House Financial Services Subcommittee on Diversity & Inclusion Hearing on Diversity Data

House Financial Services Subcommittee on Diversity & Inclusion

“By the Numbers: How Diversity Data Can Measure Commitment to Diversity,

Equity and Inclusion”

Thursday, March 18, 2021


  • Thomas DiNapoli, New York State Comptroller
  • Daniel Garcia-Diaz, Managing Director, Financial Markets and Community Investment Team, U.S. Government Accountability Office (GAO)
  • Carolynn Johnson, CEO, DiversityINC
  • Anne Simpson, Managing Investment Director, Sustainable Investments, CalPERS
  • Rick Wade, Senior Vice President of Strategic Alliances and Outreach, U.S. Chamber of Commerce


  • H.R. 1277, the “Improving Corporate Governance Through Diversity Act of 2021.”
  • H.R. ____, the “Diverse Investment Advisers Act.”
  • H.R. ____, the “Diversity Data Accountability Act.”
  • H.R. ____, the “Diversity in Financial Regulatory Advisory Committees Act.”
  • H.R. ____, the “Promoting Diversity and Inclusion in Banking Act.”

Opening Statements                   

Chairwoman Joyce Beatty (D-Ohio)

In her opening statement, Beatty called on regulated entities to fully disclose their diversity and inclusion data, saying that “what gets measured gets done.” She said that good diversity and inclusion performance has been proven to increase innovation while lowering regulatory risk. Beatty highlighted that Committee Chairwoman Maxine Waters (D-Calif.) led the enactment of Section 342 of the Dodd Frank Act, which empowered the Offices of Minority and Women Inclusion (OMWIs) at the financial regulators to conduct oversight of diversity performance of their regulated entities, saying that 80 percent of those entities have failed to share their metrics with their primary regulator. She said this voluntary assessment has failed to meet the spirit and intent of the statute, and noted that the Diversity Data Accountability Act would make Section 342 mandatory. Beatty announced that the committee is sending diversity surveys to the 31 largest investment management firms who together manage more than $47 trillion in assets, similar to last year’s report on the 44 largest banks.

Ranking Member Ann Wagner (R-Mo.)

In her opening statement, Wagner said that more work must be done to improve diversity and inclusion, particularly at the executive level, noting that the industry has acknowledged this and taken great initiative. Citing Wade’s testimony, she said it is important to remember to structure policies regarding diversity in a way that is flexible and durable, and a one-size-fits-all approach will not allow the financial services industry to reap the benefits of the country’s diversity. Wagner highlighted the importance of both recruitment and building an inclusive environment, as well as salary and promotion transparency, employee resource groups, flexible work hours, and other best practices. She said that cultural barriers in the workplace cannot be removed by regulation and legislation, but rather by active engagement within an organization from the top down. She said the committee should continue to work to understand the unique obstacles companies face and learn from their creative solutions, and ensure any data collected allows companies to tell their own stories.

Chairwoman Maxine Waters (D-Calif.)

In her opening statement, Waters said the committee is continuing to hold the financial services industry accountable for diversity and inclusion, saying she is pleased to partner with Beatty in requesting data from the country’s largest investment firms. She said that in addition to an “abysmal” record on diversity, firms have not made it a priority to do business with diverse-owned asset managers, saying there is a longstanding unfounded bias against diverse asset managers that perform as well as or better than their white-owned counterparts. She called on the industry to increase disclosure, saying this information is material to investors, Congress, and the general public.


Thomas DiNapoli, New York State Comptroller

In his testimony, DiNapoli said that corporate boards remain “overwhelmingly” white and an increased number of diverse board members is needed. He said that companies that foster diversity and inclusion are better positioned to drive long-term value for shareholders, but noted that investors must have timely access to accurate diversity information disclosed in a standardized manner to enhance comparability and consistency. He highlighted the importance of investing in minority- and women-owned business enterprises (MWBEs) and emerging managers, noting that the New York State Common Retirement Fund, the third largest public pension fund in the United States, works to promote environmental, social, and governance (ESG) practices that are sound and advocates for better corporate policies, disclosure, and reporting that can lead to sustainable long-term value for shareholders. He said the fund has prioritized questioning companies on how they are addressing potential and actual inequalities, including racial equity, noting that encouraging board diversity is an important part of that engagement. He said it is time for the Securities and Exchange Commission (SEC) to mandate the disclosure of diversity information, and the committee should consider requirements for public disclosures.

