California Democrat Maxine Waters, the first woman and first African-American to chair the House Financial Services Committee, is planning to use her new power to push for more women and minorities in the top ranks of corporate America.
Some firms are panicking at the prospect of new public scrutiny, according to lobbyists, who say that while companies won’t openly fight Democrats’ moves to promote diversity, many are uneasy about the prospect of government getting directly involved in their hiring decisions.
Lawmakers say they’re hoping to make them uncomfortable.
“They have a right to be nervous,” said Rep. Emanuel Cleaver (D-Mo.), a member of the financial services panel. “They should feel the fire is getting started and will burn, at least for two years, and hopefully beyond.”
Lobbyists privately admit that some firms have been slow to improve and that nudging from Congress may be what’s needed to force them to act.
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Corporations and industry groups have already sought to make inroads with lawmakers who will highlight the issue on Capitol Hill, according to lawmakers and lobbyists. Some, including Amazon and the Bank Policy Institute, have even recently hired staff from the Congressional Black Caucus to build relationships as Democrats take over.
One financial industry source who previously worked for a Democratic member said: “Very, very few have been ahead of the game” when it comes to improving diversity.
“Now companies are focused like a laser on identifying top African-American talent with Congressional Black Caucus relationships to help them understand and mitigate the striking lack of diversity within their corporations,” the person said.
Waters has proposed creating a subcommittee focused on diversity and inclusion. Senior members of her committee are preparing to introduce bills to force companies to disclose the gender and racial makeup of their boards. That’s just one example of how Democrats taking charge of the House are expected to bring new pressure on companies from Wall Street to Silicon Valley to diversify their leadership.
“Sometimes it’s the right time,” said Rep. Joyce Beatty (D-Ohio), who wants to chair the proposed financial services diversity subcommittee. “When you look at this Congress that we have, it is without a doubt the most diverse in history.”
Cleaver said he’s already being lobbied on the topic.
“I was with some lobbyists last night telling me how their company is nervous about diversity,” he said in December. “My comment to them was, Hey, look, were you nervous a year ago, or two years ago, or are you nervous only because we’re going to call you out?”
Cleaver said Wells Fargo was among the firms trying to connect with him on the issue. The bank declined to comment.
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The Congressional Black Caucus has started an initiative to increase diversity in the tech industry as well, and Waters has been part of it. She and black caucus members have traveled to Silicon Valley to meet with tech executives, including the CEOs of Airbnb and Twitter.
A 2017 Government Accountability Office report commissioned by Waters, Sen. Sherrod Brown (D-Ohio) and Rep. Al Green (D-Texas) found that overall representation of minorities in management positions of the financial services industry increased to 21 percent in 2015 from 17 percent in 2007 but that it decreased for African-Americans and was generally unchanged for women.
Another study by Deloitte and the Alliance for Board Diversity found that in 2016 white men held 69 percent of the board seats at Fortune 500 companies. White women held 16 percent, minority men held 11 percent and minority women 4 percent.
“While there have been some gains, they have been negligible at best and certainly not representative of the broad demographic changes we have seen in the United States in the same period of time,” the authors of the report said.
Waters has said promoting diversity in financial services is one of the top priorities on her consumer-focused agenda. She has also warned that financial regulatory agencies are also “seriously challenged” when it comes to the issue.
“Having a subcommittee that’s dedicated to making sure that financial services is representative of the United States is really important,” said Rawan Elhalaby of the Greenlining Institute, a California-based advocacy group focused on racial and economic justice. “Thus far we’ve seen the industry is really missing the mark on serving communities of color, and we think that’s partly because of the misrepresentation at the top.”
Senior Democrats on the Financial Services Committee are preparing to introduce bills designed to push corporate America to act. Some of the proposals have already sparked opposition from conservative activists.
Rep. Carolyn Maloney, a New York Democrat who will likely chair an influential subcommittee overseeing markets and the Securities and Exchange Commission, plans to reintroduce legislation that would require public companies to disclose the gender composition of their boards. The measure would also require the SEC to set up an advisory group on gender diversity.
“Companies perform better when they have more diverse boards that include women,” Maloney said in a statement to POLITICO.
Rep. Gregory Meeks, another New York Democrat who will also likely chair a subcommittee with oversight of banks and their regulators, has legislation that would require public companies to disclose to investors the gender, race and ethnicity of their board members.
It’s a concept that’s been backed by the managers of several public investment funds, who have argued that SEC disclosure requirements have failed to produce enough information needed to determine the racial and ethnic diversity of boards.
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Meeks said he has started talking to companies, and financial trade associations have begun reaching out to him.
“Some [companies] acknowledge it’s good for business,” Meeks said. “I’m not asking them to do anything that’s bad for business. This will help attract more folks to their institutions.”
To be sure, some companies, such as Bank of America, Citigroup and Wells Fargo, are ready to tout the progress they’ve made. Bank of America’s 16-member board includes five women and three people of color. Wells Fargo’s board chair is Betsy Duke, a former Federal Reserve official. Citigroup this year announced targets to increase representation of women and Africa-Americans in management roles.
Paul Thornell, a senior lobbyist at Citigroup, said he expected from Congress “a mostly friendly and polite, but sometimes a little tough” nudge at industry and government to accelerate diversity efforts.
“We need to look at it as an opportunity to thoughtfully and credibly engage rather than running away from it,” he said.
The U.S. Chamber of Commerce says it is open to some of the legislative proposals.
The Chamber has already endorsed Maloney’s gender diversity bill, which the conservative Americans for Tax Reform described as “nothing more than an attempt to open the door for government involvement in the social responsibility of private enterprise.”
The Chamber is weighing Meeks’ proposal, as well, even as it pushes to fend off corporate disclosure requirements in other areas.
“Sometimes change can be a little uncomfortable,” said Tom Quaadman, the executive vice president of the Chamber’s Center for Capital Markets Competitiveness. “But when we come out on the other side of this, the business community’s going to be stronger for it.”