I. INTRODUCTION
The federal banking agencies have issued a final interagency policy statement establishing joint standards for assessing the diversity policies and practices of the entities they regulate. Section 342 of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (Dodd-Frank Act) required the federal banking agencies to establish an Office of Minority and Women Inclusion (OMWI) at each agency to be responsible for all matters relating to diversity in management, employment, and business activities. The Dodd-Frank Act also instructed each OMWI director to develop standards for assessing the diversity policies and practices of the agencies’ regulated entities.
The final standards provide a framework for regulated entities to create and strengthen their diversity policies and practices—including their organizational commitment to diversity, workforce and employment practices, procurement and business practices, and practices to promote transparency of organizational diversity and inclusion.
The final standards are a general statement of policy, do not create any new legal obligations, and are completely voluntary, in keeping with terms of the statute. The agencies have emphasized that the standards are not part of the examination or supervisory process.
The standards focus primarily on the institutions policy. The institution should have a personnel policy that includes diversity considerations in its employment, employee promotion and in its selection of contractors. Senior management and the board of directors should approve the policy. The policy should provide that the board of directors be provided periodic progress reports on the institutions diversity activities. The institution should provide periodic training on diversity and inclusion. Further, the institution should take proactive steps to promote a diverse pool of candidates for hiring, promotion and board of director selection.
In furtherance of the policy standards, it is suggested that the institution create an outreach to minority and women’s organizations and to educational institutions serving predominately minority and women populations. Also, the institution should participate in conferences, job fairs and other events to inform the minority community of its employment policy and employment opportunities.
The standards also prominently focus on hiring of minority contractors. Just as with employment, an institution should have a policy of diversity inclusion in its contractor selection decisions. Finally, the standards provide that an institution should monitor and evaluate its performance under its diversity policies and practices on an ongoing basis and conduct a self-assessment annually.
Disclosure is completely voluntary. Moreover, in making any disclosures, each institutions has discretion in determining whether and how to disclose their outreach efforts to the public and may request that any information disclosed to a supervisor be kept confidential.
The federal banking agencies have separately provided information on how the financial institutions they regulate may begin to submit self-assessments of their diversity policies and practices as of year-end 2015, and issued Frequently Asked Questions (FAQs) about the process. The FAQs may be accessed at https://www.federalreserve.gov/newsevents/pressreleases/bcreg20160802b.htm and are also available on the websites of the Federal Reserve Board, the Federal Deposit Insurance Corporation, and the Office of the Comptroller of the Currency.
II. DEFINITION OF “DIVERSITY” AND “INCLUSION”
For purposes of the Policy Statement, the Agencies define “diversity” to refer to minorities (Black Americans, Native Americans, Hispanic Americans, and Asian Americans), and women. The definition of diversity does not preclude an entity from using a broader definition with regard to these standards.
In addition, as used in the Policy Statement, the Agencies define “inclusion” to mean a process to create and maintain a positive work environment that values individual similarities and differences, so that all can reach their potential and maximize their contributions to an organization. The standards set forth below may be used to assess policies and practices that impact the inclusion of minorities and women in the regulated entity’s workforce and the existence of minority-owned and women-owned businesses among a regulated entity’s suppliers of products and services.
III. JOINT STANDARDS
The Agencies designed the standards to provide a framework for an entity to create and strengthen its diversity policies and practices, including its organizational commitment to diversity, workforce and employment practices, procurement and business practices, and practices to promote transparency of organizational diversity and inclusion. The Agencies recognize that each entity is unique with respect to characteristics such as its size, location, and structure. When drafting these standards, the Agencies focused primarily on institutions with more than 100 employees, knowing that institutions that are small or located in remote areas face different challenges and have different options available to them compared to entities that are larger or located in more urban areas. The Agencies encourage each entity to use the standards in a manner appropriate to its unique characteristics.
A. Organizational Commitment to Diversity and Inclusion
The leadership of an organization with successful diversity policies and practices demonstrates its commitment to diversity and inclusion. Leadership comes from the governing body, such as a board of directors, as well as senior officials and those managing the organization on a day-to-day basis. The standards inform how an entity promotes diversity and inclusion in both employment and contracting and how it fosters a corporate culture that embraces diversity and inclusion.