Daniel Garcia-Diaz, Managing Director, Financial Markets and Community Investment Team, U.S. Government Accountability Office (GAO)

In his testimony, Garcia-Diaz highlighted prior work the GAO has done on diversity, which has emphasized the importance of using quantitative and qualitative measures to evaluate the effectiveness of an organization’s diversity and inclusion efforts. He said that GAO’s work has shown that financial services firms have struggled to increase the diversity of their senior leadership, and there is general agreement on the importance of collecting and analyzing data to assess diversity efforts. Garcia-Diaz also discussed how federal home loan banks and the enterprises use data to assess their diversity efforts and  how the Federal Housing Finance Agency (FHFA) oversees diversity efforts at these entities and uses data to assess its own diversity efforts, including tracking workforce composition data to compare to benchmarks, monitoring recruitment and hiring data to assess progress, as well as setting diversity goals for management.

Carolynn Johnson, CEO, DiversityINC

In her testimony, Johnson explained that DiversityINC is a business publication dedicated to transparency and the business benefits of diversity while serving as a warehouse of workforce data for major employers built over 20 years as part of the annual DiversityInc Top 50 competition. She continued that this effort is an editorial, empirically data-driven ranking which focuses on US operations for employers with at least 750 employees that consists of 276 questions that yield more than 1400 data points and measures on human capital diversity metrics, leadership accountability, talent development, workplace practices, supplier diversity, and philanthropy. Johnson said that as the committee considers ways to close the gaps in how regulated entities disclose their workforce data, it should focus on the fact that diversity data can affect change, noting the history of affirmative action in the U.S.

Anne Simpson, Managing Investment Director, Sustainable Investments, CalPERS

In her testimony, Simpson explained that as the largest public pension fund in the U.S., CalPERS is guided by its fiduciary duties of prudence, care and loyalty and believes that long-term value creation comes from effective management of financial, physical, and human capital. She noted that CalPERS has a longstanding interest in diversity issues and highlighted that the CalPERS board has adopted a new diversity and inclusion framework to strengthen its approach. She said that investors need data that is material, reliable and timely, and without this data, they do not have the full information necessary for capital management, litigation or stewardship through engagement and proxy voting. Simpson said CalPERS believes diversity and inclusion impact both risks and returns, and that companies with a diverse board inclusive of gender, race and ethnicity are better positioned to execute good governance, effective risk management, and optimal decision-making. She concluded that diversity is not just a moral imperative, but an economic necessity.

Rick Wade, Senior Vice President of Strategic Alliances and Outreach, U.S. Chamber of Commerce

In his testimony, Wade said that entrepreneurship plays an important role in building wealth in families, communities, and economies, but the opportunity to start and grow a business is not equal for white and Black Americans. He continued that Black Americans are underrepresented among entrepreneurs, representing 12% of the U.S. labor force but only 9.4% of business owners, and those businesses, have lower revenues, fewer employees, and are less than half as likely to get financing as white-owned firms. Wade highlighted the Chamber’s Equality of Opportunity Initiative to develop real, sustainable solutions to help close race-based opportunity gaps in education, employment, entrepreneurship, criminal justice, health, and wealth. Wade said that a data-driven approach is foundational to the agenda of this program, citing the Chamber’s support for H.R. 1277, the Improving Corporate Governance Through Diversity Act of 2021. He called on policymakers to structure policies in a flexible and durable way, noting that policies that make sense in a metropolitan area may not work in a rural one. He echoed Simpson in concluding that diversity is not just a moral issue, but one of economic competitiveness.

