Speaker 1:
From the Library of the New York Stock Exchange at the corner of Wall and Broad streets in New York City, you're inside the ICE House. Our podcast from Intercontinental Exchange on markets, leadership and vision and global business. The dream drivers that have made the NYSE and indispensable institution of global growth for over 225 years. Each week we feature stories of those who hatch plans, create jobs and harness the engine of capitalism. Right here, right now at the NYSE and at ISIS exchanges and clearing houses around the world. And now welcome inside the ICE House. Here's your host, Josh King of Intercontinental Exchange.
Josh King:
Know the power of women in leadership. That's the inscription on a plaque underneath a bronze sculpture, just outside the doors of the New York Stock Exchange. Installed the night before international women's day in 2017. State Street Global Advisor's Fearless Girl statue Was a bold statement to initiate a new era of workplace diversity. Since her introduction 445 companies identified by State Street have responded to the call to action by either adding a female director or committing to do so. Now, how much do you credit a piece of sculpted bronze for that? And how much do you acknowledge that we've all had a collective wake up call on what helps drive effective corporate governance. The push for gender diversity in the boardroom has appeared to have made some progress. As of September 2019, women hold 20% of board seats of publicly traded companies on the Russell 3000 Index, a rise from 2016 when women held 15% of corporate board seats.
Josh King:
And while progress is being made, the pace of change has even been slower for both male and female minorities. The NYSE Board Advisory Council aims to change that. Launched in June, the council comprises 16 member CEOs of our NYSE community. These individuals have committed to using their own networks to find diverse candidates who are interested in serving on corporate boards. They hail from some of the biggest global brands, Coca-Cola, Merck, Delta, Proctor & Gamble, and many more. I've spent some time over the weekend, reading through the biographies of the men and women put forward by our community CEOs as board candidates. They're the type of people you find yourselves working with every day in a corporate setting, a great lawyer, a strong HR executive, a Wiz marketer, a diligent finance chief. The kind of diversity that companies today need to make the tough decisions for their future. How our advisory council works is that candidates identified by the founding members get introduced to CEOs in our community who are seeking board members.
Josh King:
Through a series of events facilitating these connections, the council hopes to make an impact on expanding diversity on boards while at the same time, providing a valuable solution for our NYSE community of companies. Our conversation with the co-chairs of the NYSE Board Advisory Council on how they're using the unbridled power of a net network to diversify the top layer of companies. That's right after this.
Speaker 3:
And now a word from Ron Delia, CEO of Amcor, NYSE ticker, AMCR.
Ron Delia:
Today is a really big day for Amcor. We've been around for 160 years. After so much time takes the passion and dedication of our people around the world, and it takes resilience. And we have lots of that at Amcor. Well, our aspiration is to be the leading global packaging company, and that means winning for our customers, our people, our investors, and the environment. We have a big pledge around sustainability. We really hope to change the world as we look forward. Amcor, now listed on the New York Stock Exchange.
Josh King:
Our microphones are tapped out today, three guests inside the ICE House, all with ICE cred. Our first guest is someone you've heard before in the Library, Betty Liu, Chief Experience Officer at Intercontinental Exchange, as well as executive vice chairman of the NYSE and co-chair of our Board Advisory Council. In her roles Betty elevates the customer experience across our entire business, as well as builds and grows relationships with the C-suite of our business partners. Prior to joining us in 2018, Betty was an award-winning business journalist who most recently anchored the Bloomberg Television Daybreak Asia program and founded the ed tech startup Radiate. And sitting next to Betty is Sharon Bowen, who sits on the board of directors of Intercontinental Exchange and also co-chairs the NYSE Board Advisory Council. Sharon served as a commissioner of the Commodity Futures Trading Commissioner or CFTC from 2014 to 2017, where she was sponsor of the CFTC Market Risk Advisory Committee.
Josh King:
You've heard a current CFTC commissioner, Dawn Stump on an earlier episode of this show. And previously Sharon was confirmed by the US Senate and appointed by President Obama to serve as vice chair of the Securities Investor Protection Corporation. That's the SIPC, where she assumed the role of acting in March 2012. Prior to her appointment to the CFTC, Sharon was a partner in the New York office of Latham & Watkins. Also, joining us at the table is Duriya Farooqui also a director of Intercontinental Exchange who along with Betty and Sharon, co-share our board advisory council, Duriya is the founding president of Point A, a center for supply chain innovation backed by Georgia Pacific. She was previously the executive director of the Atlanta Committee for Progress, a coalition of CEOs that focuses on the most critical issues facing the City of Atlanta. Prior to the Committee for Progress, she was a principal at Bain & Company and served as the Chief Operating Officer of the City of Atlanta. Duriya and Sharon, welcome inside the ICE House. And Betty, welcome back.
Betty Liu:
Thank you, Josh. Great to be back with you.
Josh King:
So, thanks for taking time to join us, especially since today was a busy day for all of you. You just finished up the NYSE's biannual board networking summit, where diverse board candidates met with CEOs through what the council calls speed dating. Can you tell us how it went?
Betty Liu:
It was fantastic. Exhausting on our board leaders, but fantastic. We had 22 board leaders representing 22 companies from our NYSE community, and 55 board candidates all show up. And they went around the room in five minute sessions to really have these quick conversations. Sometimes it's just enough, being able to ask one or two questions, it's just enough to tell whether or not you want to have a further conversation that could result in a possible board opportunity. So, I thought it went great. It was even more people from back in June and onwards to 2020.
Josh King:
Guys, your thoughts, as Betty was opening and closing the festivities, but you both had important roles, Duriya interviewing James Quincey. Sharon, beginning the session with Jon Winkelried.
Sharon Bowen:
Yes. And also I got to actually interview that candidate. So, I sat at a table and they swap by five minute intervals. And I can tell you the talent pool was just amazing. Each person I met with is board ready today?
