The House Financial Services Committee continued to focus on workforce diversity. 

That committee held a hearing entitled “Diversity in the Boardroom: Examining Proposals to Increase the Diversity of America’s Boards.”

This is the second hearing on diversity in this committee this session. The first in February was entitled “An Overview of Diversity Trends in the Financial Services Industry.”

Later this month, the committee will hold another hearing on diversity entitled: “Diverse Asset Managers: Challenges, Solutions and Opportunities for Inclusion.”

“Strong diversity in the boardroom is critical to continued US competitiveness,” said committee chairwoman Maxine Waters, a Democrat from California. “Unfortunately, corporate and government boards are not living up to their responsibility to reflect America’s diversity.”

This was a message which received bi-partisan support. Patrick McHenry is a Republican from North Carolina, and he echoed Waters’ message. 

“It is extremely important to increase the diversity inclusion of American boardrooms,” he said. “Pursuing more diverse boards is the right thing to do as a matter of economic interest for these institutions, but there’s also a good reason for these leaders to prioritize diversity. Research shows when you have more array of inputs, you actually get better outcomes.”

McHenry stated that women and minorities are still underrepresented on corporate boardrooms, “while we’ve made progress,” he said, “progress does not mean we’ve arrived.”

While no one—neither the politicians or the witnesses—argued that board diversity is optimum; several witnesses provided data which showed that progress has been made.

He provided data showing the improvement.

“Over the past 10 years, we have seen a long-term progression of gender, racial, and ethnic diversity at the board director level,” Lumbra said. “In our 2019 U.S. Board Monitor, which is an annual study of the trends in non-executive director appointments on Fortune 500 Boards, we saw that women filled 40% of new board seats in 2018, a new highwater mark and more than double the percentage (18%) from 2009. In 2018, we also saw that 23% of new board seats were filled by ethnic minorities (African-Americans, Asians/Asian-Americans, and Hispanics), up from 14% in 2009.”

Linda Akutagawa is President and CEO of LEAP (Leadership Education for Asian Pacifics). She also provided data showing improving trends in diversity. 

“The growth in diversity on boards is being led by Fortune 100 companies, which has reached a high of 38.6 percent women and minorities,” she said in her opening remarks. 

Vilma Martinez is the former Ambassador to Argentina, the first woman to be ambassador to that country; she also previously served on the boards of: Anheiser Busch, Burlington Northern Santa Fe, Shell Oil, Sanwa Bank of California, Fluor, and Bank of the West. 

She is also a board member of the Latino Corporate Directors Association (LCDA). 

In her opening remarks, she noted that even as progress has been made for diversity, it has been slowest for Latinos, and particularly Latinas. 

“Unfortunately, despite a strong talent pool, Latinos and Latinas are the least represented on America’s corporate boards. Based on our own analysis of new data released today of boardroom demographics women, racial and ethnic groups continue to lag, with Latino groups falling far behind. 

She noted that while female representation on corporate boards among the S & P 1500 companies increased by 11 percent since 2008, Latino participation on the same corporate boards increased by less than one percent over the same time period. 

Akutagawa found board participation similarly lagging among Latinos: “Hispanic/Latinos grew in the Fortune 500 but lost seats in the Fortune 100. Despite being one of the fastest growing populations, Hispanic/Latina women experienced the smallest number of board appointments from 2016-2018.”

Sylvia Garcia is a Democratic Congresswoman from Texas, and she was not impressed with the progress. 

“It’s very distressing that some of the numbers that we’re seeing aren’t really significant improvements; in fact, they’re barely improvements.”

Pointing to analysis done by Ambassador Martinez and LCDA, Garcia said, “That clearly paints the picture of, ‘well the percentage looks like its improved, but the actual numbers are really small.’”

The panel also presented numerous solutions to increase diversity. 

Chelsea Gurkin is the Acting Director of Education, Workforce and Income Security Team at the U.S. Government Accountability Office (GAO).

She presented three solutions during her opening remarks: 

1) Requiring a diverse slate of candidates for all open board seats 

2) Boards should look beyond CEOs and recruit from other senior level executive positions 

3) Boards could consider increasing their size. 

The first solution is similar to the Rooney rule in the National Football League (NFL) which requires all NFL teams to interview at least one African-American candidate for every open position for head coach. 

But Visconti, in his opening remarks, noted that the Rooney rule has done little to increase diversity in the NFL: “For example, the ‘Rooney Rule’ was established in 2003, but it did not work for the NFL, which remains a de facto plantation as 88% of head coaches, 97% of owners, and only 30% of players are white.”

Alexandria Ocasio-Cortez, the rising star Democrat from New York, echoed that point during her five minute question period. 

“The NFL is where white billionaires govern the majority of power, and women and people of color work for them and give them their margins,”she said.

Visconti said board diversity in the banking sector must be achieved through regulation: “Continued nondisclosure, lack of transparency and a complete lack of accountability will only result in stasis – unrepresentative boards unable and incompetent to provide strategic leadership required for banking services to a country that has grown and continues dramatically growing in its diversity. In my opinion, regulation to ensure fair and equitable representation on bank boards would greatly benefit our nation.”

Lumbra agreed with Gurkin that one solution is to think outside the traditional box when considering candidates: “Casting a wider net to find executives outside of existing networks can make a huge difference. Boards can achieve greater diversity by looking beyond CEOs and considering senior operational and functional leaders. While CEOs certainly bring valuable skills to the table, there are far greater numbers of diverse leaders at the general manager, divisional head, or business unit levels, who possess both P&L experience and operational leadership ability.”

He also called for a comprehensive, process-oriented approach. “Boards also have to be intentional and purposeful when it comes to insisting on diverse candidate slates and seeking diverse leaders to fill their new board seats. Intentionality is a key part of change, and there has to be a commitment to open-mindedness and creating a purposeful plan for finding and considering candidates from diverse backgrounds.”

Ambassador Martinez, when asked by Garcia for solutions, said that groups like LCDA and Catalyst, an organization which promotes women on boards, “really need to be leveraged.”