1. Standards
In a manner reflective of the individual entity’s size and other characteristics,
B. Workforce Profile and Employment Practices
Many entities promote the fair inclusion of minorities and women in their workforce by publicizing employment opportunities, creating relationships with minority and women professional organizations and educational institutions, creating a culture that values the contribution of all employees, and encouraging a focus on these objectives when evaluating the performance of managers. Entities with successful diversity and inclusion programs also regularly evaluate their programs and identify areas to be improved.
Entities use various analytical tools to evaluate a wide range of business objectives, including metrics to track and measure the inclusiveness of their workforce (e.g., race, ethnicity, and gender). Entities that are subject to the recordkeeping and reporting requirements of the Equal Employment Opportunity Commission (EEOC) and the Office of Federal Contract Compliance Programs currently collect and maintain data and supporting documentation that may assist in evaluating and assessing their policies and practices related to workforce diversity and inclusion. Specifically, entities that file EEO-1 Reports required under Title VII of the Civil Rights Act of 1964 routinely track and analyze employment statistics by gender, race, ethnicity, and occupational group. Entities that develop and implement the affirmative action programs required under the regulations implementing Executive Order 11246 track and analyze employer-created job groups. Entities also are encouraged to use other analytical tools that they may find helpful.
C. Procurement and Business Practices—Supplier Diversity
Companies increasingly understand the competitive advantage of having a broad selection of available suppliers to choose from with respect to factors such as price, quality, attention to detail, and future relationship building. A number of entities have achieved success at expanding available business options by increasing outreach to minority-owned and women-owned businesses.
As in the employment context, entities often use metrics to identify the baseline of how much they spend procuring and contracting for goods and services, how much they spend with minority-owned and women-owned businesses, and the availability of relevant minority-owned and women-owned businesses, as well as changes over time. Similarly, entities may use outreach to inform minority-owned and women-owned businesses (and affinity groups representing these constituencies) of these opportunities and of the procurement process.
In addition, entities’ prime contractors often use subcontractors to fulfill the obligations of various contracts. The use of minority-owned and women-owned businesses as subcontractors provides valuable opportunities for both the minority-owned and women-owned businesses and the prime contractor. Entities may encourage the use of minority-owned and women-owned subcontractors by incorporating this objective in their business contracts.
D. Practices to Promote Transparency of Organizational Diversity and Inclusion
Transparency and publicity are important aspects of assessing diversity policies and practices. Greater awareness and transparency give the public information to assess those policies and practices. Entities publicize information about their diversity and inclusion efforts through normal business methods, which include displaying information on their Web sites, in their promotional materials, and in their annual reports to shareholders, if applicable. By making public an entity’s commitment to diversity and inclusion, its plans for achieving diversity and inclusion, and the metrics it uses to measure success in both workplace and supplier diversity, an entity informs a broad constituency of investors, employees, potential employees, suppliers, customers, and the general community about its efforts. The publication of this information can make new markets accessible for minorities and women and illustrate the progress made toward an important business goal.
In a manner reflective of the individual entity’s size and other characteristics, the entity is transparent with respect to its diversity and inclusion activities by making the following information available to the public annually through its Web site or other appropriate communication methods:
E. Entities’ Self-Assessment
The Agencies interpret the term “assessment” to mean self-assessment. Entities that have successful diversity policies and practices allocate time and resources to monitoring and evaluating performance under their diversity policies and practices on an ongoing basis. Entities are encouraged to disclose their diversity policies and practices, as well as information related to their assessments, to the Agencies and the public. Entities submitting information may designate such information as confidential commercial information as appropriate, and the Agencies will follow the Freedom of Information Act in the event of requests for particular submissions.
IV. USE OF ASSESSMENT INFORMATION BY AGENCIES
The Agencies may use information submitted to them to monitor progress and trends in the financial services industry with regard to diversity and inclusion in employment and contracting activities and to identify and highlight those policies and practices that have been successful. The primary federal financial regulator will share information with other agencies when appropriate to support coordination of efforts and to avoid duplication. The OMWI Directors will also continue to reach out to regulated entities and other interested parties to discuss diversity and inclusion practices and methods of assessment. The Agencies may publish information disclosed to them, such as best practices, in any form that does not identify a particular entity or individual or disclose confidential business information.