Josh King:
I mean, this book is really a phenomenal piece of work.
Sharon Bowen:
Very impressive.
Josh King:
And all the people that get represented by these bios.
Sharon Bowen:
Absolutely. And I can tell you on behalf of the other board leaders who were there, particularly the CEOs who were there, they very much enjoyed the experience as well.
Duriya Farooqui:
And that's what struck me the most that the engagement from the CEOs council that were present today, as well as the board leaders that they had sent were really immersed in the experience. They took the whole effort really seriously. We got great feedback. And they met a tremendous roster of candidates all recommended by their peers. Because one of the things that is part of the magic ingredient, if you will, for the work that we are leading and driving with Betty's vision, is that we are asking these CEOs to suggest and recommend candidates from their network that they believe are board ready. That have the operating, the strategic or special skillset that would be valuable in a boardroom, given their experience and given what they know public companies are looking for.
Josh King:
I mean, when you went through some of these bios and saw which CEOs signed off on these bios, it wasn't lightly thought of. They seemed to put a lot of work into the selection process and the quality of the people they put forward with was really at the very top, but may not have been at the top of the list of maybe the executive search firms, looking for board candidates who say, you must have been a CEO before you get there.
Betty Liu:
Yeah. I just have a short anecdote from today where one of the CEOs of a public NYSE company said, look, I've been looking for board candidates. I've got some positions I know coming up soon. And I've gone the executive search firm route and they've certainly been helpful. But even they have limited networks. And so when he looked at our board candidate bio list, I asked him, I said, "Have you seen any of these names before?" He said, "No, these are all new people to me." So, he was excited to meet every one of them because he knows he's got some positions coming up on his board. And the other thing I just wanted to mention too, is that this was like a four hour commitment among the CEOs. And we know how busy CEOs are particularly running public companies. So, I was really happy to see, and I think Duriya and Sharon would share this as well that these are CEOs who walk the talk too. I mean, they spent four plus hours here doing this work at no charge.
Sharon Bowen:
Plus Betty, remember we also have conference calls and we get feedback from them.
Betty Liu:
Exactly.
Sharon Bowen:
So, it's not just a twice a year event. This is an ongoing dialogue, which is really important.
Josh King:
I mean, talking about walking the talk, Betty. The conversation that was held with Jon Winkelried, who was on track to become the chairman and CEO of Goldman Sachs, now runs TPG.
Betty Liu:
Yep.
Josh King:
Has in their portfolio companies has appointed 64 women more than half of whom have not served on a board before. He seemed incredibly open-minded to taking candidates who did not hold that chief executive officer position in the past.
Betty Liu:
Yeah. I mean, I think he pointed out a really big conundrum for first time board candidates and particularly for women and people of color, which is you often are told, well in order to join a board, you need to have board experience. But if you don't have the board experience, how can you join a board? And I think it just takes much more openmindness among CEOs, among people like Jon Winkelried, to know that there's a wide variety of experience before someone gets placed on a board. So, I was really heartened to see the numbers, he mentioned something like they now have 800 plus women that they've identified who could be placed on a board. But if there's no board position he was saying, what am I going to do. This is such a great database that we have ourselves. So, my first instinct was turn that list over to us. We can do something with it.
Josh King:
I mean, your closing remarks at the podium, you said something like, and I'm not going to quote you, but you basically said, it's one thing to spend four hours here. It's one thing to have this period in which we all get to know each other and look at these resumes and consider these people for potential board slots. It's another thing to convert and actually bring them on board. So, do you have any successes to report from today yet? Or should we come back and report?
Betty Liu:
Not yet, but I think we're close. We had some repeat board candidates up here today and several of them gave updates on conversations they had from June. And I think we're pretty close. So, I hope that by the time we have our next summit, we will have some good news to report.
Josh King:
Certainly felt that that vibe was in the room, that these people are headed for service in a way that I think will be important for both private and public companies, a company like TPG with all those portfolio companies that they need to fill. It was a long day at the New York Stock Exchange, no question about it. Duriya, big things doing on the floor of the NYSE this morning, your iconic hometown company, Coca-Cola, ringing the opening bell to mark the 100th anniversary of being a public company. We know Atlanta is the home to Coke, Southern company and hundreds of FinTech operations. But given your background, what's the status support on how Atlanta is doing more broadly to the city, the suburbs they're constantly changing?
Duriya Farooqui:
Oh, absolutely. I think today was a great day. It's not every day, even at the New York Stock Exchange, you get to celebrate a company that has been publicly listed for a 100 years. It was also interesting when we had the fireside chat with James Quincey to hear about all the different ways that they're investing. I mean, they announced this morning during their celebration that they were going to grant a million dollars to Girls Who Invest. So, the empowerment of women is something that is a cause near and dear to their heart. And they have a pretty heavy, strong legacy there. We confirmed today that the first woman to ever serve on a public board was on the board of the Coca-Cola company in the 1930s. So, it was a great convergence if you will, of a morning that celebrated them as well as the work that we're doing with the advisory council.
Duriya Farooqui:
Well, I mean, look, I think companies are finding out today that you have to give back, you have to find ways to demonstrate that you are going to be purposeful. You're going to have some sort of a social responsibility mindset, both in the communities in which you operate. There's great history in Atlanta of Woodruff really investing heavily in the community. But when you become a global iconic brand that has to transcend into efforts that matter and resonate with stakeholders around the world, whether they're customers or investors, or just consumers and the next generation of talent that you're trying to recruit. So, I think James touched on all of those things in a really meaningful way in his remarks.
Josh King:
I shared some of your bio in the introduction with our listeners, your period with Bain & Company. How did you initially come to Atlanta and make that your home and become such an important sort of cog in that community, working with the mayor's office and as head of operations for the city?
