CalPERS and CalSTRS sponsored the California Diversity Forum in Sacramento (“America’s Most Diverse City”) on Wednesday, May 12, 2017, bringing together investment and corporate executives to discuss how to better capitalize on the abilities of the diverse modern workforce. Diversity is both morally right and profitable. Narrowing the global gender gap would add $12 trillion in annual gross domestic product to global growth (McKinsey Global Institute).
What follows are my cryptic notes from the Diversity Forum. Sometimes they are just phrases I captured that may not mean so much out of context. Maybe it will be just enough to mark your calendar for next year’s Forum. More coverage at Part 1 and on Twitter at #CADiversityForum. I loved the fact that for once, I didn’t have to travel thousands of mile. Nice to have such an event in my own hometown.
Diversity Forum: The Corporate Perspective
Leaders from different industries who have successfully increased diversity present the key initiatives and activities they undertook to achieve change. Presentations from this and most panels at the Diversity Forum were followed by an interactive dialogue about implementation and best practices, as well as a Q&A session.
- Betty Yee, Controller, State of California (Moderator)
- Gabriela Parcella, Chairman, President & CEO, Mellon Capital
- Paul Chiames, Director of Human Resources and Development, SLAC National Accelerator Laboratory
- Victor Hymes, CEO and Chief Investment Officer, Legato Capital Management
Women are typically not climbing a corporate ladder. It is not straight up but more like a jungle gym, with a variety of experiences often being a plus. Parcella reported that Mellon Capital now has 60% women in the C-suite. Read much more in their Return on Equality report. Influence your company culture. Make diverse hires. Invite diverse peer/employees to meetings. Focus on maternity leave. Remember: We are not all alike… and that is a good thing. Interviewers must be diverse. Bias against accents – not sure how to address that. Look at the multiplier effect of freeing up women’s time.
Paul Chiames noted that job descriptions are frequently too male oriented. Check out your office décor. Does it emphasize male dominated sports or other activities? Fast brain thinking dominates. We need to slow it down.
All decisions are emotional. Bias is an error in decision-making. We need to engage our slow brain. No “bias blaming” appeal to the pre-frontal cortex, Mapping efforts to metrics. Success breeds success.
Startup diversity is harder because there are few employees. That is is time to establish the firm’s core values. That task is easier with fewer employees. Of course, managing to those core values is harder than writing them down. Creating a supportive environment is easier. Institutionalization is harder. When a company is new and small, you can create a job tailored to individual. That becomes more difficult at larger firms. Probity can lead to instantaneous course correction. Fairness is not sameness. Go beyond measuring the % of people to how long they have been there and what proportion of the money they earn. Expand on what works. Prepare a diversity model portfolio if we were to achieve the vision. Celebrate successes.
Diversity Forum: Change In the Boardroom and From the Boardroom
Great strides have been made to promote diversity on corporate boards but this panel of the diversity forum highlighted that much remains.
- John Chiang, Treasurer, State of California (Moderator)
- Anne Simpson, Investment Director – Sustainability, CalPERS
- Ginger Lew, Managing Director, Cube Hydro Partners
- Helena Morrissey, Head of Personal Investing, Legal & General Investment Management
Proxy access is critical to board accountability and will help move diversity. Too many boards are sitting on their hands. Turnover on boards is decreasing and that means fewer opportunities to replace old white men (my words) with a more diverse population. One of the problems is that the U.S. has a weak regime of shareholder rights.
What skills and experience are needed for long-term strategy? A new dimension added adds value. Programs like Credit Suisse’s Real Returns can be very helpful. Read interview with Julia Dawson. The 3D program initiated by CalPERS and CalSTRS addressed the pool but too many companies are still sitting on their hands. Binders full of women and minorities are helpful but only if the tool is used. ‘Technology,’ ‘international’ and ‘female’ are the most frequently searched words on the Diverse Director DataSource 3D database.
