Pledges alone don’t catalyze diversity

“Easier said than done” is especially true of diversity pledges.  

Whether they’re high-profile promises made by high-profile executives or attempts to harvest grassroots support, pledges that don't result in progress are ineffective — even counterproductive, when they result in lawsuits. Empty promises are in sharp contrast to diversity vows that are integrated with accountability, such as the CFA Institute's program, which is gaining traction.

“It’s important to do the work, not just to say that you’re in favor of it,”  said Marlene Timberlake D’Adamo, the diversity, equity and inclusion officer for CalPERS, who serves on the diversity committee for the CFA Institute. CalPERS has signed on to the CFA Institute’s DEI code, as have 138 other investment firms.

“It’s easy to put together a pledge, but nobody is making sure that these companies are doing what they said they are doing,“ Janice Gassam Asare, founder of Black White Green Business Solutions, a diversity and workforce consulting firm, said of the overall pledge trend. “Who follows up with them?”

These days, everybody. Public pledges invite scrutiny from business partners, stakeholders, clients and communities, along with activists. The well-publicized travails of Wells Fargo are Exhibit A, Asare said. “They’re one example of many financial institutions that have made pledges but their actions and policies are not reflective of their words.”

In fact, one high-profile pledge campaign, CEO Action for Diversity and Inclusion, doesn’t even pretend to collect metrics or any evidence of diversity progress at the companies that sign on.

Usually, announced promises are matched by either evidence of change or embarrassment when a firm fails to rise to the standard it claimed, said Gwen Young, CEO of the Women’s Business Collaborative.

In January, the WBC released its annual snapshot of DEI transparency, based on reports released by large publicly held companies. The WBC found a marked disparity between promises and corresponding transparency: 70% of the 553 companies in its report had made public diversity commitments, but 53% had actual diversity goals. Basic employee demographics, in the form of EEO-1 reports, were released by 47% of the companies, while 84% included some demographics in their ESG reports, and 34% in a separate diversity report.

At the very least, public promises invite follow-up, and now documentation invites challenges to change, Young said.

“It isn’t good enough to analyze it,” she said of data that document the status of women and ethnic minorities within employee populations. “What people are asking for more and more is, ‘What are you going to do about it?’”

Venture capital firms face accountability of a different sort. The 2023 VC Human Capital Survey released Tuesday by Deloitte found that 47% of limited partners require a diversity report from VC firms, up from 19% in 2018. The report found that women comprise 19% of investment partners at VC firms and 26% of investment professionals.

Despite the mounting evidence that accountability is essential for DEI progress, only 53% of employees nationally believe that their employers do hold staff responsible for achieving diversity goals, according to Catalyst, the venerable nonprofit that advocates for women in the workplace. Worse, the same Catalyst study found that 37% of employees believe that internal processes at their workplaces are fair.

This credibility gap was exactly what the CFA Institute had in mind as it designed its model.

“It’s intended to be challenging. That’s the point,” said Sarah Maynard, global head of external inclusion and diversity strategies and programs for the institute. And while signing on to the institute's code is a key step, it’s really the underlying program that firms are committing to, Maynard explained, and that differentiates its program from others.

The institute has been doggedly laying the foundations of accountability, requiring demographic data reports from pledge signatories so that all firms have benchmarks to measure the progress at their firms and among the group.

As it formulated the promise that the institute wanted firms to adopt, the committee also mapped the “what next?” route to change, she said.

“The idea behind the code was to give people a road map, so an org didn’t have to say, it’ll take us six months to research,” CalPERS' D’Adamo said. "We wanted a methodology and a framework — the idea was for firms to do what they could, where they were, and give them some opportunities to practice and leverage their results.” A framework for measuring results is the final step in the institute’s cycle, she added.

Good intentions are the easy part, Maynard said. “Typically, it takes longer for codes and standards to take off.”

So far, most of the firms engaged with the institute’s program are based in the U.S. or Canada. Collectively, they represent 10% of global assets under management.

Any internal push is quickly meeting an external shove. As with VC firms, institute members increasingly face expectations from their business partners that they will be making verifiable DEI progress. “This is already in RFPs,” Maynard said. “Clients are asking about this. That injects a welcome note of humility for all of us. We’re all acutely conscious of how much work there is to do.”

Even the institute, with its multipronged approach, faces uneven engagement.

Allspring Global Investments, with $465 billion in assets under management, has a presence on the CFA diversity committee but has yet to sign on to the CFA code — one of several firms that have claimed a leadership role but haven’t publicly committed to change. That, a company spokesperson said in an email comment, is because Allspring only formalized its diversity function 2022 and is figuring out its inaugural strategy. It is using the CFA tools as a guide, the spokesperson said.

“What was most important to us was not a document that everybody signed ... but to have something people could do something with,” D’Adamo said. The institute built confidential reporting mechanisms so that firms struggling to achieve diversity goals can plot strategy outside the crucible of public discussion and privately compare their results against the aggregate data among all the pledge signatories.

“That gave firms comfort, that if they did all these things and their results weren’t great, that’s between you and the CFA Institute to figure out what you need to do to see improvement,” she said. “It’s all about outcomes.”