Duriya Farooqui:
So, I moved to Atlanta 15 years ago because of my husband's career and made him stay in the city for my career. So, that's a sign of the times in terms of how the tide is shifting there. But when I came to the city, I joined city government. I worked under two mayors. I was chief operating officer, 2 billion operation, 7,000 employees, everything from the busiest airport in the world to going to homicide and fire scenes. And a big part of, I think, what is going to make cities in the future, true for communities as well, and you're seeing this in the engagement by the business leadership and private sector is that public and private sectors will have to work together. And unless you bring public private partnerships to the forefront, you are not going to see the kind of transformation change and mobility that many of the biggest cities in the world today are struggling with.
Duriya Farooqui:
There's huge opportunity, but huge inequity as well. And I think that CEOs and corporate leaders are beginning to recognize that. And they want to move the needle collectively in places that are going to drive development and progress. And if they join hands to actually invest in efforts that move the needle together, that is much more powerful than a diluted set of initiatives that don't have critical mass. And I think that's exactly what you're seeing with the New York Stock Exchange Board Advisory Council, where you've got 16 CEOs joining hands to say that we are going to make meaningful difference. We will move the needle. The numbers you cited are promising, but change isn't happening fast enough. And we are solving a big part of the pipeline problem there.
Josh King:
Chief Operating Officer of the City of Atlanta, one of America's largest, most successful cities, the anchor of the Southeast United States certainly. How did you personally recognize and decide that when your service to the city was going to come to an end and you were going to enter the private sector and also make yourself available for membership on a board of directors. What's that process like for someone to say, this is a way that I can now serve, and how does it become an opportunity for you to be tapped, to serve in the board of Intercontinental Exchange?
Duriya Farooqui:
Great question. And that really begins, frankly, with a visionary leader like Jeff Spreche, who is the CEO of ICE and chairman of the New York Stock Exchange. He called me one day and said, "We've been doing a search for two years for a diverse candidate on our board. And I have been asked by our biggest investors to consider women who have run a large nonprofit, because as you know, five to 6% of Fortune 500 companies are run by a female CEO today. So, there aren't enough women in that pool."
Josh King:
I saw you tweet about that a few weeks ago.
Duriya Farooqui:
Right. Exactly. There aren't enough women in that pool. So, I didn't raise my hand and he actually called me and said, would you be interested in being considered to join our board? And in typical fashion, I said, I'm not sure I'm qualified.
Josh King:
I mean, Jeff said this morning, I heard Jeff say at the podium. It's hard to find good people. We're looking for people, not necessarily with like skills, and Sharon brings this in spades, in clearing and futures, but looking for personality for the people who are going to be able to get along with the other board members who are going to be able to get along with management and really be a good member of the team. So, you must bring a certain special sauce to that mix.
Duriya Farooqui:
And I think that network piece is critical, because Jeff had seen me operate in a boardroom setting. So, had really visibility into how I would operate in a setting like that. And two, reminded me, look, you ran a $2 billion operation. You've done strategy work through Bain, and now you manage board of CEOs. I'm pretty sure you're qualified.
Josh King:
What have your two and a half years on the board been like? I just wondered.
Duriya Farooqui:
It's been a terrific experience. I think first of all, it all starts with the tone that the CEO and the board that you are joining sets in terms of the culture of collaboration, of really being a partner with the management team, but also holding them accountable to the fact that you are there to represent the value that shareholders get. So, you are there representing shareholders and the long term success of the company. And one, it's been a great experience because my peers on the board and colleagues on the board are terrific.
Duriya Farooqui:
And including Sharon, I was super excited when she joined. It was I think shortly after a year after I did. And then two, you get a set of experiences that really put you at the forefront of the conversations around governance and public responsibility that is paired with building value and long term value for shareholders in the company. And then lastly, I would say, I enjoy being on a board that has three women. I think it makes a big difference in the conversation and not just diversity, but inclusion. I would say that not only has the board been extraordinarily welcoming, but some of the experienced directors on the board have given generously of their time and energy to bring new directors up to speed, if you will.
Josh King:
And one of those new directors, of course, Sharon Bowen, and it's difficult to have in this library, a former CFTC commissioner in our midst without asking you for a quick perspective on the arc of the CFTC. Two chairs, Chris Giancarlo, and he now Heath Tarbert have led the commission since the end of the Obama Administration. You went to the Georgetown University Law Center in 2017, at the end of your term, this is what you said at your farewell address as a commissioner, "So, many before me have passed the baton, giving the next person the opportunity to turn her leg of the race into a better position for the next person receiving the baton. Dropping the baton isn't really an option, at least not a winning one. So, I think about today where I stood when I received the Baton and where I will stand soon in passing the Baton to a fellow commissioner." Sharon, so, how has the current CFTC taken up the Baton as you've watched it from your perch?
Sharon Bowen:
I think if you look at the numbers, they've been very aggressive on the enforcement side. I think the theme of protecting investors has been sort of a thread throughout since the financial crisis, especially. And so I think with the recent report, you see that the current commissioner followed the same path that Chris Giancarlo did, which was the same pattern that [Tim Massett 00:22:05] did. So, I think in that respect our first stop for any commissioners is to make sure we protect the public. And I think in that sense, they're doing a great job.
Josh King:
So, if you look at your resume, Sharon. BA in economics from UVA, MBA from Kellogg, JD from Northwestern, and of course your service as a practicing lawyer and a public servant, you are tailor made for boards. I'd put the same question that I put to Duriya to you. At what point did you think now is the time to move from some of these line jobs that have had some of these roles in public service into the boardroom? And how did you mentally prepare for that?
Sharon Bowen:
It was a fast transition to be honest with you. Well, when I left the commission, I thought it made sense the next chapter was to think about board service. It's something I thought about earlier on in my career before I decided to become a public servant, if you will. I thought that the skillset that I could bring to a board with the regulatory expertise, especially, the DC experience, which way different from a Wall Street experience meant that I could add a lot of value to almost any public company right off the bat. I didn't have to wait too long. I got a phone call, I think within five weeks, I think of stepping down in that role. I thought I was going to have a year to think about-
Josh King:
Who's on the other end of the line?.
