Parker. Yes. Thank you, Chairwoman Beatty, for the
question. Yes, I do, and we believe that it is a misstep. Why?
Because we have seen that while there is oversight and
governance by the regulatory agencies, having an external point
of view, to be registered on the record, starts with the
conversation. The art of the conversation is all about
leadership. And we think reconstituting this particular
advisory council will serve as a resource to the SEC in getting
what we call on-the-street, Main Street feedback of what is
working well and what needs to be addressed going forward.
Chairwoman Beatty. Thank you for that, and we would like to
follow up with you on that.
I only have 3 seconds left. But, Mr. Clements and Mr.
Taraporevala, I will have questions I will send to you because
I enjoyed hearing your testimony.
At this time, at the request of our ranking member, Mr.
Rose is recognized for 5 minutes.
Mr. Rose. Thank you, Chairwoman Beatty. And thanks to
Ranking Member Wagner for her gracious indulgence.
Thank you also for holding this subcommittee hearing on
this important topic, and I want to thank all of our witnesses
for taking the time to join us today and testify, and for your
thoughtful prepared statements.
Mr. Taraporevala, State Street Global Advisors' inclusion
and diversity webpage states that in August 2020, State Street
launched 10 actions to directly address and strengthen racial
equity across your firm, and I believe you mentioned that in
your opening statement.
How do you define, ``equity,'' versus ``equality?''
Mr. Taraporevala. Thank you for the question. We view
equity as really a level playing field in every sense of the
word. There are lots of technical definitions to it which I
will not get into, but it is really a level playing field, and
I think that is the key.
Mr. Rose. Thank you for that insight.
Ms. Gadsden-Williams, the word, ``equity,'' appears in your
business title, so I think this will be a fairly easy question
for you. How do you define, ``equity,'' versus ``equality?''
Ms. Gadsden-Williams. As a seasoned DEI executive, as you
can imagine, diversity of yesteryear was focused on--it was
more of a head count exercise, versus inclusion, which speaks
more to the environments that we are trying to create.
Equity is the most important factor in the equation, at
least in my view, and it is all about creating parity,
fairness, and fair outcomes to advancement by way of policies
and programs for all individuals within an organization.
Mr. Rose. Thank you, as well.
On September 22, 2021, the Heritage Foundation held a panel
discussion entitled, ``Unequal Protection: The Push to Replace
Equality with Equity is Unconstitutional.'' This discussion was
held as a part of the Heritage Foundation's, ``Preserve the
Constitution 2021'' event series. The description of the event
states that, ``Equity is being embraced wholesale by schools,
corporate America, and even the Biden Administration. It has
infiltrated hiring, curriculum, admissions, trainings, and
more. But equity is not the same as equality and delivers very
different results. Rather than providing all individuals with
equal opportunities to succeed, equity segregates individuals
by race, while driving a narrative of oppressor versus victim.
It calls for institutions to treat people unequally in order to
achieve equal outcomes. Equity recklessly embraces legally
prohibited classifications as a way to eliminate perceived
differences in outcome in violation of equal protection in
Federal law.''
Mr. Taraporevala, do you believe that it is fair to use
equity as an excuse to treat people unequally in order to
achieve a desired outcome?
Mr. Taraporevala. With all due respect, I do not actually
agree with those definitions that you just laid out.
Mr. Rose. To the question, though, do you believe that it
is fair to use equity as an excuse to treat people unequally?
Mr. Taraporevala. No. As I said, the definition is an equal
playing field, both in terms of the inputs and the outcomes.
Mr. Rose. Thank you.
Ms. Gadsden-Williams, do you believe that it is fair to use
equity as an excuse to treat people unequally in order to
achieve a desired outcome?
Ms. Gadsden-Williams. Thank you for your question,
Representative. I am a firm believer that equity is far more
important than equality. They are very different, at least in
my opinion. It is all about creating the right opportunities,
the right support systems and mechanisms so that all
individuals will have an opportunity to realize their ambitions
internally. That is my response to your question,
Representative.
Mr. Rose. In the remaining moments I have left, about a
year-and-a-half before I was born, back in February of 1965,
Dr. King, in his famous, ``I Have a Dream'' speech, said, ``I
have a dream that my four little children will one day live in
a nation where they will not be judged by the color of their
skin but by the content of their character.'' I fear that
equity, as currently defined and being implemented across our
society, will take away the essence of Dr. King's dream. I have
two little children, and I hope they can grow up in a country
where they will be judged based on the content of their
character.
Thank you, and I yield back.
Mr. Parker. Chairwoman Beatty, if I may just weigh in on
this, given my numerous years in the private sector? I would
like to weigh in with the fact that diversity is a factor--
Chairwoman Beatty. Mr. Parker, we may have to come back,
and someone will yield, because the gentleman controls the
time, and his time has expired.
Mr. Parker. Okay.
Chairwoman Beatty. The Chair now recognizes the gentlewoman
from California, Chairwoman Waters, who is the Chair of the
full Committee on Financial Services, and the founder of this
first-ever Diversity and Inclusion Subcommittee, for 5 minutes.
Chairwoman Waters. Thank you very much, Chairwoman Beatty.
Ms. Gadsden-Williams, and Mr. Taraporevala, I am committed
to ensuring highest returns for consumers and retirees, and we
have heard today that diverse asset managers perform as well,
if not better, than non-diverse asset managers. Both BlackRock
and State Street manage the Thrift Savings Plan (TSP), the
largest retirement plan in the world, and I am concerned that
BlackRock and State Street have not done enough to ensure
actual diversity in business, specifically contracting with
diverse asset managers and related businesses. And the TSP has
done very little. The Federal Thrift Investment Board, which
manages the TSP, was called out in October 2020 and again in
November 2021 by Senator Menendez.
What steps have been taken at BlackRock and State Street to
increase engagement with diverse asset managers and related
firms?
