Source: United States Senator for New Jersey Bob Menendez
WASHINGTON, D.C. – U.S. Senator Bob Menendez (D-N.J.), the highest-ranking Latino in Congress, today led 21 of his Senate Democratic colleagues in sending a letter to the U.S. Securities and Exchange Commission (SEC) Chair Gary Gensler urging the Commission to expeditiously adopt the Subcommittee on Diversity and Inclusion (D&I) of the SEC Asset Management Advisory Committee’s (AMAC) July 7, 2021, recommendations to promote greater transparency and diversity among asset managers.
“Women and people of color are dramatically underrepresented in the field of asset management. As pointed out by the D&I subcommittee, less than 1% of the $70 trillion in global financial assets under management are managed by woman or minority-owned firms,” the senators wrote to SEC Chair Gensler. “Women and people of color are also extremely underrepresented at the board and senior management levels at asset management firms.”
In the letter, also sent to SEC Commissioners, the AMAC Chairman, and the SEC D&I Subcommittee Chairman, the senators pointed out that the underrepresentation of women and people of color is a serious problem for the industry and more likely to result in losses for companies that have a diversity problem compared to those with a more diverse board. They also highlighted a recent report that found the promotion of diversity within the asset management industry would not only improve performance to the benefit of investors but would also serve to facilitate fair and open markets for all Americans.
“[I]t is clear that the promotion of diversity within the asset management industry would not only improve performance to the benefit of investors, it would also align with the SEC’s diversity and inclusion goals and its mandate to protect investors and facilitate fair and open markets,” the senators concluded before urging the SEC to immediately approve all D&I subcommittee recommendations as unanimously passed by the AMAC this past summer.
The recommendations include enhanced disclosure requirements to provide transparency on issues of gender and racial diversity in the workforce and ownership of advisory firms, as well as each investment company, and the establishment of a procedure to allow the SEC, when it receives reports of discriminatory practices, to direct reporting parties to other government agencies or offices that are designed and equipped to investigate and address such complaints, to name a few.
Sen. Menendez has long advocated for increased diversity and inclusion across all sectors and industries. Earlier this year, he authored the Improving Corporate Governance Through Diversity Act of 2021, legislation that would address shortcomings in the U.S. Securities and Exchange Commission’s (SEC) diversity disclosure rule by requiring public companies to disclose information related to the racial, gender, ethnic makeup and veteran status of corporate boards and senior management. In the 116th Congress, he introduced the Federal Jobs Act, a bill that would have required the development and implementation of a government-wide initiative to promote, expand, and retain diverse talent across the federal workforce. For over a decade, Menendez has also regularly conducted corporate diversity surveys of the largest companies in the country.
Joining Sen. Menendez in signing the letter to the SEC Chair and Commissioners were Sens. Sherrod Brown (D-Ohio), Catherine Cortez Masto (D-Nev.), Tina Smith (D-Minn.), Raphael Warnock (D-Ga.), Chris Van Hollen (D-Md.), Jack Reed (D-R.I.), Elizabeth Warren (D-Mass.), Mark Warner (D-Va.), Dick Durbin (D-Ill.), Alex Padilla (D-Calif.), Tammy Baldwin (D-Wis.), Tim Kaine (D-Va.), Jeff Merkley (D-Ore.), Richard Blumenthal (D-Conn.), Ben Cardin (D-Md.), Mazie Hirono (D-Hawaii), Ben Ray Luján (D-N.M.), Kirsten Gillibrand (D-N.Y.), Cory Booker (D-N.J.), Amy Klobuchar (D-Minn.), and Ron Wyden (D-Ore.).
The full text of the letter can be found HERE and below.
Dear Chair Gensler:
We write in support of the Subcommittee on Diversity and Inclusion (D&I) of the SEC Asset Management Advisory Committee’s (AMAC) July 7, 2021, recommendations to promote diversity among asset managers.[1]
Women and people of color are dramatically underrepresented in the field of asset management. As pointed out by the D&I subcommittee, less than 1% of the $70 trillion in global financial assets under management are managed by women or minority-owned firms.[2] Women and people of color are also extremely underrepresented at the board and senior management levels at asset management firms. Across the industry, the senior leadership level is overwhelmingly white and male; 83.7% of executives are white and 74.6% are male.[3] The investment consultant community exhibits similar characteristics.[4]
This is a serious problem for the industry, investors, and the country as there is a wealth of data showing that greater diversity leads to greater profitability. A July 2021 report from BoardReady showed that companies with at least 30% of their board seats filled by non-white Executives experienced year over year revenue growth of 1.2% in 2020 despite the pandemic. Meanwhile, companies with less than 20% of their board seats filled by diverse executives experienced 8.3% revenue losses.[5] Additionally, a recent McKinsey report found that ethnically diverse executive teams are 36 percent more likely to outperform their peers on profitability.[6]
Given this data, it is clear that the promotion of diversity within the asset management industry would not only improve performance to the benefit of investors, it would also align with the SEC’s diversity and inclusion goals and its mandate to protect investors and facilitate fair and open markets. Therefore, we urge the SEC to immediately approve all D&I subcommittee recommendations as unanimously passed by the AMAC on July 7, 2021, including:
- Require enhanced disclosure requirements to provide transparency on issues of gender and racial diversity in the workforce and ownership of advisory firms, gender and racial diversity on the fund boards of each investment company, and business practices for consultants who recommend investment advisors and investment funds;
- Issue Commission or Staff Guidance to clarify that a wide variety of factors may be considered by fiduciaries in their selection of asset management firms, and that fulfillment of fiduciary duty does not require automatic exclusion of asset managers who are new to the industry or do not meet a certain threshold of assets under management;
- Conduct a staff study on the influence of political contributions on asset allocation in the institutional market; and
- Establish a procedure to allow the SEC when it receives reports of discriminatory practices to direct reporting parties to other government agencies or offices that are designed and equipped to investigate and address such complaints.
We urge the SEC to adopt and implement these recommendations expeditiously to help bring transparency and diversity to the asset management industry.
Sincerely,
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