Sharon Bowen:
It was Fred Hatfield, a former commissioner of the CFTC on the ICE board. And initially when Fred call, it was to ask if I was interested in the New York Stock Exchange Board. And I thought, oh, that would be nice. I started in securities. That was sort of my background before I moved into derivatives and swaps and how great it is to come full circle. I also thought, wow, this is really convenient, because I can actually walk to the New York Stock Exchange from my home. So, I had another reinvested interest in seeing yes. And so what I sat down to meet with Fred and two members of the nominating committee after we completed that interview the very next day, I got a phone call and they said, well, you know what, we want you on the parent company board too.
Sharon Bowen:
So, we want to move you to be in our board as soon as possible. And so what they did was I created a seat. I didn't take someone's seat who had been on the board and it's been almost exactly two years to the date that I joined the ICE Board and then the New York Stock Exchange Board about three months later.
Josh King:
And your home may be just down the street, but you are now dealing with some global issues. You are sitting in a board in addition to Jeff, in addition to Fred Solerno, who you mentioned and Judith Sprieser, who's the other female on the board. Vincent Tese, Thomas Newman, Lord Hague, Jean-Marc Forneri, Charles Crisp. I mean, what is the dynamic in this room and who plays what role on that board?
Sharon Bowen:
Is a great dynamic. And everyone brings a different skill set to the table, which is what you want. Jeff is a visionary leader in the sense that he wants different viewpoints at the table. He's not a CEO who expects us to rubber stamp anything at all. Trust me. And we do challenge and ask questions and he feels like he benefits from it. Likewise, Jerry's right. The board member who are all extremely supportive of each other and we learn from each other. As a global company for example Brexit is on everyone's mind. And I think we have a vote in a couple of days, the new referendum there. And having Lord Hague on our board gives us a really unique perspective that we otherwise would not have had. And so it just, having the international, the different expertise it makes for a really dynamic board.
Josh King:
So, Betty, now we come to you and you and I have talked on this show before in the past, and we've spent the last few minutes talking about the particular makeup of the Intercontinental Exchange and the New York Stock Exchange Board. But as a convening power, the NYSE and ICE can do a lot to bring these CEOs to the table like it did today. Why did the NYSE decide to create the Board Advisory Council?
Betty Liu:
Yeah, I want to answer that question, but before I do though, I just want to mention, so I love hearing the stories of both how Duriya and Sharon were invited to join the board. And they're both atypical, but also typical stories because they really drive home the point that, which we've been talking about with this council, which is that a majority of board appointments are through people's networks. And there's not one path to get to the board, but the sure fire path it seems is that you've got to go out there and network and your network is what's going to bring you a board seat. So, I love hearing their stories because I think it's also very inspirational and motivational as well for people to be out there and be very intentional about looking for a board opportunity.
Betty Liu:
Now, in terms of the question around why would the NYSE choose to, or why did we decide to do this? When I look at the New York Sock Exchange and I've been here about a year and a half, the thing that attracted me the most about the NYSE, what is such our unique, competitive advantage is our community. It's global community base of 2300 companies. It's unrivaled. I mean, there really is no other organization out there that convenes so many fantastic companies all around the world. And I think it would be a shame if we didn't leverage that community and we do every single day. But this in particular is a way for us to leverage it for the greater good. To use this as a way to advance the mission of more diversity at the very top leadership of companies.
Betty Liu:
So, it just seemed like an obvious thing to do. There was also just a real need among our companies when we were doing a listening tour. I did this early on when I first joined and talked to CEOs about what's top of their mind. I mean, the board. Board issues and boards are on top of their minds. And many of them said, I spend an inordinate amount of time looking for board candidates. I'm already busy running a company, but I've got to also go out there and source new board candidates. And that takes up a lot of time. It takes up a lot of energy. It would be great to have some help around that and executive recruiting firms, while great, don't always solve the problem and the challenge. So, if we can help our companies, if we could be a part of their solution, then it would be a shame for us not to be a part of them.
Josh King:
You talk about the things that executive recruiting companies can do well, and maybe not so well. For so many years, Betty, you are at the anchor desk of Daybreak Asia and working on other stories for Bloomberg News. You certainly have on the other side of your interviewing table, people who are Chief Executive Officers, people who are board members of companies. As you reflect back on those years, do you think you sort of began to develop a model for the types of values or traits that were either successful or not in a board member?
Betty Liu:
I don't know if I can link that so directly. I will say that several years ago, I don't really, I didn't hear CEOs talk about diversity. That topic didn't really come up and if it came up, it sounded, it honest felt like it was check the box. It just felt like lip service. But nowadays I think CEOs leaders are much more, and you heard that today in our summit, much more attuned to it as good business practice, as something that is not nice to do, but must do. So, I see that authenticity these days, because I think it's been proven out that more diverse leadership does lead to better companies, better ideas, better strategies. So, several years ago kind of lip service check the box. Nowadays, it's a must have must. It's a must do.
Josh King:
Both Duriya and Sharon with your service, both to the City of Atlanta and in the federal government, you must have some perspective on this. The business round table in August issued a statement on the purpose of a corporation, arguing that companies should no longer advance only the interests of shareholders, but rather all stakeholders. This speaks directly to corporate governance and the responsibility that companies have to address diversity. What's your perspective on the importance of social purpose now in corporate leadership?
