Ill. treasurer: Require more women, people of color in business leadership

Michael Frerichs wants data on workplace, leadership diversity reported to SEC, made public.
Published: Sep. 16, 2020 at 2:09 PM CDT
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SPRINGFIELD, Ill. (WIFR) - Illinois State Treasurer Michael Frerichs told the Securities and Exchange Commission the federal government must implement requirements to boost the numbers of women and people of color within the ranks of finance and big business on Wednesday.

“Providing an opportunity to be considered is a first step to rolling back decades of institutional racism that discouraged the hiring of women and people of color,” Frerichs said. “These are qualified individuals and firms who are not being considered simply because the rules are stacked against them. I understand not everyone will embrace these ideas and that is disappointing. At a time when the leader of the free world is ordering the dismantling of diversity training because he believes it to be un-American, we must show our country and the world that barriers to entry must be removed.”

Frerichs believes big banks and investment houses remain reluctant to change legacy rules that serve as barriers to employment for women and people of color, such as unreasonable years of service and a minimum of $1 billion in investment assets.

“Further, while some institutions acknowledge the removal of barriers to female and minority participation are warranted, they are reluctant to release data that would show their progress,” Frerichs said.

At their request, Frerichs testified to the SEC’s Asset Management Advisory Committee and said institutional investors have an obligation to pursue shareholder value.

“The willful decision not to increase race and gender diversity within the ranks of corporate boards and leadership positions will inherently lessen the value of these companies and harm shareholders,” Frerichs said.

Specifically, Frerichs called upon the SEC to:

  • "Adopt the Garcia rule and require financial institutions and publicly traded companies to consider enterprises led by women and people of color when selecting firms including broker-dealers and asset managers and to consider at least one woman and person of color when nominating directors or selecting executive officers. This must include explaining why women and people of color were not chosen and the steps needed to improve future applications. The Garcia Rule is named after Gilbert Garcia who, as a member of an investment board in Houston, Texas, required the Metropolitan Transit Authority of Harris County to consider at least one emerging manager in every search. The rule is similar to the NFL’s Rooney Rule, which requires at least one minority candidate to be brought forward for coaching and front-office positions.
  • Mandate the disclosure of diversity data within the workforce including race, gender, ethnicity, religion, nationality, disability, veteran status and sexual orientation. Data utilization rates for outside vendors also should be disclosed. These disclosures must be made every two years.
  • Require financial institutions and publicly traded companies to publicly disclose the race and gender of directors, nominees, and executive officers annually.
  • Commission a study to evaluate the practices of investment consultants and the systemic and structural barriers to diverse investment firms."

“Data collection is not unduly burdensome because it already is being done,” Frerichs said.

All private employers with 100 or more employees are required to report diversity data to the Equal Employment Opportunity Commission, which is kept confidential. In the public sector, the Illinois State Treasurer’s Office requires diversity data when seeking government business.

“If not required, however, too many companies refuse to provide it. For example, in 2018, the SEC received only 38 responses from 1,500 registrants who were asked to voluntarily complete a Diversity Assessment Report," Frerichs said.

A copy of Frerichs' remarks prepared for the SEC committee is here.

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