Hmm. Interesting. The financial industry regulators, per Dodd-Frank, have come out with a proposed Joint Statement on diversity standards for banks just a few weeks after the OFCCP issued final rules expanding affirmative action obligations for federal contractors (including banks with more than 50 employees) to veterans and individuals with disabilities.
Why, with the flood of Dodd-Frank regs, is that interesting?
Because there seems to be an almost complete disconnect between the two, confirming my long-held belief that government agencies don’t talk to each other.
I despair of members of Congress ever getting on the same page. But you would think that federal regulators could take the time to review other recent agency activity, and align their actions accordingly.
Consider the proposed joint statement
Section 342 of the Dodd-Frank Act directs six financial regulators (OCC, Federal Reserve, FDIC, NCUA, CFPB, and SEC) to develop standards for assessing the diversity policies and practices of entities regulated by those agencies. On Oct.22, the regulators invited comments on a Policy Statement Establishing Joint Standards for such an assessment. The comment period closes Dec. 24. [Update: On Dec. 19, the agencies extended the deadline to Feb. 7. Read the announcement.]
Anyone who has dealt with diversity or EEO policy will read the proposed Policy Statement and wonder, “Why did they bother?” It is so weakly-worded and ringed with qualifications that, rather than “Statement,” it better deserves the title “Suggestion.” Or even “Hint.”
In the preamble, the regulators say that nothing “may be construed to mandate any requirement on or otherwise affect the lending policies and practices of any regulated entity, or to require any specific action based on the findings of the assessment.”
The Statement goes on to assure regulated entities that the agencies “will not use the examination or supervision process in connection with these proposed standards.” Instead, they will rely on the regulated entities to conduct self-assessments, and will encourage “voluntary disclosure” of these self-assessments to the regulator and on the entity’s website.
As for the proposed standards themselves, they are pretty vanilla. Here is a summary:
• Organizational Commitment To Diversity And Inclusion—“Tone from the top”— senior level involvement—training throughout the workforce.
• Workforce Profile And Employment Practices—Use of metrics, such as the Affirmative Action Plan (entities with 50 or more employees) and/or EEO-1 annual report (entities with 100 or more employees) to track applicants, hires, promotions, and terminations—outreach and recruitment efforts
• Procurement And Business Practices—Supplier Diversity—Adopt a supplier diversity policy and track contracts—outreach efforts
• Practices To Promote Transparency Of Organizational Diversity And Inclusion—Annual report on website or other appropriate communications methods
A narrow definition of diversity
However, it is not the wishy-washy language of the Statement that puzzles me as much as the narrow and outdated definition of diversity. The Statement refers only to women and minorities, “minorities” here referring to race and ethnicity.
Today’s HR practitioners use a much broader concept of diversity to include individuals with disabilities, differing socio-economic backgrounds, age, and other characteristics that may or may not have legal protection. The broader concept recognizes that greater diversity and inclusion promotes stronger, more effective, and more innovative businesses, as well as opportunities to serve a wider range of customers.
The Statement gives lip service to that goal—while undercutting it with its limited definition of diversity.
That broader concept is not just a nice idea floated at HR conferences. It has been accorded legal heft over the years in federal statutes like the Age Discrimination in Employment Act (ADEA) and the Americans with Disabilities Act (ADA), as well as state laws, for example, those addressing employment discrimination on the basis of sexual orientation and identification.
Significantly, only a matter of weeks before the proposed Statement, the Office of Contract Compliance Programs (OFCCP) issued two Final Rules extending affirmative action obligations to veterans and individuals with disabilities. As I explained in my earlier post (“Big Changes Coming in Affirmative Action”) the new rules apply to all banks with 50 or more employees. The new rules were first proposed over two years ago, yet the financial regulators seem to be ignorant of them.
Affirmative Action is not diversity
Another thing that struck me as I read the proposed Statement: That’s the financial regulators’ reliance on the regulated entity’s Affirmative Action Plan (AAP) as the ideal analytical tool for assessing diversity.
Let’s leave aside, for the moment, the regulators’ failure to recognize the expansion of AAP obligations to veterans and individuals with disabilities. Their equating of affirmative action with diversity is worrying.
Affirmative Action is a zero-sum game.
It’s an “I win; you lose,” share-of-the-pie philosophy, based on a paradigm of scarcity. There are only so many jobs available; if the bank sets a percentage goal of employing this group, then that group loses out. The OFCCP swears up and down that Affirmative Action goals are not “quotas,” but the difference is merely semantic.
On the other hand, diversity and its sister concept, inclusion, are based on a paradigm of abundance.
That is, everyone is better off if we expand our horizons beyond prescribed categories. There’s a whole world of employees (and customers) we haven’t tapped yet. Let’s get started!
Just checking the box
I shouldn’t be too hard on the regulators. They are only following the dictates of Dodd-Frank Act. The clue is the three-and-a-half years that have passed since the statute was signed into law. This may be one of the last rulemaking exercises required under Dodd-Frank. That indicates its low priority amongst all the other obligations the Act places on financial regulators.
Bottom line, the regulators are just checking the box, and moving on. Busy banks will probably follow their example.
The comment period for the proposed Joint Statement ends on Dec. 24. I shall be surprised if many comments are submitted. The Statement may be out of step with current HR practice and with other federal agency rules, but, because it is more aspirational than prescriptive and has no enforcement mechanism, it is unlikely to provoke more than a big yawn.