Sharon Bowen:
It's interesting because often that question is posed as I either, or. I mean, I don't think that, that is or should be the case. I think any company who doesn't see diversity as additive to not just their bottom line, but their talent pool, you want a talent pool that's diverse. Your stockholders are diverse, whose money's in the market, that's really financing your product. It's a diverse group of people. Women and minorities control a huge purchasing power. And so if you're going to ignore the majority of the population and not address their concerns and their issues, I think a company does that at their own peril. And I think personally as a regulator I would consider that to be a financial risk. If there were a company today who did not take things like ESG and sustainability and diversity as a key performance indicator.
Duriya Farooqui:
A 100% agree with Sharon. I think that when people talk about the trade off, if you will, they're inherently seeing the value in thinking about purpose and what it means. Because it's a huge motivator for talent today. And second of all, I would also say that if you go back to the Fearless Girl, which is where you started your podcast. If we anchor back on that, what changed the tide was investors. And that is what really brought the issue to the forefront. When investors said, we actually want more diversity, more female representation on boards, because we actually think that there are financial implications in addition to, it's kind of the right thing to do. Because we all know one of the reasons why representation matters is because if you want to promote women and people of color, and first generation college graduates that are coming up through your company, they need to be able to see a role model that they can relate to. And be able to aspire to that.
Duriya Farooqui:
I mean, lots of times you'll hear women and people of color in really successful roles and leadership roles. And if you ask them, what was that defining moment that changed the trajectory of their career? It was either meeting someone that had shared a similar journey that had gotten to a leadership spot and broken through some sort of a glass ceiling, or it was someone like that saying that they believed in that person. So, I think that is the other piece, which is going to become increasingly important. If you don't inherently try to think about frame and unlock the financial brand and talent value of talking about purpose and living it, you're checking the box and you want to actually reap the return.
Josh King:
I want to go back to something thing that Sharon said, because it's one thing for a regulator to look at a lack of diversity on a board and call it a risk. It's another thing for a federal or state government to come in and pass a law to try to address that. And we had an interjection in the Winkelried session to discuss a little bit about what has happened in California. California made waves last September, as it became the first state to require quotas of female directors on the boards of public companies following the enactment of Senate Bill 826, the law requires any publicly traded company headquartered in the state to have at least one woman on its board by December 2019. And additionally states like Maryland, Massachusetts and New Jersey are considering similar rules to promote diversity. I want to hear just a little clip from CBS news about the California situation.
Speaker 8:
Governor brown also signed a Bill that requires California corporate boards to include women. According to the legislation, by the end of 2019 all publicly traded California based companies must have at least one woman on their boards. Companies that do not comply will face fines of $100,000 for a first violation. California is the first state to require this. Corporate Association's opposed the Bill as unconstitutional.
Josh King:
So, what we heard in the Winkelried session in addition to that, that by 2021, they have to have three women on the board. So, that's 1060 women added to boards, I think within the next, what two years, Betty. So, clearly there's a lot of debates over the ways in which companies should adapt to diversify their boards. What's the best practice here?
Betty Liu:
I mean, we tend to stay away from mandating our companies or having listing standards around quotas. What we want to do is give our companies the best tools and resources necessary in order to reach those objectives. I think there's many ways towards achieving the goal of more diversity in company leadership and boards. Quotas is one of them, government legislation. But what we tend to do is we give our companies, or what we like to do is to give our companies the most resources and the best tools available in order to achieve those goals.
Sharon Bowen:
Right. Plus I think quotas could be limiting in some respects. Why should it be three? It could be eight. I mean, why mandate a number. I mean, I think until we're more representative, I mean, then maybe we would've arrived, but why would a company think that journey to diversity is now done because they have three women?
Duriya Farooqui:
I think the other thing that I'd be concerned about is our company is going to choose to stay private because they are, and Stacey Cunningham has talked about this as well. And in this context where legislation is coming down, which is driving certain mandates and quotas will companies that are on the fence of being public versus private choose to not go public or choose to go public later. And I think ultimately that is not great for accountability and transparency. Because the biggest thing that you on is for there to be a push and a motivation based on value, based on representation for people in leadership roles, CEOs, and lead directors and board directors to say, look, we want a diverse board. And it's good not just because it creates long-term value, it's the right thing to do.
Duriya Farooqui:
But we may have some blind spots, and you're seeing that with companies that have gone public later in their life cycle, it's not just shareholder return driven by pure economic strategic choices, but it's how employees are treated in the workplace and how inclusive the environment is. And those have turned out to be real blind spots for some tech companies that have gone publicly. So, I think incentivizing the right behavior, pushing for transparency, and then having accountability really come from investors, because that has the most teeth, if you will. I'm optimistic about that, being able to move the needle.
Sharon Bowen:
I've always thought that disclosure and transparency is really the answer to that. So, if we know if a company tells us how the demographics of your board, I, as an investor, can choose whether I want to invest with that company. Likewise, if that company makes a product that I don't believe in, or that's harmful to the environment, I, as an investor can choose not to invest in that company. And I think for many people ESG and other metrics, including diversity, increasingly is something that investors care about in making their investment decisions. So, I think the transparency and disclosure will solve that.
Josh King:
Jon Winkelried was very upfront about this. He said that of all the portfolio companies at TPG a couple years ago when he'd have investor meetings and these investors, let's remind ourselves, represent teachers, firefighters, policeman, vast millions, and billions of dollars of their life savings built up and invested in TPG portfolio companies. They hadn't asked about it that much in years past. Now they're asking about it a lot. And many different factors play into the success of a business. But if you listen to Winkelried you'd think you'd get an answer to how much of that success depends on its ability to maintain a diverse board and employment base. He seemed to be veering toward the idea that it increasingly matters a lot.
Betty Liu:
What we've found is interesting. And I think maybe this actually points to a focus on making sure that investors are as educated as possible and that they're advocating for this. Because it really is driven in many ways by them. What we've noticed is for smaller companies, investors are not as focused on diversity as they are on the management teams or the CEOs or CEO pay. It's really, we've seen investors and institutional investors really drive diversity among medium to large size companies. And so the result of that is that some of our biggest global companies they're doing really well on diversity, actually. A trend now is really having investors focus on the medium, to smaller size companies and really driving them to drive those companies who are seeing more and more board turnover to get them to focus on board diversity in that area. I think that's where you'll see some growth.
