CalPERS
Simiso Nzima is the Investment Director & Head of Corporate Governance at the California Public Employees’ Retirement System (CalPERS), the largest state public pension fund in the United States with approximately $470 billion in total assets under management. In this role, he leverages his 12+ years of practical investment management experience as he seeks to ensure that CalPERS’ corporate governance activities are grounded in economics and fiduciary duty and lead to long-term sustainable investment returns. His team votes proxies and engages with management and board members of portfolio companies to urge them to incorporate ESG—risks and opportunities—in their strategy development and capital allocation frameworks in-order to generate long-term sustainable value for shareowners.
Diversity, equity and inclusion (DEI) is not a problem to be solved. Rather, it is an opportunity to be taken advantage of. DEI is an asset that can be used to increase returns and reduce risks. There is a growing body of empirical evidence that shows that diverse teams perform better than non-diverse teams. Diverse teams make better decisions, lead to more robust risk management, show higher innovation and have superior operational and financial performance. It is essential, therefore, that boardrooms and C-suites avail themselves of the most diverse talent pool for effective management of both risks and opportunities in their oversight of financial, physical and human capital.
As investors, we have a vested economic interest in ensuring our portfolio companies assess how their policies, practices, products and services impact or are impacted by DEI. We want to ensure our companies do not suffer reputational, regulatory, human capital management, and other related risks as a result of inequitable policies and practices.
Diverse teams have a higher likelihood of developing the best solutions to the most complex problems. When you bring people with different perspectives together to solve a complex issue, you are more likely to achieve a viable and sustainable solution that wasn’t developed from a homogenous viewpoint. To successfully execute a long-term business strategy and mitigate risk, a company’s board and C-suite should reflect a diverse mix of skills, backgrounds and experiences.
As a global investor, CalPERS cares about sustainable business models and sustainable returns. We have a fiduciary duty to preserve and increase capital over the long term, hence our focus is on long-term value creation by companies in which we invest. It is critical in today’s global economy that boards and C-suites avoid “groupthink” and ensure there is a diverse mix of characteristics, skills, knowledge, and breadth of experience to meet current and future complex business needs.
Adtalem Global Education
Donna Jennings is the Senior Vice President, Chief Human Resources Officer for Adtalem Global Education, a leading workforce solutions provider in the healthcare and financial services industries. With more than 25 years of experience in helping global companies thrive, Ms. Jennings is responsible for the attraction, development and retention of talent for Adtalem, which has more than 7,000 employees worldwide.
DEI is something that all employees are accountable for improving, but driving that accountability starts in the boardroom and is implemented, measured and reported by the C-suite. Corporations that embrace gender diversity on their executive teams, for example, were more competitive, 21% more likely to experience above-average profitability and had a 27% likelihood of outperforming their peers on longer-term value creation, according to a McKinsey report.
With that said, the alternative—a lack of diversity among a company’s leadership team and organization—can pose multiple risks that leaders must be highly intentional about addressing.
In a remote world, companies are no longer competing just with businesses in their backyard, and that means top talent has thousands of companies from which to choose. The millennial and Gen Z generations, which make up 46% of the full-time U.S. workforce, are the most diverse in history. It should come as no surprise that younger job seekers want companies with a diverse and inclusive workplace. To effectively compete for that talent, you must have a brand, leadership team and work environment that reflect the value of DEI. And every great company knows that ensuring employees feel valued, respected and that they belong brings a myriad of other benefits, including reduced turnover, increased productivity and more highly engaged employees.
If a company’s top leadership team doesn’t reflect the demographics of its customer base, then it’s likely there will be an inherent gap in how the company serves its customers. This can inhibit a company’s competitiveness and bottom line and deter future investments. When faced with the demands from investors and public pressure, companies are risking their shareholders’ trust (and their funds) by remaining silent on issues of social justice and equitable representation.
With the immediacy of social media, companies that fail to meet growing expectations on DEI—from employees, shareholders or the general public—are subject to enormous amounts of scrutiny and ultimately a loss in trust. Customers, or even potential talent, may question whether a company’s values are misaligned with their own values and take their business or skills elsewhere.
At the end of the day, the boardroom and C-suite drive a company’s culture and, ultimately, accountability. Companies that truly foster an inclusive workplace and allow every member to feel valued, represented and heard will attract and keep the best talent and better serve the needs of an increasingly diverse customer base.
Orrick
Duane Hughes spearheads Orrick’s Inclusion & Client Relations program and is a member of the firm’s executive leadership team. His unique multidisciplinary background spans economics and finance, international business and corporate law. Mr. Hughes has served as Business Unit COO and Managing Director with each of J.P. Morgan Chase and Morgan Stanley. He started his career in Wall Street law firms Shearman & Sterling and Simpson Thacher & Bartlett, with an interim stint at Lucent Technologies. Mr. Hughes holds JD, MBA and MA degrees from the University of Pennsylvania and a BA degree summa cum laude from Howard University.