Question & Answer

Diversity Data Disclosure Practices

Members of the committee asked various questions about current diversity data disclosure practices with a particular focus on whether disclosure should be made mandatory. Beatty asked why the Chamber has endorsed legislation mandating board diversity requirements but not legislation mandating workforce diversity reporting. Wade said the Chamber supports having flexibility to allow companies to develop their plans and policies because there is no one-size-fits-all approach. Asked by Beatty whether firms face increased litigation of reputational risk by sharing their data with DiversityINC, Johnson replied no.

Wagner asked whether firms are able to tell the full story of their diversity successes and failures with the reporting of workplace data. Wade responded that the data is just one component, and a combination of qualitative and quantitative factors can better depict the complete picture. Wagner then asked about regional differences, to which Wade replied that there is no one-size-fits-all approach and assessments should take into account different demographics across the country. He also noted that the quality of the data is important.

Rep. Ayanna Pressley (D-Mass.) asked how mandatory reporting would increase accountability and transparency in financial services. Johnson replied that the data is necessary in order to identify and fix the problems that exist. Asked by Rep. Madeleine Dean (D-Pa.) what positive effects disclosure would have, Simpson said companies will be able to pay more attention to these issues and fiduciaries will be more effective, continuing that increased diversity disclosure benefits companies, investors, workers and communities. Dean then asked what dangers are posed by “selective reporting,” which Simpson compared to allowing firms to choose how to calculate profit, saying there is a need for standards.

Rep. Rashida Tlaib (D-Mich.) noted that companies held by private equity firms do not have to disclose data on diversity and inclusion and asked whether disclosure would impair the performance of those investments. Simpson responded that diversity and inclusion is good for performance, risk management, and returns adding that CalPERS has helped develop a template to drive this agenda in private markets.

Importance of Data Disclosure

Reps. Nikema Williams (D-Ga.), Pressley and Beatty asked why diversity data is important to investors. DiNapoli explained that companies that show success in diversity metrics are more likely to present a profitable, sustainable investment opportunity. He continued that without a standardized approach, investors have to assess company by company or rely on third parties for information, which is costly. In response to a question from Rep. John Rose (R-Tenn.), Wade said investors are interested in both the data as well as how companies are growing the talent pipeline and thinking about the workforce of the future.

Beatty asked about CalPERS’s call for public companies to conduct racial equity audits. Simpson explained that it is important to understand where racism shows up in your portfolio as an investor, and the racial equity audits will supply the information needed to do so.

Diversity and Inclusion Challenges

Wagner asked what practical challenges firms face trying to implement diversity recruitment and retention efforts. Wade explained that one of the biggest challenges is creating pipelines and partnerships that companies need to hire diverse talent. He called for investment in education and skills training that help address the totality of the issue.

Emerging Managers

Reps. Anthony Gonzalez (R-Ohio) and Waters raised questions about emerging managers and MWBEs, particularly questioning DiNapoli and Simpson about how many assets in their plans are managed by diverse asset managers. Asked by Gonzalez what the barriers are to increasing that percentage, DiNapoli explained that the fund is working to ensure “the doors are wide open” and that they are developing those relationships. He also noted that, relative to their peers, MWBEs have either performed similarly or outperformed them.

Business Case for Diversity

Williams asked what key factors explain why diverse companies see greater productivity, revenue and market share. DiNapoli explained that diverse firms have been better positioned to take advantage of new and niche market opportunities that traditional companies can overlook.

ESG Issues

Rep. Jake Auchincloss (D-Mass.) asked what effect ESG policies are having on companies and whether those principles are impacting diversity practices in the firms being invested in. Simpson said that some of the biggest risks in CalPERS’s portfolio are difficult to manage because they do not have the data, citing climate change as a good example of this. She said that the balance between risk and return plays out all the way through the ESG agenda. Simpson also stated that she has found they can have an influence on companies directly through their engagement as well as the use of their votes, noting that if they do not see progress on board diversity, they have voted against the chairs of the nominating committee to send a message that they are “falling down on the job.” She said many companies have responded positively to this engagement and have brought diverse directors into the boardroom.

Other Legislative Proposals

Rep. Al Green (D-Texas) highlighted his legislation, H.R. ____, the Promoting Diversity and Inclusion in Banking Act. Asked if she thought this legislation would be valuable, Johnson replied yes.

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