Duriya Farooqui:
I feel like the next wave of that is also going to be consumers. And you're seeing investors holding companies accountable. But part of the reason why I think some of the big companies are doing better in this space is because they're used to consumers holding them accountable. Not over a five year horizon of unicorn growth. But really over a five decade horizon perhaps, of evolving as a company, as a culture that is in sync with how you give back and how do you represent all of the customers that purchase and consume your products.
Sharon Bowen:
And the other major stakeholder, frankly, are your employees. The people who walk into your building everyday and what they care about. And we know, particularly with this next generation, they're really purpose driven.
Duriya Farooqui:
And you're seeing that in tech companies. Where employees are standing up, walking out, pushing forward and saying that we want a different culture and a different tone set from the top. And ultimately, I think both to your point, Betty educating investors, but also transparency that consumers have access to helps them make choices about their consumer behavior, which is something that we've seen in other areas of ESG. And I think that you could see that on diversity too, if companies are held accountable. And again, rather than we met our quota, how are you sort of walking the walk and setting the tone from the top when it actually could be something you choose not to do. But it's a choice you're making.
Josh King:
After the break, Sharon, Duriya and I will discuss the recent trends in board diversity. And what's happening with the Board Advisory Council here at the New York Stock Exchange. That's right after this.
Speaker 3:
And now a word from Calvin Choi, CEO of AMTD, NYSE ticker, HKIB.
Calvin Choi:
We are the first Hong Kong independent investment bank to list here. It's so unique coming here to list because we want to embrace internationalization. We want to go global. This is a global change. We want to embrace global connectivity. A is adventure. M is [inaudible 00:42:38] mission. T is actually teamwork. D is destination. NYSE is our destination. MTD now lists on the New York Stock Exchange.
Josh King:
Welcome back, before the break, the co-chairs of the New York Stock Exchange Board Advisory Council, Betty Liu, Sharon Bowen, and Duriya Farooqui, and I were discussing some of the macro trends affecting board makeup in America today. I want to now delve into some of the details. Since the introduction of Fearless Girl, 445 companies identified by state street have responded to the call to action by either adding a female director or committing to do so. This is one of the early examples of companies having a social purpose. Are there other creative ways to encourage corporations to take action?
Betty Liu:
I think it's just drawing more and more attention and really drawing more of a direct line between some of these goals to direct business benefits. I think the more you do that, the less of a calculation needs to be made. And the more we'll see that as again, not nice to do, but really a must do. I'm very proud of the work that we've done on this council. I think that, that's really helped advance the mission on that.
Sharon Bowen:
I can't remember who it ... Was it James or John who made the point about changing the compensation or the performance reviews.
Josh King:
Winkelried talked about it. People who oversee his companies are being brought to the table, and this is the metrics by which they're measured by. And their comp is to determine whether they're properly diverse.
Sharon Bowen:
And I think that's one way to move the needle that companies can do, because I think it's not just the CEO's job. I think often it's like the CEO says it and therefore it will happen. But once people understand diversity is everyone's job and it's part of your performance metric. That's going to change the culture. That's going to really move the needle. So, if there's one thing I would encourage a company listening to do today would be to make sure that the performance metrics would take into account to what extent does that person contribute to the diversity and the organization?
Duriya Farooqui:
I think the other piece is going to be talent. You're are seeing people coming straight out of college and frontline, new employees and companies be much more even in terms of men, women, and diversity, racially, and otherwise. And companies that are thinking about the fact that they're investing and training these employees, they're going to move up the ladder. How are you going to retain half of that workforce as they move up the pyramid, if you will? That's a pretty big imperative. And unless you have a clear tone from the top that they are going to be supported through the arc of a career in that company, they can choose to go somewhere else where they see better representation of the top, because that sends them a message that their talent over time is going to be more valued at perhaps a competitor company.
Duriya Farooqui:
And I think to Betty's point, linking and drawing better clear sort of linkages between, even things like retention. If you have a stronger diverse board and a more diverse C-suite, does that mean that over time you have a better shot at retaining diverse employees? I would hazard a guess that the answer is yes.
Sharon Bowen:
I would say yes.
Duriya Farooqui:
But seeing that linkage over time, because I think the next frontier for companies is winning the board on talent. And that combined with the imperative coming from the other side from investors, as well as external stakeholders I think is going to be powerful.
Betty Liu:
Also, I totally agree that everyone has to be on board with diversity. I do think that the CEO is just so critical in this.
Duriya Farooqui:
Hundred percent.
Betty Liu:
Because if they're not bought in and they again play lip service to it, then the rest of the company won't be committed to it.
Sharon Bowen:
I think the tone at the top, definitely. But if the middle of the management, if they aren't accountable there will be no progression. I mean they become the gatekeepers frankly, which is why retention becomes such a problem. And why people leave is because of middle management and that's where people get stuck.
Duriya Farooqui:
I mean, that was the reference in that McKinsey study recently, right?
Sharon Bowen:
Yes.
Duriya Farooqui:
It's really that first rung contrary to popular belief. That's where you see already a big drop off with at least women. And I think that word accountability is critical, whether it's external or internal. At the end of the day, if you're not going to, whether it's through compensation, performance reviews or the outcome mattering, at some level and having some consequences. If you don't set that tone from the top, it's very hard for it to filter down. I mean we saw James today actually interviewing candidates and sitting in the interviews and interacting with the slate of candidates we had. And it's no surprise to me that a CEO who is willing to do that and really engage in a meaningful way is able to move the needle internally and in terms of leadership roles within the organization.