Adept risk management and diverse leadership go hand in hand. Not only do corporate leaders manage known risks, they also prepare, to the extent possible, for unforeseen or hard-to-predict market conditions—or VUCA. Coined by the U.S. military, VUCA stands for volatility, uncertainty, complexity and ambiguity. Failure to respond creatively to VUCA conditions is one of the biggest risks faced by board members and C-suite executives. The global pandemic classically exemplifies a VUCA condition. Causing tragic loss of human life and widespread pain and suffering, not to mention fundamental economic disruption, the pandemic encouraged corporate leaders to re-examine the robustness of their business processes. This stress test can, in turn, lead to innovation.
And this is where diversity and inclusion come in. The VUCA conditions created by the pandemic, combined with the shock waves caused by the murder of George Floyd, have forced corporate leaders to face their business models and the persistent effects of social imbalance at the same time. In rising to this challenge, companies with diverse leadership teams have enjoyed a natural advantage. Why? Social diversity in the boardroom and C-suite encourages decision makers to innovate. In her article, “How Diversity Works,” Katherine Phillips, explains that: “When group members notice that they are socially different from one another, they … assume they will need to work harder to come to a consensus, and the hard work can lead to better outcomes.” Put simply, Philips states, “Diversity jolts us into cognitive action in ways that homogeneity simply does not.”
And it is no accident that the NASDAQ agrees. Home to some of the world’s most innovative companies in the world, NASDAQ has proposed and the SEC has approved a requirement that certain listed companies have at least two diverse directors, including at least one woman and one member of an underrepresented minority or the LGBTQ+ community, or explain their non-compliance in a public disclosure. At the same time, corporate boards around the world are expanding the field of viable board candidates beyond those with traditional CEO/CFO backgrounds. Now, more and more, candidates with risk, operations, marketing, HR, and law and regulatory backgrounds are getting their due consideration. Everything else held equal, this increased diversity will enable leaders to respond more resourcefully to VUCA circumstances. This wider tent is also creating a more socially diverse talent pool for corporate boards. All this to say: The more inclusive we are in the corporate suites of today, the more inventive we will be in facing the inevitable crises of tomorrow.
Nielsen
Laurie Lovett is Nielsen’s Chief People Officer. She joined Nielsen in January 2020 and is responsible for Nielsen’s HR strategy, which drives our people-oriented, innovative culture and the Nielsen Employee Experience. Ms. Lovett will run the HR function for the Nielsen Global Media business and will remain with that business after the completion of the separation of the two businesses.
Ms. Lovett possesses decades of deep and varied HR experience and a consistent record of achievement in high growth, premier, multibillion-dollar, global companies. She is known for building world-class “employer of choice” programs, championing diversity and inclusion, and effectively managing initiatives for organization design, talent and HR operations. Her effectiveness comes from a capacity to identify and analyze business challenges and produce innovative strategic and operational solutions in performance, satisfaction and service quality.
Prior to her current role, Ms. Lovett spent over 20 years holding various leadership roles at Accenture and then moved on to Verisk Analytics as the Global Chief Human Resources Officer, where for nearly four years she led the full scope of talent, HR, diversity and culture. Ms. Lovett has a Bachelor of Science in Business Administration and Management from Syracuse University and a Master of Industrial and Organizational Psychology from Stevens Institute of Technology.
DEI is not an HR problem. It’s a business solution, and that’s why the C-suite and boardroom play such an important role in disclosure, measuring ourselves against targets and taking ownership.
Companies that acknowledge and invest in DEI acknowledge that the company’s success cannot be left up to chance. Despite best intentions, a homogenous group of C-suite leaders or board members cannot serve a company or its employees well.
Risks are mitigated by the presence of a diverse perspective; hence, we’re consistently tracking our representation, balancing pay equity and reviewing all business opportunities (business diversity or supplier diversity) and investments in our business transactions. A lack of consistency puts us at risk on many levels, but most importantly, prioritizing DEI as a business strategy keeps us on track.
One of our main risks is loss of talent and the challenge of attracting new talent, especially tech talent. Some board-facing actions that address this are our efforts around gender pay equity and our quarterly review of DEI dashboards with our compensation committee. We need to decrease attrition and increase focus on building a diverse and inclusive workplace, which is key to attracting top talent.
In 2019, our CEO David Kenny assumed the role of Chief Diversity Officer to reinforce that DEI was a business imperative at Nielsen. He said that there is no more powerful position than the CEO, and that change is only possible if the people with the power use that power to invoke change. Few CEOs have worn both of those hats at the same time. As a result, we were better equipped to set hard targets for ourselves, make those targets transparent to our board and measure them like we measure other strategic outcomes.
Sandra Sims-Williams, who reports to David, was appointed Chief Diversity Officer in March 2021, and she and I work closely to ensure transparency and drive diverse, equitable and inclusive recruiting, retention, career growth and development programs.
The board, our shareholders and our investors are deeply focused on our progress. David assesses his executive committee annually and holds it accountable for ensuring the metrics for the organization are achieved. We have four distinct measures that are reviewed quarterly, and David conducts a quarterly self-assessment.
At Nielsen, we’re committed in our boardroom, our people, our products and our purpose—to power a better media future for all people.