Ms. Gadsden-Williams. We at BlackRock are committed to both
supplier and vendor diversity, as well as asset managers. We
have a number of programs in place, and our goal is to increase
the number of diverse brokers, the number of diverse managers,
and the number of diverse suppliers. It is our goal to remain
connected and to engage with these individuals so that we can
continue on this journey. It is certainly an area of
opportunity for us. We recognize that, but we also recognize
that we have a lot of work to do there. But we are certainly
committed to it.
Chairwoman Waters. Let me ask you, have you responded to
Senator Menendez's inquiry about the pilot program trying to
get information about what progress has been made? Are you
aware of his very, very strong letter that was directed toward
BlackRock?
Ms. Gadsden-Williams. Thank you for your question,
Chairwoman Waters. Unfortunately, this is out of my purview. I
cannot answer that question, but I will circle back with my
colleagues so that we can get back to you and your office with
a response to that question.
Chairwoman Waters. You mentioned contracting, and I am very
interested in contracting, because Chairwoman Beatty and I are
interested in wealth building, and this is one of the areas
that if minority asset firms were contracted with, it could
create a lot of wealth in our communities.
You mentioned that you have done better or well contracting
with LGBTQ, Black, and Latinx. Could you give me some
definitive numbers on that?
Ms. Gadsden-Williams. With all due respect, Chairwoman
Waters, I do not have that information in front of me. Again,
this is outside of my scope of responsibility. We will get back
to you with those specifics.
Chairwoman Waters. Mr. Taraporevala, could you give me some
information about what is happening and what progress have you
made working with this tremendous opportunity that you have
been afforded, basically doing the contracting and working with
our Pension Benefit Guaranty Corporation (PBGC)?
Mr. Taraporevala. Chairwoman Waters, let me first and
foremost reiterate that we are very committed to increasing the
diversity of our suppliers and vendors, and this year we have
increased our spend with diverse suppliers by over 50 percent.
In my earlier remarks, I also--
Chairwoman Waters. Could you disaggregate that for me? Tell
me how many contracts, what are the percentage of contracts
with Blacks, with Latinx, with women, what do they amount to,
what is the bottom line? Can you give us some definitive
information?
Mr. Taraporevala. I will have to get back to you with those
details. Let me then come to your question about the TSP,
which, as you know, is overseen by the Federal Retirement
Thrift Investment Board. We are hired as a manager by that
board, and we run the money for those mandates ourselves
internally. And, therefore, my prior comments about how we are
committed to increasing the diversity of our workforce is the
most relevant question when it comes to how we run those
mandates and perform the job for which we have been hired.
Chairwoman Waters. Okay.
Chairwoman Beatty, I am going to yield back the balance of
my time. I know you have a lot of others who have questions,
but I think we need definitive information when they come
before us. Otherwise, we don't know what they are doing.
Chairwoman Beatty. Thank you, and I certainly agree with
you, Chairwoman Waters. I would say to those last two witnesses
that, per our guidelines, the expectation is you will have a
time limit to submit those answers in writing to this
committee.
Thank you, Chairwoman Waters.
The gentlewoman from Missouri, the ranking member of the
subcommittee, Mrs. Wagner, is now recognized for 5 minutes.
Mrs. Wagner. Thank you, Madam Chairwoman.
Ms. Gadsden-Williams, in your testimony you mentioned
BlackRock's leadership development programs. Could you describe
the Women in Leadership Forum and how this program has helped
women achieve senior-level positions?
Ms. Gadsden-Williams. Thank you for your question, Ranking
Member Wagner. The Women in Leadership Program is one of our
signature leadership development programs where we identify
high-potential women in the organization, put them through a
rigorous learning and development opportunity to upscale
themselves in a number of different ways, from core
competencies, technical competencies, behavioral competencies,
and they have sponsors and so forth that are also assigned to
them in the program as a support mechanism, and that is
essentially the crux of the program.
Mrs. Wagner. When did you begin the program, and what has
been its evolution? When did you begin this program?
Ms. Gadsden-Williams. I'm sorry?
Mrs. Wagner. When did you begin this program, and what has
been its evolution?
Ms. Gadsden-Williams. Unfortunately, I do not have the
timing of when we started it. That was prior to my tenure at
BlackRock.
Mrs. Wagner. But it has been in place for some time?
Ms. Gadsden-Williams. Yes, it has been in place for some
time.
Mrs. Wagner. Okay. In the United States, what percent of
senior BlackRock employees are women? Do you have that figure?
Ms. Gadsden-Williams. Forty-three percent.
Mrs. Wagner. Forty-three percent?
Ms. Gadsden-Williams. Correct.
Mrs. Wagner. That's pretty amazing. I would be very
interested to know the genesis of your Women in Leadership
program, and how that has developed to allow you to reach a
place of some 43 percent of BlackRock employees, of senior
BlackRock employees in leadership.
Mr. Pan, we have discussed in this subcommittee the results
of firms implementing a Rooney Rule when it comes to candidates
being considered for a position. But I am interested in hearing
how this reverse Rooney Rule is working for your member firms.
Could you please discuss the hiring practices of ICI's member
firms and how many of them have hired diverse interview panels
and slates for new hires?
Mr. Pan. I do not have the information as to specific firms
and their experience and practice with these types of interview
panels. What I can tell you is that one of the initiatives that
the ICI has done is we have a special committee of members
focusing on D&I, where they come together and they exchange
information about their experiences. They share best practices,
they share ideas, innovations that they are doing to try to
tackle D&I.
I think one takeaway from these discussions is that firms
are very different from each other. They have unique
circumstances. We do not have one program that all of them--not
to use a phrase, but one-size-fits-all is often not the
solution. Instead, I think there is great value to them kind of
picking each other's brains, and that is going on right now.
Unfortunately, I do not have specific information about how
individual firms have experience with these types of interview
panels.