Josh King:
I mean, in some ways the success that state street global advisors had with Fearless Girl was a public relations coo of such extraordinary scale that it ended up maybe as we sit here or write or read about stories of boardroom diversity, we miss a bit of the story because of the gender affiliated with that statue. I mean, as we said in the introduction, as of earlier this fall, women had 20% of board seats of publicly traded companies on the Russell 3000. And that has a rise since 2016 when they held just 15% of those seats. But the pace of change has been slower for both male and female minorities. Do you have any expectations for broader boardroom diversity in the years to come beyond gender? Because it's easy just to look at nine and three and look at simple gender breakdown, but not looking at people of color or ethnic backgrounds.
Betty Liu:
Oh yeah. I think we have very strong opinions on it. [crosstalk 00:49:04].
Duriya Farooqui:
True minority sitting here.
Sharon Bowen:
Yes. [crosstalk 00:49:07] color. Yes. We have a view on that.
Josh King:
So, let's have it.
Betty Liu:
I mean, obviously this will be unnamed, but I've had CEOs say to me, oh, we have three women on our board, we're good. And you're not good. Diversity is much broader than just having women on the board. It's having people of color, it's ethnic diversity. And then you can broaden that out-
Josh King:
LGBTQ.
Betty Liu:
Exactly. And age diversity and geographic diversity. So, it can go in a big direction. I understand that you start off a bit narrow just to start making that progress so that people can wrap their heads around it. But I think it's time where we need to shift that conversation more to talking about racial and ethnic diversity and all sorts of other aspects to diversity.
Sharon Bowen:
Yeah. And I think that's part of the transparency. So, don't lump it together with women in minorities. But talk much more specifically in terms of what race, what sexual orientation et cetera. And so then you have some real transparency. I think when you lump the two together, then it becomes somewhat distorative, it doesn't really give you a real picture.
Duriya Farooqui:
And I think sort of the network piece we talked about is double edged. Because the fact is most people have networks that are pretty similar to their background and it takes more effort to think about a diverse candidate that may not naturally be in the circulation of your network. So, even for sitting CEOs, if the Fortune 500 CEOs in the CEO's seat today are not a particularly diverse pool. And we're asking them to recommend candidates, we've also been intentional to say that we would love representation and diversity on many dimensions, not just women for the Board Advisory Council and the summit here. So, I think that networks are double edged, because oftentimes you may find that candidates that are diverse in many different ways may not be easily plugged into a network. And then you kind of have to think harder about who you can reach out to and make sure that they're part of the conversation and are being considered, and have the access that others have.
Josh King:
Research from IR Magazine indicates that small cap up companies are the least likely to set board diversity goals. And I think Jon Winkelried talked about this a little bit, that the companies in his portfolio and his company's portfolio tended to be less diverse than when they get larger and become public. So, what advice does the Board Advisory Council and its co-chairs have for these companies aiming to make a change and compete for diverse board candidates, which is a shrinking pool because the demand is so high.
Betty Liu:
I remember, I go back to when I was starting my company and it was fairly, obviously a small company were raising our seed round. The advice I got from investors at that time was to just put people on your board that, put Uncle Joe on your board, put people who don't really count, because the last thing you want as an entrepreneur is you ... Last thing you want to do is be fighting with your board, it's hand to hand combat every single day trying to start a company. So, you want a board that you can control and that you don't have to think about. There's a huge debate about whether that's good advice or not, but I understood why I was given that advice.
Betty Liu:
But I think that's what you end up with as you see a company go through their series, B, C, D rounds is that they tend to have boards that are not great in terms of governance. And they have a lot of friends on the boards or their uncle Joe and aunt Mary on the board. But if they want to have any chance of growing and of going public, they're going to have to change their boards around in order to appease investors. And so better just start, think about that earlier than right before you're going public.
Sharon Bowen:
And I think we see some effects of companies that didn't do that sooner in the process. Who maybe stayed private a little bit too long and were a little bit too insular. And didn't really adopt really good, diverse boards early on.
Duriya Farooqui:
And honestly, I would say, even if you're not going to go public. At the end of the day, if the idea is to truly have strategic partnership from your board and to consider different perspectives and recognize that your board is representing and setting the culture of your company. Shifting gears, just because you're going to be a public company, that's slightly disingenuous. Because clearly you're then trying to check a box because you're going to be scrutinized publicly and be judged publicly by the representation on your board. And I think it's helpful to educate founders about how much harder it is to make that shift later when, especially with some of these companies, which are growing at tremendous rates. You are scaling that specific culture that you began with, and that representation, and general way of operating and governing that you began with, and you're scaling that hyper fast.
Duriya Farooqui:
So, in some ways there's a need for stronger governance, better discipline, the right trajectory being set earlier when the growth is so fast, which was not the case for the legacy companies that you see today. They grew over decades. That's not happening today. So, I would say even if you're not going to be a public company, it would behoove a strong visionary CEO to take a lesson from the experiences of either failed or botched or not the most successful IPOs or post IPO experiences to note that even if they didn't go public, at some point, there is going to be a set of expectations, which will be called. Did you meet them or did you not?
Sharon Bowen:
Thank you for actually raising that. I do sit on a private company board and we practice all the great governance that you would expect from a public company as well. And it makes a difference, I think, in terms of its performance. And it definitely makes a difference in terms of the culture and in terms of employee satisfaction and their investor base as well. So, thank you for pointing out. You don't have to [crosstalk 00:55:43].
Josh King:
Or that's a different organization.
Sharon Bowen:
That's new burger.
Josh King:
Yeah. I mean looking at the room today and listening to the conversations, citing some of the statistics that we've cited, there's certainly room and a place for optimism at the table. And yet the interviews that we had were with Jon Winkelried and James Quincey. I know there's these positive signs for board makeup. But Duriya you recently retweeted something from the mom project that noted that the number of CEOs at S&P 500 companies is dropping even as board representation picks up. What are your thoughts about getting more diversity into the corner office and not just the boardroom?
