2019 CalPERS CalSTRS Diversity Forum

2019 CalPERS CalSTRS Diversity Forum

2019 CalPERS CalSTRS Diversity Forum lived up to its billing as a unique opportunity to engage with industry leaders and experts on diversity and inclusion topics such as:

  • The “Why” and “How” of driving diversity and inclusion
  • Building and sustaining a positive corporate culture
  • Human Capital Management metrics and their value to investors

In the following post, I reflect on the day, highlight findings from a recent Conference Board Report, and suggest possible improvement by incorporating a proxy roundup day. Looking for a recap? Go to the CalPERS YouTube Channel and/or CalSTRS YouTube Channel in about a week to watch posted videos. In the meantime, check out the posts to Twitter at #CADiversityForum.

If you attended the Forum, please post your impressions and recommendations in the comment field below. What were your takeaways? How can the Forum be improved?

2019 CalPERS CalSTRS Diversity Forum: Reflections

In their welcoming remarks, Henry Jones of CalPERS and Sharon Hendricks of CalSTRS, emphasized that financial returns increase with diversity. They gave examples of engagement and increased willingness to go after Nominating and Governance Committees when progress is slow.

Sallie Krawcheck, of Ellevest, provided insight into the leverage, greed and group think of the financial crisis. Those at trading desks were like clones. The antidote is cognitive diversity, originating in background, education, skin color, gender, perspective, etc. Research has shown that diversity brings higher returns, lower risk, greater innovation, more client and staff interaction. Diverse teams outperform smarter teams.

A basketball team with all point guards is unlikely to beat a team with a wider range of skills. Having a diverse workplace means getting the best person to round out the team. 86% of financial advisors are white males. Women leave for more money and for promotions. Progress in diversity is primarily down to a CEO deciding to make it a priority, not because of all the programs (although they can be helpful). To me, that’s evidence that CEOs have too much power. Shareholders, directors, and other stakeholders should have enough power to force change when CEOs resist.

The discussion between Celia Huber and Lori Nishiura Mackenzie provided the most detail on stalled progress. See Women in the Workplace 2018 from Leanin.org and McKinsey & Company. The study includes plenty of graphs, such as the famliar gender/race pipeline (little improved); “Women onlys” experience more micro-aggession; and basic practices for improving (notice how few hold managers accountable for progress).

Gender Race Pipeline Women Onlys and aggressionGender Diversity ChecklistLarge companies are changing. Progress at small companies is slower. Use a rubric or scorecard to let people know how they are reviewed and AI to screen applications. Tips

Cambria Allen-Ratzlaff discussed the Human Capital Management Coalition’s petition to the SEC for rulemaking to require issuers to disclose information about their HCM policies, practices and performance. The petition is full of materiality citations and rationale for data needs, as well as data use. Eric Bradbury described his conversion as a result of working on the Embankment Project for Inclusive Capital (EPIC), which is changing value measurement. Video. Dr. Anthony Hesketh emphasized HR needs to talk in Excel, not PowerPoint. EPIC found the return on investment in talent was 300%.  Read his letter to the SEC-IAC in support of a rulemaking to specify needed human capital disclosures.

Leaders in the investment community (Kara Helander, Erika Irish Brown, Sekou Kaalund, and Rakhi Kumar discusses successful engagements. Use Rooney Rule mechanisms to insure candidate pools are inclusive. Set measurable goals around hiring and supplier diversity, with an emphasis on feedback loops. Small actions can have a big impact. State Street asked for one woman on boards without them and often got two. Companies need to disclose goals and strategies for every pay level. That creates value. There were many other fascinating speakers, but the above should give you a taste of the day.

2019 CalPERS CalSTRS Diversity Forum: Conference Board Report

Corporate Board Practices in the Russell 3000 and S&P 500: 2019 Edition. According to a comprehensive review of SEC filings made in 2018, 50.4 percent of Russell 3000 companies and 42.5 percent of S&P 500 companies disclosed no change whatsoever in the composition of their board of directors. Only one-quarter of boards elected a first-time director.

  • The average director tenure exceeds 10 years.
  • Companies continue to value board experience in director selection over inclusiveness and a diverse array of skills.
  • Boards remain inaccessible to younger business leaders, with the highest number of directors under age 60 in new-economy sectors.
  • 20 percent of firms in the Russell 3000 still have no female representatives on their board.
  • Evaluating director performance is critical to a more meritocratic and dynamic boardroom.
  • Among smaller companies, staggered board structures also stand in the way of change.
  • A plurality voting standard remains prevalent.
  • Only 15.5 percent of the Russell 3000 companies have proxy access bylaws.

Next CalPERS CalSTRS Diversity Forum: Include a Day for Proxy Strategies

At the next Forum, how about posting a bibliography of studies supporting the importance of diversity? Here are a couple of old starts that need updating from our Library: Diversity Bibliography (download in Word) from Julie Gorte of Pax World and References on Board Gender Diversity (download in Word) from Laura F. Spira.
The first day of the 2019 CalPERS CalSTRS Diversity Forum (under separate registration) was a workshop for creating a diversity and inclusion implementation plan and taking deep dive into Human Capital Management Metrics. CalPERS and CalSTRS could consider adding a third day, under separate registration, around proxy proposal and regulatory strategies.
The LA Trustees use to sponsor a two day Roundup. See LA Trustees Roundup 2012: Corporate Governance and LA Trustees Round Up 2012: Retirement Security in an Era of Financial Constraints. These sessions were productive in heightening awareness of issues. CalPERS and CalSTRS could include the following:

2019 CalPERS CalSTRS Diversity Forum: Other Coverage


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One Response to 2019 CalPERS CalSTRS Diversity Forum

  1. James McRitchie 06/18/2019 at 8:02 am #

    Soon after I posted the above, Subodh Mishra, of ISS, posted U.S. Board Diversity Trends in 2019 at https://corpgov.law.harvard.edu/2019/06/18/u-s-board-diversity-trends-in-2019/ Among many findings of their analysis: 45 percent of new Russell 3000 board seats filled by women in 2019 (compared to only 12 percent in 2008); 10 percent of Russell 3000 directors currently belonging to an ethnic minority group, while 15 percent of new directors are ethnically diverse.

    State Street’s policy initiative to require at least one female director at every board and, more importantly, regulation in California mandating all boards of companies headquartered in the state should have at least one woman on their boards in 2019 and more later.

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