Mrs. Wagner. I would like to ask this first to Ms. Gadsden-
Williams, and then Mr. Pan, time allowing. When it comes to
diversifying the workforce within the financial services
industry, past witnesses have highlighted that diversifying the
talent pool is kind of a key solution. The lack of female and
minority students enrolled in STEM programs at the high school
and college level has led to a pipeline problem that is
creating challenges across the financial services industry.
How can the asset management industry better increase
participation in STEM-related fields of study for college, high
school, and even middle school students in America?
Ms. Gadsden-Williams, first.
Ms. Gadsden-Williams. I'm sorry, I could not hear very
well.
Mrs. Wagner. Okay.
Mr. Pan, did you hear my question?
Mr. Pan. Yes, I did. Basically, there are two parts. We see
it as education and exposure, meaning part of it is, how do you
make these students--whether in STEM, and, of course, asset
management, which looks for talent in a wide variety of
disciplines, even non-STEM--aware of core opportunities in our
industry?
We partner with organizations, especially those
organizations that do work a lot with women and minority
students, to just make them aware. That is the education part.
Then, there is the exposure part. For those students who
are interested in exploring careers in the field, how do they
make themselves known?
Mrs. Wagner. Pardon me. My time has expired, but I would
submit to all of you to take a look at the GAO study that I
requested in 2019, the findings that came out. I think this is
a very important pipeline issue that we need to tackle when it
comes to getting women and minorities involved in STEM fields
and the financial services industry.
I appreciate the Chair's indulgence, and I yield back.
Chairwoman Beatty. Thank you.
The gentlewoman from Massachusetts, Ms. Pressley, who is
also the Vice Chair of our Subcommittee on Consumer Protection
and Financial Institutions, is now recognized for 5 minutes.
Ms. Pressley. Thank you, Madam Chairwoman. I am so
appreciative of your leadership in convening this hearing.
Ms. Gadsden-Williams, thank you for being here today.
BlackRock has an office in Boston, as you well know, and
employs some of my constituents, and the well-being of my
constituents is very important to me. Over the last year, many
brave employees and former employees have come forward to share
their experiences of sexism, sexual harassment, and racism at
BlackRock.
These stories are deeply troubling. Essma Bengabsia, an
Arab-American Muslim woman, was mocked for using a standard
Muslim greeting, repeatedly bullied, threatened with sexual
harassment, and called un-American. A Black woman was sexually
harassed by her manager. Latinx and Black employees have been
called aggressive. A Black gay employee was told to, ``not be
too flamboyant.''
Your head of international and corporate strategy, Mark
Weidman, has been identified as notorious for making
inappropriate comments, especially towards women, yet he
remains in a leadership position.
The problem is clearly a systemic one. Hiring women and
people of color into a hostile environment where they promptly
leave, traumatized, is not the progress that we are aiming for.
In fact, it is not progress at all.
Ms. Gadsden-Williams, according to your testimony,
BlackRock has increased the diversity of its new hires. I am
interested to know if these new hires are sticking around? Is
the retention rate for Black and Brown employees as high as the
retention rate for White employees?
Ms. Gadsden-Williams. Thank you for your question,
Representative Pressley. The events that you are speaking of
and that were recounted in recent reports have absolutely no
place at BlackRock, and we have taken some actions to build a
more inclusive work environment within our firm. Some of the
activities that we have done in response to those claims are
improving training for all employees, providing discussion
venues to raise concerns, and increasing accountability for
inclusivity, including among our senior leaders and managers,
who have an obligation to ensure that we are creating the right
kind of environment to address non-inclusive behavior when they
see it.
To answer the second part of your question, I do not have
those stats in front of me at the moment, but I will get back
to you and your office on those statistics around retention of
women and/or people of color.
Ms. Pressley. Yes. Specifically, is there a retention gap,
and how disparate is it according to White employees? As the
Chairwoman said earlier, for all of the data points that we are
seeking, there will be a timeline, so we eagerly await your
response.
What about the retention rate for women versus men?
Ms. Gadsden-Williams. Again, Representative, I do not have
those stats in front of me at the moment. I would rather come
back to you with firm statistics and data to support this
conversation. So, we will get back to your office with that
information in due course.
Ms. Pressley. Okay. And would you happen to have any
information on promotion rates? Are the promotion rates for the
new hires who are women and people of color as high as White
male employees, and are they being hired into management or
revenue-generating roles at the same rate as administrative
roles? I am just building upon what Chairwoman Waters was
alluding to, and your earlier testimony in saying that there
needs to be a paradigm shift and one that you certainly want to
be leading, that diversity is not about counting heads but it
is really about inclusion, and we also care about promotion and
wealth building, especially since there is such a large racial
wealth gap, and that certainly abounds in my district.
Can you speak to any of those promotion rates or where
people are being hired into? Are they in administrative roles,
management, or revenue-generating roles?
Ms. Gadsden-Williams. Year after year, we have seen
increases in terms of diverse talent pipelines from women and
people of color, particularly Black professionals and Latinx
professionals. I do not have the specific data that you are
requesting at this moment, but we will get back to you with
that information. But I can confidently say, based on our
pipeline efforts and initiatives that we have in place, from
recruiting, retention, promotions, we have annual talent
reviews that are meaningful, I think we have all the right
systems and processes in place to ensure that, year after year,
we are making meaningful, substantive changes in those areas in
making sure that women and/or people of color--
Ms. Pressley. Reclaiming my time--I am so sorry. I am
trying to get one more question in on the record. We look
forward to you getting that to us.
I spoke with a former BlackRock employee who told me the
firm has offered the victims of sexism or racism a severance
benefits package tied to a non-disclosure agreement (NDA),
which prohibits them from speaking publicly about their
experience or to sue for any reason.
Chairwoman Beatty. I'm sorry, your time has expired, but
you can enter it into the record, and we will request that
response.
