Last year, we celebrated the 50th anniversary of the historic March on Washington first conceived years earlier by labor and civil rights leader A. Philip Randolph. The meeting between Randolph and then-President Franklin Delano Roosevelt on the issue of diversity resulted in FDR's response “I agree with everything you have said. Now, make me do it.”
Soon thereafter, Randolph called for what was to be the first Washington, D.C., gathering. His goal was to diversify the armed forces and open the doors of economic opportunity for African-Americans related to the business activities of World War II. In exchange for Randolph's canceling that planned march, FDR issued Executive Order 8802 to end discrimination in the defense industries and government. Randolph was successful in making FDR do it!
However, decades later we find ourselves addressing the same issue; not in the armed forces, but in financial institutions across the country. It is now our time to help make them do it.
On Dec. 19, 2013, the NCUA issued a joint press release with its regulatory counterparts extending the period to submit comments in response to the Proposed Interagency Policy Statement on the diversity practices and policies of the entities they regulate pursuant to Section 342 of the Dodd-Frank Act. The original deadline did not take into account the holidays of the last quarter. Hence, the Dec. 24, 2013, deadline was moved to Feb. 7, 2014.
Section 342 of the Dodd-Frank Act directed each of the federal regulators to establish an Office of Minority and Women Inclusion that shall be responsible for all matters of the agency relating to diversity in management, employment, and business activities. This responsibility included assessing the diversity policies and practices of those entities (e.g., credit unions) regulated by each of the regulatory agencies. However, Section III of the PIPS titled “Proposed Approach to Assessment,” recommends a self-assessment, voluntary disclosure method for credit unions and other regulated entities. The proposed approach renders Section 342 ineffective.
Skeptics of diversity standards and practices fear that Section 342 will impose quotas. For example, in October 2013, the National Review Online posted the article “Dodd-Frank's ‘Diversity’ Quotas.” But this “set aside” assertion could not be further from the truth. It is true that Europe is in the process of imposing gender-based quotas for board diversity. As a matter of fact, according to the Harvard Law School Forum on Corporate Governance and Financial Regulation, in an article titled, “Developments Regarding Gender Diversity on Public Boards,” the European Commission is poised to require public company boards to be comprised of at least 40% women by 2017. Failure to reach that goal could result in sanctions. However, the same article pointed out that the United Kingdom has been resistant to such a proposed law and highlighted the country's willingness “to rely on corporate initiatives to promote board diversity.”
Former British trade minister Lord Davies recommended that companies set their own goals but strongly suggested they be required to report annually on their diversity practices. Moreover, he is quoted as saying that “government must reserve the right to introduce more prescriptive alternatives if the recommended business-led approach does not achieve significant change.”
Financial regulators should permit the entities they regulate the opportunity to create business-led strategies to achieve significant diversity progress. However, this approach must also include mandatory reporting. An example of a business-led strategy can be found in the National Football League.
The policy requires that at least one minority be interviewed for a top coaching or management operations position. Last year marked the 10th anniversary of the rule and since its inception, the number of minority head coaches successfully doubled from 2003 to the present, more than in the prior 75 years of the league's history. Neither quotas nor set asides were involved. Rather, the competitive playing field of opportunity was expanded to include minority candidates.
I encourage all who are interested in the sustainability of the credit union movement to join the conversation. The NCUA and other financial regulators want to hear from our trade organizations, advocacy groups, public interest associations, academia, and you. Our regulators need your help to “make them do it.”
Mark Brantley is board chairman at Municipal Credit Union in New York and vice chair of the African-American Credit Union Coalition. He can be reached at firstname.lastname@example.org or (347) 835-2047.