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Financial companies to reveal gender, race data

A trader works in the Goldman Sachs booth on the floor of the New York Stock Exchange. Goldman and MetLife will have to disclose how diverse their work forces are under an agreement with the New York City Comptrollers office.
A trader works in the Goldman Sachs booth on the floor of the New York Stock Exchange. Goldman and MetLife will have to disclose how diverse their work forces are under an agreement with the New York City Comptrollers office.Richard Drew / AP

Studies show that companies with the most diverse work forces, especially in top management, tend to be more profitable. But good luck figuring out the gender and race composition at many U.S. corporations.

There is no requirement that Corporate America disclose its diversity data, but Monday two major companies – Goldman Sachs and MetLife -- announced they’d be giving up the long-held secret.

It’s part of an effort in the last few months by John Liu, New York City’s Comptroller who also serves as an advisor and trustee for the Big Apple’s pension funds, to get the companies the funds invest in to disclose their work force diversity.

“Studies have shown the benefits of a diverse work force on company performance and long-term shareowner value, and many companies say they are making serious efforts to recruit, retain and promote women and minorities,” Liu said in a statement. “Without quantitative disclosure, shareowners have no way to evaluate the effectiveness of these efforts.”

The information is available and has been since 1964, because under the Civil Rights Act of that year, companies with 100 workers or more have had to report the data on race and gender annually to the U.S. Department of Labor. The problem has been, they were not under any requirement to release that data to the public, or even to local governments such as New York.

“Transparency is key for ensuring equal pay as well as equal opportunity for workers of all backgrounds,” said Beverly Neufeld, president of New York Women's Agenda & Director of the Equal Pay Coalition NYC.  “This agreement creates that and underscores just how much willing and interested leaders in government and in business can do together to address inequality in the workplace.”

And there’s a lot of inequality, especially in the higher ranks at companies where the lack of diversity is greatest.

According to data provided by Liu’s office:

  • The number of women and minorities holding management-level jobs in the financial sector did not substantially change over the 15 years from 1993 to 2008.  In 2008, white men held 64 percent of these jobs, or more than twice as many jobs as white women, who held only 27 percent. Together, minority men and women held less than 10 percent of executive positions at financial firms, with African-Americans holding 2.8 percent, Hispanics 3 percent, and Asians 3.5 percent.
  • Similarly, a 2009 study found that racial disparity is 38 percent worse in the advertising industry than in the overall U.S. labor market, and that the gap between advertising and other U.S. industries is more than twice as wide as it was 30 years ago.  The study also found that African-American college graduates working in advertising earn 80 cents for every dollar earned by their equally qualified white counterparts.

There has also been stagnation in the number of women making it to the corner offices of Corporate America. In 2010, women held less than 15 percent of the executive officer positions at Fortune 500 companies, and only 7.6 percent of the top earning jobs, according to Catalyst, a diversity research firm.

This despite research that shows diversity at the top helps the bottom line.

According to Catalyst's research, “companies with the highest representation of women on their top management teams experienced better financial performance than companies with the lowest women’s representation. This finding holds for both financial measures analyzed: return on equity, which is 35 percent higher, and total return to shareholders, which is 34 percent higher.”

That kind of data is getting people like Liu twisting the screws on companies that won’t divulge diversity information.

Besides Goldman Sachs and MetLife, New York’s pension funds hold shares in AIG, Omnicom, Publicis, and Interpublic. In all, the assets total about $362 million, out of $118 billion in total assets of the funds.

Matthew Sweeney, a spokesman for the comptroller, said the agency is in talks with insurance firm AIG to provide similar data. Advertising firm Omnicom Group Inc. would not agree to the fund's request.

Sweeney said the issue is going to be part of a shareholder vote in the spring.

No one at Omnicom could immediately be reached for comment; but based on the 14 top executive positions posted on the company's web site, only three were women.

The advertising companies that the funds invest in have been reluctant to disclose the diversity data, according to Liu’s statement.

There have been larger efforts to push diversity at U.S. companies, including a new Securities & Exchange Commission rule that went into effect in 2010 requiring that companies disclose how diversity is considered when new board members are nominated. 

Liu and New York City's pension funds, added Sweeney, “were among the investors pushing this reform and remain committed to making boards more diverse. But until companies promote more women and minorities into the senior ranks, which the current initiative is geared toward, it will be very difficult to increase diversity in the boardroom, since most directors are picked from the executive ranks of corporate America.”

Liu's push for disclosure is a good first step on the road to more diversity, said Emilio J. Castilla, professor at MIT Sloan School of Management and author of  an article titled “Bringing Managers Back In: Managerial Influences on Workplace Inequality,” published in the American Sociological Review late last year.

“But this might not be enough,” he stressed. “They’re increasing transparency, showing some percentages, but I’d think about accountability. Are there organizational procedures in place to make sure these efforts result in the outcomes they want?”