Ms. Pressley. Thank you.
Chairwoman Beatty. Thank you.
The gentleman from Ohio, Mr. Gonzalez, is now recognized
for 5 minutes.
Mr. Gonzalez of Ohio. Thank you, Chairwoman Beatty and
Ranking Member Wagner, for holding this hearing today, and to
our witnesses for agreeing to be here with us to discuss this
important topic.
While there is still a lot of work to do, I have been
encouraged by the progress we have seen in recent years, and I
am encouraged by the conversation that we are having here today
in many ways.
My perspective has always been that you should probably get
your own house in order first before you start sort of pushing
others to do things that you yourself might not be willing to
do. And so, with that in mind, I sent a letter, along with
Representatives Beatty, Wagner, and Sylvia Garcia, to the PBGC
encouraging them to expand their pilot program to include
smaller asset managers, and to maintain a commitment to
including women- and diverse-owned firms while still
maintaining their fiduciary responsibility.
Mr. Parker, my first question is going to be for you. Do
you believe that there are other opportunities that we should
focus on to promote women- and diverse-owned firms within the
various Federally-run pension programs while maintaining
fiduciary standards?
Mr. Parker. Thank you for the question, Representative.
Yes, I do believe that we should institute intentional systems
to gain exposure to talent that may not be recognized, and to
potential that may not be fully tapped. I think by having an
intentional, structured program with some regularity, we will
build a cadence of engagement.
Mr. Gonzalez of Ohio. Thank you. Some of the institutional
investors that we spoke with--I am going to stay with you, Mr.
Parker--what they would say is, we have these emerging manager
programs where we try to get smaller firms, more diverse asset
managers, in the door, and then they can hopefully graduate to
the bigger platform where they can get the major investments
from the institutions.
Some of them have described sort of a chasm where in the
jump from emerging manager to the full portfolio, there is a
fallout that happens. In your world, have you observed
something similar? And if so, what do you think we can do to
bridge that gap, to make sure that more people can cross that
chasm, if you will?
Mr. Parker. Thank you for the question, Representative. I
would say to you that intentional mentoring protege programs
that would allow for these emerging managers at a certain stage
to be exposed to new areas of the financial services sector--
cryptocurrency, ETFs--we are working with some members who are
in this particular hearing to create unique ways in which
proteges and mentors can exchange ideas and build upon
experiences and capabilities that can be useful in that growth
trajectory, but yet not subjecting any firm to under-performing
against its aspirations and the principles and standards of the
clients.
Mr. Gonzalez of Ohio. Great.
Ms. Gadsden-Williams, same question, if you could? The
question I just asked was, how do we help diverse asset
managers bridge that gap from emerging manager programs to the
broader platform for major institutional investors?
Ms. Gadsden-Williams. Thank you for the question,
Representative. Generally speaking, we are very much committed
to diversifying our asset management. We are certainly
committed to this, but this is certainly outside of my purview
and area of responsibility.
Mr. Gonzalez of Ohio. Fair point.
Mr. Parker, back to you. You mentioned cryptocurrencies. We
had a great hearing on this yesterday. One of the things that
excites me about cryptocurrencies is I think it presents an
opportunity for minority communities to get in at the ground
level of a technology revolution and to reverse some of the
previous discrimination we have seen in the traditional finance
sector.
How do you view cryptocurrencies in the context of the
broader diversity and inclusion discussion?
Mr. Parker. Thank you for the question, Congressman. I
would say that any area that is an emerging area allows for
underrepresented groups to get in on the ground floor. I think
cryptocurrency, blockchaining, and other New Age, 4th
Industrial Revolution tendencies allow for women- and minority-
owned firms to get in, to understand the mystery behind it, but
at the same time, to be fully engaged and to build in the
capacity to take advantage of it in the future.
Mr. Gonzalez of Ohio. Thank you.
I have 20 seconds left. Let me just make one point. This is
sort of a--I do not know how this will land, but we will go for
it. The term, ``Latinx'' gets used a lot. I am Latino,
Hispanic, Cuban American. If you look at surveys amongst
Hispanic populations, it is not clear that that is a term that
folks like to have put on them. I see it in a lot of the
testimonies, and I guess I would just encourage your firms to
be thoughtful in how you address folks, and maybe survey your
own population, but also look at the broader Hispanic/Latino
community as we go forward. I think that would be helpful for
everybody.
With that, I yield back.
Chairwoman Beatty. Thank you, Mr. Gonzalez.
The gentleman from Massachusetts, Mr. Lynch, who is also
the Chair of our Task Force on Financial Technologies, is now
recognized for 5 minutes.
Mr. Lynch. Thank you so much, Madam Chairwoman. I do
appreciate the opportunity.
Just as a threshold matter, I am a little surprised that
none of our witnesses have come up with any data or any
benchmarks that reflect the diversity and inclusion in their
companies. I just want to remind people that this is the
Subcommittee on Diversity and Inclusion, and the name of this
hearing, the title of this hearing is, ``A Review of Diversity
and Inclusion Performance at America's Large Investment
Firms.'' That is why you were invited here. So, when I
repeatedly hear that people don't have numbers on this, what
did you think we were going to ask you about? We have to do
better on this. When you get invited to a hearing, you need to
be ready to help us with our work.
As the Chair remarked, I chair the Task Force on FinTech,
and here is the problem. It merges, as you know, the world of
finance and the world of technology. They are being merged, and
it is really the future of the industry in FinTech. Finance is
a world that has been hostile to or unwelcoming to women and
people of color. Technology is also an industry and a world
that has been hostile to women and people of color, and now we
are merging them both, and that is where we have a big problem.
Here's the thing. Congresswoman Pressley and I represent
Boston. We have a lot of people in both of those worlds, and we
are trying to introduce our constituents to those worlds and
make those entities more diverse. So, I started a charter
school. I co-founded a charter school, one of the most diverse
in the City, probably one of the most diverse in the country,
and we are focused on creating workers for your industry,
finance and technology. One of our biggest problems is getting
teachers to come into those schools and actually help us
educate the workers of the future.