We need to work more on cultural dynamics. Forcing doesn’t work.
[Although, I would argue forcing can be effective if the effort is legislated for all companies. Read my review of Getting Women on to Corporate Boards, which describes outcomes of the Norwegian quota law and its snowball effect on other countries.]
Ginger Lew emphasized the gains that can be made by asking for a census of demographic characteristics of your fund managers and portfolio companies.
‘Comply or explain‘ contributed to reducing director tenure in UK, where it is now assumed that after nine years of service a director is no longer considered ‘independent.’ (see Renewed Focus on Corporate Director Tenure) Much of the work has shifted from board to pipeline or ecosystem.
Diversity Forum: CIO to CIO – Asset Owner Perspective on Changing the Investment Landscape
Leaders from the two largest pension plans in the United States discuss their efforts to encourage greater diversity and inclusion both within their own organizations and the companies they invest with.
- Danielle Gray, Partner, O’Melveny & Myers (Moderator)
- Theodore Eliopoulos, Chief Investment Officer, CalPERS
- Christopher Ailman, Chief Investment Officer, CalSTRS
CalPERS (or was is CalSTRS?) created a 5 year emerging manager focus. Grow them over the long-term. Then they created a middle transition program to have a place to grow emerging managers over time. They have a diversity inclusion steering committee in investment office. Did not have the diversity that reflected beliefs and institution. Diverse hiring panel. Discussed with recruiters. Established strategic partnerships with AAAIM, NAA(?), CFA, 100Women(?) and other advocacy groups I missed. The point is 3-5 staff were assigned to each after 70 volunteered. They collected data on diversity at the portfolio manager firms they are doing business with. There is a great power in measuring. Teaming up, learning together.
CalPERS divided its strategy by firm size, asset class. Goal is 50% women. Details of student internship and mentoring programs were provided. Looking at standardizing surveys with other funds. Talking within US and globally. GroupThink is a problem. Too many fund managers pulling only from elite East Coast schools. Yes, you can have a career in finance in Sacramento and West Sacramento.
Randy Diamond, reporting for Pensions&Investments did a much better job covering this discussion than I did. (CalPERS, CalSTRS outline diversity efforts at forum).
Theodore Eliopoulos said he anticipates that when CalPERS gets down to its goal of 100 outside managers, 15 of them will be part of a transition program. The program is designed to help promising managers, including women- and minority-owned firms, move from managing small stakes of CalPERS’ portfolio to larger shares…
Mr. Ailman said at the forum that 62% of senior leadership of the system’s investment office is made up of women. CalPERS statistics provided by Ms. White [who Diamond contacted via email] show that 20% of senior leadership in its investment office are women.
Diversity Forum: Mentorship Creates Success for Everyone
- Marcie Frost, Chief Executive Officer, CalPERS (Moderator)
- Verdun Perry, Senior Managing Director & Co-Head, Strategic Partners Fund Solutions, Blackstone (Mentee)
- Stephen Can, Founder & Co-Head, Strategic Partners Fund Solutions, Blackstone (Mentor)
Verdun Perry did most of the talking on this panel at the Diversity Forum, describing the value he found in having Stephen Can as a mentor. Perry grew up in inner city Philadelphia, whereas Can grew up in upstate New York near the Canadian border. Perry at first thought they had little in common but they had much more in common than he thought, especially in terms of values.
My main takeaway from both is that mentorship is mostly about sponsorship. Recommending your mentee for challenging opportunities and then having your their back.
One heartfelt story related by Perry was of a death in his family at an awkward time at work. Stephen Can had is back, so he could be with his family without worry about his career.
Their differences turned out to be a growth opportunity for both, instead of an impediment. Learned diplomacy, statesmanship. Stephen covers his blind spots. He encouraged everyone to speak up and be heard. Personal challenges impact work. Interestingly, at the Investment Committee of Strategic Partners Fund Solutions– if one member is against the investment, they don’t do it. That results in a greater commitment from the whole team to the success of the investments they do make.
