Wednesday, May 04, 2022

SEC report shows progress on DEI, but small sample size

By Anne Sherry, J.D.

Virtually all the companies that voluntarily reported their diversity practices to the SEC Office of Minority and Women Inclusion (OMWI) consider diversity and inclusion in their recruiting practices, according to a report newly published by the SEC. OMWI sees hope in the responses, although it acknowledges that the response rate was very low, with less than 10 percent of companies deciding to self-report. The SEC and OMWI described their goal of improving the response rate through outreach and awareness campaigns aimed at stating the business case for diversity, equity, and inclusion (DEI).

In January 2020, OMWI invited 1,263 regulated entities to participate in the SEC’s 2020 Diversity Assessment Report process. The SEC received 59 responses covering 118 regulated entities—about 9 percent of those invited. OMWI acknowledged that the voluntary nature of the project means it cannot draw inferences as to the entities that did not respond, but said that identifying trends among those that did respond is valuable in identifying DEI strengths and opportunities for improvement.

Those strengths include the fact that 98 percent of reporting entities consider diversity and inclusion as part of their strategic plans for recruiting, hiring, retaining, and promoting employees. Most entities also have a diversity and inclusion policy, take proactive steps to promote a diverse pool of candidates to the board, and/or publish information about their DEI efforts on their website.

As for areas of improvement, OMWI observed that just over half of the respondents maintain a list of qualified minority- and women-owned businesses that may compete for upcoming contracts, and only 45 percent of entities have a supplier diversity policy. Accordingly, supplier diversity may present the greatest opportunity for improvement.

Improving response rates. In the Diversity and Assessment Report and its annual report to Congress, OMWI said that the biggest challenge in assessing diversity policies and practices is getting the regulated entities to share information about their self-assessments. The SEC engages with external stakeholders about the importance of DEI during regulatory events and conferences. OMWI also plans to hold outreach and awareness campaigns in 2022 aimed at illustrating the importance of DEI and the attendant value of submitting self-assessments to the SEC. At one of the planned events, executives from two regulated entities will highlight the business case for participating in the diversity assessment process. OMWI also plans to increase the technical support it offers during the FY 2022 diversity assessment collection and to engage in listen-and-learn sessions to allow entities to discuss their concerns and ways to increase response rates.

OMWI Director Pamela Gibbs said, “By providing this framework for self-reflection, we engage regulated entities in a deeper analysis and understanding of the leading practices and policies for advancing workforce and supplier diversity. But to effectively help them achieve their diversity and inclusion objectives, we need greater participation in this self-assessment process."

DEI at the SEC. OMWI also works in close collaboration with all SEC divisions and offices as part of its role in guiding the agency to improve diversity and inclusion within its own ranks. OMWI’s annual report to Congress details the progress the Commission has made on DEI. The percentages of SEC supervisors and managers who are Black, Hispanic or Latino, and Asian have each increased over the past three years, with nearly 27 percent of supervisors and managers identifying as minorities. Nearly half of Senior Officers at the Commission are women, and the agency awarded nearly 40 percent of its contracts to Minority Women Owned Businesses. Nearly half of new hires at the SEC identified as minorities. SEC Chair Gary Gensler stated his belief “that a diverse SEC workforce helps promote fairness and inclusion in the financial services industry.”