We had a hiring round not that long ago where we got
hundreds of applications from English teachers, but when we
tried to hire math and science teachers, we got three
responses--nine responses but three positions.
So, what you could do--and I am speaking to BlackRock and
others--to help us, and this goes to the pipeline issue that
Congresswoman Wagner and others have raised, is to help us
get--if someone has math and science skills, they are not
coming into our public schools and teaching. They are going and
making the big money in finance and technology.
Help us. You could establish chairs at some of these
schools, public charter schools, where you supplement someone's
pay to teach math and science and finance in these schools. My
charter school starts at 5th grade. You can't wait until a kid
shows up at your door as an adult and try to train them in some
of this. They have to have a good, solid foundation.
Look, there is a solution here. It would be good for your
industry to help us educate the workers of the future who are
going to work for you. We have to change the way we think about
this. I appreciate the internships and things like that, but we
have to start much younger. We have to build math and science
skills, and technology skills in these kids before they ever
arrive on your doorstep. So, I am asking you to focus on that.
I know there are very nascent efforts in this regard, but
we have to do better in this. It will be good for your
industry, it will be good for the people that we are trying to
help, and it will build the future.
Is anybody doing anything like that in the early years? Can
I ask any of our witnesses, is anybody doing something at the
elementary school, grade school, or high-school level?
Ms. Gadsden-Williams. If I may respond, Chairwoman Beatty?
Mr. Lynch. I will take that response in writing. My time
has almost expired. Any responses that you have, I will take in
writing.
Thank you, Madam Chairwoman. I yield back.
Chairwoman Beatty. Thank you so much to the gentleman from
Massachusetts.
The gentleman from South Carolina, Mr. Timmons, is now
recognized for 5 minutes.
Mr. Timmons. Thank you, Madam Chairwoman.
Lack of diversity is not always an easy problem to solve
because root causes are often complex and subtle. I think one
way we can ensure that we continue to make progress in this
area is to have a candid dialogue about what is working and
what is not working. If we do that, we can learn from each
other and not be shamed for things we are trying but may not
yet be yielding immediate results.
I would like to open it up to the entire panel. What are
the challenges you are facing? What are you struggling with? Is
there a factor here that we are not seeing, that you think we
should be aware of and consider?
Mr. Parker, I will with you.
Mr. Parker. Yes. Thank you for your question. I think there
is a cadence that needs to be established around this
particular topic with some degree of frequency. Leadership
starts with a conversation, and I think by having quarterly
meetings, brown-bag lunches, somewhere we can engage and share
what is working, and what is not working. To the question
earlier, we are investing in a fast-track program that deals
with high school students, but also getting to young
professionals. There are a plethora of ideas out there, best
practices that we can deploy to address your particular
question. Thank you.
Mr. Timmons. Thank you.
Anyone else want to chime in?
Mr. Pan. This is Eric Pan from the Investment Company
Institute. I would just like to, again, indicate that we have
made efforts to do exactly what you are suggesting, which is
getting our members together, having them exchange information
about different initiatives that they are doing, and learn from
each other what is working, and what is not working. I would be
happy to provide a list of things that have been discussed so
far. But we are very much in agreement with what he had said.
Mr. Timmons. Thank you.
Yes, ma'am, go ahead?
Ms. Gadsden-Williams. In terms of challenges around DEI,
what I have seen over the years is that transparency and
accountability are, in my view, key ingredients to any
successful DEI strategy. Without that, I just don't know how
you can measure and track progress over time.
So, as a firm, one of the many things that we have done is
we have several ways that we tie performance reviews and pay or
compensation to our DEI strategy. First, we begin at the very
top. We have a top-down approach to accountability, starting
with our Global Executive Committee. Their performance
assessments and compensation are assessed and determined by how
they deliver against the DEI and/or talent strategies.
Second, at the business level we track or measure progress
over time. We have quarterly business reviews. We have talent
reviews. We have diversity dashboards that track things like
hiring and retention and development. We have integrated DEI
into the performance management process.
In sum, I think you cannot make progress without holding
leaders and/or others accountable to DEI. That is a challenge
that I have seen over the years where things can certainly
unravel. Thank you.
Mr. Timmons. Sure. I have one follow-up question for you. I
serve in the Air Force, and the military has been struggling
with this for years. As an officer in the South Carolina
National Guard, I was training just about a year-and-a-half
ago, and we had a lot of these conversations. One of the things
that came up was, how do we make sure we are focusing on
diversity and inclusion and giving people opportunities who
deserve opportunities, without disadvantaging other people who
may not be diverse but have had very challenging lives. How do
you address that?
Ms. Gadsden-Williams. I think you do that by focusing on
inclusion. It is all about the collective, ``we,'' and not the
individual. So, I think the more you can talk about DEI, it is
about all of us and not some of us. That is the position we
have taken at BlackRock, and I think that is where the success
and where people turn corners philosophically around this
notion of diversity, equity and inclusion, that it is about the
collective, ``we,'' and not just the individual.
Mr. Timmons. Sure. We had very frank conversations in
training, and it was very challenging because a lot of people
who go into the military do so for economic opportunity because
they have not had opportunities wherever they grow up,
regardless of their race/skin color, and it was a point of
contention. So, I think we have to make sure we are factoring
in equity for socioeconomic disadvantaged individuals and make
sure that we are moving everyone forward together.
Ms. Gadsden-Williams. If I may also add, Representative,
when we talk about diversity, I think to your point, we should
talk about it in all of its dimensions. A lot of organizations
talk about gender and/or ethnic minorities, but there are other
dimensions of diversity that get less air play--LGBTQ,
veterans, individuals with disabilities, and so forth.