Formal and informal mentoring. Apprenticeship first few years. You can’t sponsor everyone. Gave him some great assignments, like compliance, which is not an assignment that is usually seen as fun, but which gave Perry a more solid foundation
Recruiting, Retaining, & Promoting a Diverse Workforce
This panel at the Diversity Forum discussed how to grow the pipeline of diverse talent from entry level to senior management. The panel was introduced by Yvonne Walker, President, SEIU Local 1000, which represents the largest number of State employees, which form about 1/3 of CalPERS members.
Billy Dexter, Partner, Heidrick & Struggles (Moderator)
Dorothy Leland, Chancellor, University of California – Merced
Susan Reid, Global Head of Diversity & Inclusion, Morgan Stanley
John Bowman, Managing Director – Americas, CFA Institute.
Julianne Haskell, Managing Director Global D&I, State Street Corporation.
The more clients push, the more diverse their money managers will get. When the CEO says it, it gets done. Lead by example. Clear the path. Look beyond finance majors to journalists and others. Exercise looking at top talent in women or minorities.
It probably was not a member of this panel, but I remember the anecdote as I am writing this. Two candidates took a test. One got six of eight questions right. The other got only two right but those were two questions that everyone on the existing team had gotten wrong. The team’s first instinct is to hire the candidate who scored the highest but hiring the other candidate might actually add more to the team.
Started with an awareness campaign. Found they were loosing women early because of lack of role models. Women and millennials tend to be more value driven. Outreach trying to reach into universities. Hiring based on competencies, rather than experience, will yield more diversity. Millennials much more cost conscious. There is a disruptive storm with technical solutions. Fiduciary battle is part of it. What are fiduciary duties and how do they relate to advocating for diversity?
Haskell is going out and talking to people about State Street. I have to say, that task must have gotten easier with all the publicity they got around the ‘Fearless Girl’ statue, which has drawn Wall Street crowds and attention. State Street is requiring diverse slates for interviews. Unconscious bias training. Conversations around what can be. Employees involved in mentorships. Epic fails come when diversity mandated, so that theme continued. Volunteerism works best.
Diversity Forum: Call to Action Keynote
Thompson went to an historically black university. He then got a job with IBM drumming up new accounts with small businesses. Under the tutelage of a white salesman, one of the first customers they called on told the salesman that he did not want to see a black man servicing his account. IBM had a policy of not doing business with customers who discriminated. Rather than lose the account, his boss decided to kick Thompson upstairs. He saved several years that a normal career path would have taken to work on accounts at major public companies.
Thompson was the CEO of Symantec for years. He had an interesting anecdote about that too. Apparently, Jessie Jackson held a diversity conference for Silicon Valley and the announcement of Thompson getting the CEO spot at Symantec came two days later. Although the decision had been made long before Jackson’s conference, many gave the activist preacher credit for Thompson’s appointment.
To add insult to injury, when reporters wanted to interview Thompson about his appointment he gave as a condition that the focus be on his background and vision for Symantec, not on the fact that he is black. Only one reporter agreed to those terms. They had a good discussion but as the reporter was leaving, he had one last question. It was something like, what is it like being the first black to head a major Silicon Valley company? Thompson blew his stack. Of course, they headline read something like Thompson: No Poster Black Leader for Silicon Valley. Too bad he had not heard Paul Chiames’ talk on the importance of slowing down the brilliant brain.
Risk is a big factor for Thompson, not just the risk of failing to take advantage of the benefits of diverse perspectives but also the reputational risk that comes from a company being outed for lack of progress or programs. He urged CalPERS, CalPERS and other funds to ask about portfolio company programs and plans as owners. What are they doing to build the pipeline to get diverse candidates into senior positions? We also need to push on schools to do better. Microsoft has a program supporting educational development around the world.