Mr. Timmons. Thank you, ma'am. I yield back.
Ms. Gadsden-Williams. Thank you, Representative.
Chairwoman Beatty. Thank you, Mr. Timmons.
The gentlewoman from Pennsylvania, Ms. Dean, is now
recognized for 5 minutes.
Ms. Dean. I thank the Chair, and I thank the witnesses for
being with us today.
At the risk of repeating what we have heard over and over,
but I don't think we can repeat it enough, increasing diversity
and inclusion--and, I would suggest, beyond inclusion,
belonging--is not only the right thing to do from a moral
standpoint, it is the right thing to do for the bottom line. An
analysis by McKinsey using 2019 data found that firms with
higher gender and ethnic/cultural diversity were likely to be
more profitable than less diverse firms.
So, Ms. Gadsden-Williams, Mr. Taraporevala, specifically to
BlackRock, and specifically to State Street, how does
increasing diversity improve the bottom line? What numbers do
you have? What data can you share? What measurements are there?
Ms. Gadsden-Williams. Thank you for your question,
Representative. There is enough empirical data and research in
the ethos to substantiate the business case for DEI. We as an
organization have decided that it is, in fact, a business-
critical imperative based on that empirical data and research.
In terms of how and what specific numbers, I do not have
that information in front of me, but what I can assure you,
based on my years of experience, is that there is enough
research that would substantiate all of the things that you
have cited.
Ms. Dean. You are absolutely right. We have seen the
research. But I am just wondering internally, maybe you could
get back to us with whatever measure you have, specifically to
BlackRock?
Mr. Taraporevala, for State Street?
Mr. Taraporevala. Thank you for the question, Congresswoman
Dean. I think you have just mentioned two great data points off
data which demonstrates that, in fact, diverse teams do result
in better outcomes in terms of profitability. There have been a
plethora of studies I could quote a lot, whether it is a Morgan
Stanley Capital International (MSCI) study on gender diversity
and how companies with more gender--
Ms. Dean. Pardon me. I am asking for State Street
specifically. Do you have measurements on this?
Mr. Taraporevala. On the outcomes? I think that is pretty
hard. I am not sure, given all of the data that has already
been accumulated, that searching for more data is the critical
thing. I think the real focus needs to be on action and moving
the needle on diversity and inclusion.
Ms. Dean. I actually disagree. I would think that within an
organization, you would want to see and bear out the proof on
increasing diversity, and increasing profitability.
I recently came across an interesting article in The
Philadelphia Tribune by some faculty at Wharton highlighting
that effective diversity, equity and inclusion, belonging, is
key to retention, which should be especially of interest to
corporate America, given that we are in the midst of the so-
called, ``Great Resignation.'' The authors note the importance
of middle managers, not just senior executives, in creating a
truly inclusive workplace.
Mr. Parker, could you speak to that notion of, how do we
make sure that we have diversity in middle management,
especially at this tumultuous time?
Mr. Parker. Yes, thank you for the question. It starts at
the top, Congresswoman. It starts with the CEO, with the
leadership, with the Board, really. Governance, intervention,
making sure that there are processes in place. It starts with
the CEO, his or her staff, going down to the next level of
those who are running operating divisions, getting into what we
call the frozen middle, the middle management group, and making
sure they understand that growth is contingent upon having a
workforce that is reflective of their customer base.
By measuring it and looking at it, just like we do with
revenue, profitability, and market share, these things can be
accomplished inside an organization. But it takes
intentionality and accountability at the top.
Ms. Dean. It really does take intentionality. I remember
having a roundtable on diversity in my district, and a
government leader, and he is African American and a highly-
elected person, said, ``I believed that we were a diverse
community of staff and employees. And I actually looked around,
and found we weren't.'' He also said, ``We need to be
intentional. We think we are, and sometimes we are not.''
Ms. Gadsden-Williams, I wanted to ask you quickly, and
maybe Mr. Parker quickly also, there is so much more to be
done. I heard you say it. I heard others say it. Can you give
us, granular, two specific things? And, Mr. Parker, the same
thing?
Ms. Gadsden-Williams. Yes, there is much more work that
needs to be done around representation of diversity. That is an
area of opportunity within our firm. Although we have seen
year-over-year progress, we would like to see more diverse
representation at the senior levels and at the frozen middle,
as well.
Ms. Dean. And I know my time is up, but Mr. Parker,
quickly?
Mr. Parker. Transparency and accountability.
Ms. Dean. Thank you.
Thank you. I yield back.
Chairwoman Beatty. Thank you.
The gentlewoman from Texas, Ms. Garcia--who is also the
Vice Chair of this subcommittee, and I thank her for that--is
now recognized for 5 minutes.
Ms. Garcia of Texas. Thank you, Madam Chairwoman. It is a
pleasure to work with you here on all of our issues on the
Diversity and Inclusion Subcommittee. Thank you for this
hearing. And, of course, thank you to all the witnesses for
being here with us today or on the screen.
The topic of diversity and inclusion is so important to the
financial services industry, but it is especially important in
the investment industry, one that works to build wealth and
whose workforce is skilled and knowledgeable in creating
financial opportunity.
My district is 77-percent Latino. We as Latinos are the
fastest-growing market in the United States. The Department of
Labor found that Spanish-speaking Americans are expected to
account for almost 65 percent of labor force growth through
2029, adding 7 million new workers. Yet many institutions, from
wealth managers to credit providers, have not actively sought
to reach this growing market, and their workforce does not
reflect it. Not only that, but cultural barriers exist for
members of the community who have been historically
disenfranchised.
My question is for Mr. Pan. In your work representing
regulated funds, you have come across cultural and
institutional barriers that are as longstanding as they are
resilient, and I am glad to see your organization is making
concerted efforts to reach a more diverse workforce, so thank
you for that.
I understand this is a growing effort that is constantly
under development, so I just wanted to highlight an important
issue facing my district and many others, simply put, language
barriers. I want to ask you this: Is the ICI exploring ways to
reach future job applicants whose primary language is not
English?
Mr. Pan. We have not discussed this, but, Congresswoman,
thank you for your comment, because I will bring this to the
attention of our Board of Governors and the importance, as you
have laid out, of making sure that we are able to access
everybody in America regardless of what language they are
speaking.
Ms. Garcia of Texas. Thank you.
Mr. Parker, what about your organization?
Mr. Parker. Yes, our organization is an organization that
is made up of all people of color, primarily African Americans
and Latino, and we work very hard with trying to connect with
young people through our fast-track program, our young
professionals program, to demystify this world of financial
services, and we are doing that with some of our strategic
partners. So, it is very intentional.
Ms. Garcia of Texas. Thank you.
I have also been very concerned with the impact the
epidemic has had on women in the workforce, particularly
working mothers. A recent survey of 40,000 women in corporate
America found that many of them have considered either leaving
or downshifting their careers due to the pressures from
balancing work and family.
My question is to you, Ms. Gadsden-Williams. I know your
firm has done a lot to hire diverse candidates for entry-level
positions, and also for your Board. What are you doing for
those in the middle, especially those who are in the parenting
stages of their lives? What are you doing specifically to
support working mothers?
Ms. Gadsden-Williams. Speaking about the pandemic
specifically, our priority at BlackRock is to ensure that the
health and safety of our employees is paramount, number one.
Ms. Garcia of Texas. Can you speak to working mothers,
please?
Ms. Gadsden-Williams. For working mothers, we provide all
types of virtual programming and such to ensure that they are
still connected. For those who have caregiving
responsibilities, we have buddy programs and the like. So, we
do have support programs for working mothers and individuals
who may have had a tough time based on the research that you
are citing to continue to engage in the organization during the
course of the pandemic.
Ms. Garcia of Texas. Do you provide child care or a child
care stipend to your working parents?
Ms. Gadsden-Williams. We do. I do not know the details of
our programming, but someone on my teamwe will get back to your
office with those details.
Ms. Garcia of Texas. Okay.
Mr. Taraporevala, what about your firm, sir? What are you
doing for working mothers?
Mr. Taraporevala. Yes, thank you. And I do want to
acknowledge your point that the effects of the pandemic have
been particularly acute for working women. I actually believe
that where the workforce and the workplace of the future are
headed is towards more either hybrid or home working
arrangements.
Ms. Garcia of Texas. But what specifically, sir? Excuse me,
just reclaiming my time, I only have 20 more seconds. What are
you doing specifically for working mothers?
Mr. Taraporevala. We are supporting more hybrid working
arrangements, of which working mothers are more likely to avail
themselves.
Ms. Garcia of Texas. Sir, with all due respect, just about
the whole world has because of the pandemic. But what
specifically are you doing to be supportive to make sure that
we retain them or make sure that they continue in their
careers?
Mr. Taraporevala. Again, we have done many of the things
that we have already talked about, whether it is mentorship,
sponsorship, having folks more connected with more senior
leaders, and all of that is helping them as they get through
this tough time.
Ms. Garcia of Texas. Thank you, Madam Chairwoman, and I
yield back.
Chairwoman Beatty. Thank you.
The gentlewoman from Georgia, Ms. Williams, who is also the
Vice Chair of our Subcommittee on Oversight and Investigations,
is now recognized for 5 minutes.
Ms. Williams of Georgia. Thank you, Madam Chairwoman.
My home City of Atlanta, unfortunately, has the largest
racial wealth gap in the country, but my district is also a
global business hub and one of the strongest incubators of
Black wealth. I know firsthand that the fates of our businesses
and the people who work there are interconnected.
On this committee, I am dedicated to ensuring that our
business partners advance racial justice and help close the
racial wealth gap through diversity, equity and inclusion. One
area where this is key is to make sure that diverse individuals
can become successful asset managers.
Mr. Parker, how would ensuring diversity, equity and
inclusion in asset management create greater opportunities for
Black wealth and closing the racial wealth gap?
Mr. Parker. Thank you for the question. It really is
embedded into all of our programming, starting from our fast
track, our young professionals, to our women's forum, of which
we have 11 chapters around the country where we roll out these
programs on an annual basis, inviting all of the subject-matter
experts in the different asset classes to participate, as well
as firms that you see here in this hearing.
We try to address it from a regional standpoint, but we
also look at it from what we call a workforce lifecycle
standpoint, starting with young professionals, working our way
up to those seniors who are in transition to possibly out of
the workforce as well.
Ms. Williams of Georgia. Thank you, Mr. Parker. And as you
mentioned in your testimony, only a small fraction of asset
management firms, 8.6 percent, are women- and minority-owned.
But what is even more troubling is that these firms only manage
about 1 percent of all assets. We can't make progress on
diversifying the industry and ensuring that diverse firms are
truly included in it until we do more to collect the data.
Mr. Parker, why is tracking data so crucial to diversity
and inclusion results, and can increased transparency around
the utilization of diverse professional service firms,
including asset managers, spur action toward improving the
numbers that you cited in your testimony?
Mr. Parker. Thank you for the question. You manage what you
measure, and we have said numerous times that full transparency
as to where you are, not to say to be critical but to try to
apply practices that we know are tested in other markets that
we can apply. So, managing what you measure and measure what
you manage is our mantra coming out of NASP.
Ms. Williams of Georgia. Thank you, Mr. Parker.
Mentor-protege and emerging manager programs are intended
to cultivate diverse and talented asset managers, but we have
to be sure that those programs are working as they are
intended. For example, we can't have large asset firms creating
smaller firms and then just checking a box to meet program
criteria but not divesting their ownership interest.
Finally, Mr. Parker, what is your opinion about the
continued value of mentor-protege and emerging manager
programs? How would these programs be amended to be more
effective in serving women- and minority-owned firms, as
intended?
Mr. Parker. Great question, Congresswoman. We would say
that a new model that should be introduced in the mentor-
protege relationship is accountability, and that is for the
mentor to have some accountability on the outcome of the
performance of the protege as the protege continues to go
through the different professional stages of their ability to
service their particular clients. This relationship is
something that we are going to be introducing across some of
our programs, but having the mentor be accountable for the
outcomes of that protege tied to the relationship they have
with their stakeholders and shareholders.
Ms. Williams of Georgia. Thank you, Mr. Parker.
Madam Chairwoman, I will yield back the balance of my time,
but I want to thank you for this hearing today, and as we
continue to do our work on this subcommittee to make sure that
we are closing the racial wealth gap, which, unfortunately, in
my home City of Atlanta, leads the country. I am committed to
this work and I appreciate your leadership in getting this
done. Thank you.
Chairwoman Beatty. Thank you to the gentlewoman from
Georgia.
The gentlewoman from Michigan, Ms. Tlaib, is now recognized
for 5 minutes.
Ms. Tlaib. Thank you so much, Chairwoman Beatty, for always
centering since the beginning of my days here last term until
now. And, of course, thank you, Chairwoman Waters, for
continuing to support the work of Chairwoman Beatty.
I think it is really important, as a person who did
organizing for a long time, this conversation and debate about
equity versus equality. Something I learned early on, and for
the panel and my colleagues, is that equality is giving
everybody the same pair of shoes, just give everybody a pair of
shoes. Equity is giving them a pair of shoes that actually fit.
That is something that I learned. I don't know where I picked
it up from, but I remember that and it really stuck with me in
understanding the difference.
But let me get to some of the panelists here, and thank you
so much for your patience and for sticking with us on really
important questions and really understanding how we can be
helpful and be a partner here.
With $47 trillion in assets under management, the decisions
that these firms make with regard to diversity and inclusion
have implications for the entire financial services industry
and our economy, and I think that is why we are having this
hearing.
As the committee's report found, we have a lot of work to
do, the industry does. I would like to ask all of you about the
SEC's recommendations for diversifying the industry. In July,
the SEC's Asset Management Advisory Committee, the Subcommittee
on Diversity and Inclusion, found, ``widespread gender and
racial bias in the decisions by those in positions making asset
and asset manager allocation decisions regarding who manages
money for governments, universities, charities, foundations,
and the institutional market in general.''
The committee made a number of recommendations. They went
on to state that investors, the industry, and the public
markets would benefit by SEC guidance which clarifies that a
wide variety of factors may be considered by fiduciaries in the
selection of asset management firms, and that fulfillment of
one's fiduciary duty in this context does not require automatic
exclusion of asset managers who are newer to the industry or
who do not already have a certain level of assets under
management (AUM).
So, Mr. Pan, Mr. Taraporevala, and Mr. Clements, if a firm
acquires the services of outside asset management firms, how
are they assessed? Is the assessment based exclusively on
things like assets under management or years in industry, or is
a more holistic evaluation completed?
Mr. Pan. I am happy to go first. I cannot speak to how a
specific individual firm goes about this activity, given my
position at a trade association. But what I can tell you is
that different firms follow a variety of factors that are
unique to their circumstances, and their needs. The fiduciary
duty that exists today, that of the duty of care, the duty of
loyalty they have to their shareholders, is a fiduciary duty
but also something that all of our members take extremely
seriously. And the reason why diversity and inclusion is so
important to our industry is this recognition that a diversity
of viewpoints, diversity of staffing, is highly consistent with
ensuring that you are doing the best you can for your
shareholders.
Mr. Taraporevala. Congresswoman, this is Cyrus
Taraporevala. I will go next. Thank you for your question.
Just to clarify, as a large asset manager ourselves, we are
on the receiving end, if you will, in terms of that selection
process that you are describing, not on the deciding end. But
we do agree, I think, with what you are describing, which is
that a wide variety of factors should be considered in the
selection process. Very rarely, we do hire ourselves what are
called sub-advisors, another asset manager to manage part of
our assets. That is a tiny part. Most of what we do, we manage
ourselves internally. But when we do think about sub-advisors,
we do consider diversity and inclusion factors as part of that
decision criteria.
Mr. Clements. This is Mr. Clements. I would note that when
we report our key practices, one of those key practices is to
look to remove potential barriers, for example, looking at
assets under management or track record, and trying to target
those better to the firm so that it better matches the needs
and works for firms of all sizes while still maintaining our
fiduciary obligations.
Ms. Tlaib. And I agree with regard to tracking data, how
incredibly important that is in producing diversity and
inclusion results.
Madam Chairwoman, that is all for my line of questions.
Again, I really cannot thank you enough for your commitments
and really just determination to make sure we get this work
right. You were there when I asked bank CEOs at one point if
they knew what environmental racism was, and my heart sank when
every single one of them had no idea or had heard the term.
Again, my district lives it every single day, and I just was
taken aback by that. But I know by including people like us in
these places that are making decisions, it is going to make a
huge difference.
Thank you so much, Chairwoman Beatty. I yield back.
Chairwoman Beatty. Thank you.
I would like to thank our witnesses for their testimony
today.
The Chair notes that some Members may have additional
questions for these witnesses, which they may wish to submit in
writing. Without objection, the hearing record will remain open
for 5 legislative days for Members to submit written questions
to these witnesses and to place their responses in the record.
Also, without objection, Members will have 5 legislative days
to submit extraneous materials to the Chair for inclusion in
the record.
And without objection, I would like to enter a statement
from the Diverse Asset Managers Initiative for inclusion in the
record.
This hearing is now adjourned.
[Whereupon, at 12:50 p.m., the hearing was adjourned.]
A P P E N D I X
December 9, 2021
[all]