Duriya Farooqui:
I think that's a very troubling sign. Because it means that while we are solving for the fact that we had five or 6% of Fortune 500 companies run by women and hence not many retired CEOs, which was the traditional pool to draw from for boards, that we are actually losing ground on even that pool itself. And I think that means there aren't enough sitting CEOs that have a succession plan, which is as thoughtful as it needs to be. And two, that the bench that they're developing, how do we sort of have a stronger, better, more open conversation about some of the strategies that leaders who are wanting to move the needle end up deploying. Give someone a shot that may not have the full resume to go the distance, put them in an interim role, give them a chance and see if they can do that.
Duriya Farooqui:
Tap someone who's not raising their hand because we know that oftentimes women are terrible at advocating for themselves. I mean, I told you my own story when I was asked to serve of on the board. Jeff had to remind me that I would be a great board member.
Betty Liu:
He had to convince you.
Duriya Farooqui:
Right. And what value I would bring to the table running a large city having the strategy experience, advising other CEOs and people in the C-suite and managing a board with 30 CEOs on it. I mean, I had to hear that back for me to be able to say, yeah. I can do that.
Sharon Bowen:
I think that also goes to the point, we're talking about the accountability of the middle. So, again, you're not going to grow the C-suite if they're being stopped at year 2, 3, 4, and 5.
Duriya Farooqui:
Right. Right. Right.
Sharon Bowen:
They won't be there.
Duriya Farooqui:
I mean, in one of the companies I worked at before, and this is true at Bain that when the office got really serious about supporting women, the partners were expected to actually take responsibility for how that person was doing in their career at the company. Even if they didn't have supervisory responsibility for that person. So, if you choose to be, and I often talk about the difference between and sponsorship. If you're a mentor, you have coffee, you give your someone your time, your advice, your energy. But a sponsor is someone who's willing to expand some political capital or some relationship capital or some public capital for whoever they're sponsoring and saying I basically go out of their way to get that person considered access, a shot or to advocate for them. So, I think we need clearly a lot more of that.
Duriya Farooqui:
And I think that at the end of the day, consumer behavior is also going to drive that. I mean, you see companies being held accountable because of their boards. But I think this point you made about CEOs, critical conversation and shame on the industry at large. Having this kind of momentum, this kind of focus on the topic, but clearly not having practical to tools to equip their organizations to be successful. And I think men have to be a big part of the conversation. Women talk a lot to each other, and we're often expected to represent the agenda on diversity, if you will. But we need to celebrate, incentivize and draw much more attention to men who are doing that for women.
Sharon Bowen:
Which is why you have to reshape, I think, the expectation. And it's not just public companies. I think back to the legal profession. It's not booming with a number of-
Duriya Farooqui:
Yeah. Professional services. It's a huge issue there too.
Sharon Bowen:
Yeah. Basically the 20% number, that's the, we call the new glass ceiling for women. And for minorities, that number is probably like 4%. And that number has not really changed very much in the last 30 years. But one of the things that we did when I co-chaired the diversity committee at my firm was we tweaked a question in the self-evaluation for the partners and said to what extent do you promote diversity in the firm and mentor women and minorities?
Sharon Bowen:
And so what happened when we asked that question, I had so many of my white male partners run into my office to say like, no one told me I was supposed to be doing that. What should I be doing? And so part of it is changing people's expectations, because people don't wake up every day in the morning to say, okay, what can I do today to promote a minority? Or vice versa. They don't wake up saying, what can I do to stop someone from succeeding? And so until it's part of the expectation that it's your role and part of your job description, because this benefits all of us in the collective good of the whole organization and that's a culture shift that's has to permeate.
Duriya Farooqui:
I mean, absolutely. I have male friends who are in leadership roles and they ask me what can I do? So, clearly I think there isn't enough conversation around practical tactical steps you can take in a corporate leadership role to drive diversity. I mean, you mentioned the tweet from the mom project. I mean, the mom project is a startup founded by a woman who had a corporate career and started a family and said, I want to take a break, but I want to be able to come back, without being heavily penalized. And one of the things that you see from research is that when women do come back, they actually don't recover their trajectory. The trajectory that they were on before. So, I think it's things like not penalizing parents, not just women, men, and women, or caregivers for a interruption in career and a entry back, and some ways to enter back, which isn't sort of binary between zero hours or 40 plus hours a week.
Duriya Farooqui:
And then two having leave policies is also that send the message that you don't have to make a choice, whether it's involve dads that want parental leave or it's moms that want to spend a year with their child. And having the option to come back. So, I think there's a lot of that, which sets the culture and the tone. And I'd love to see a list of 10 things, practical things you can do as a CEO or as a leader in a corporate environment, simple things like policies around entertainment. Are you giving women and diverse employees as much access, if everything is centered around golf or a football game. Because a lot of relationship building happens in those contexts.
Sharon Bowen:
That may be a project for us guys and for our counsel.
Betty Liu:
I like that. 10 best practice.
Duriya Farooqui:
Yes. Yeah.
Sharon Bowen:
We could even ask each of our 16 CEOs, because I'm sure they've asked that question within their organizations to give us their 10. And then put those together and then we'll have 160.
Duriya Farooqui:
There we go.
Josh King:
[crosstalk 01:03:47] here inside the ICE House. Betty, Sharon, Duriya. I mean, it's been an incredible day. As we wrap up-
Sharon Bowen:
Long day.
Josh King:
I know there's no shortage of qualified board candidates for companies to choose from. Are there specific skills that boards are looking for in their candidates? And as we leave this episode, what advice do you give to someone looking for their first board seat?
Betty Liu:
So, I mean, I think there are certain areas that companies are looking for more expertise these days. I mean, there's no question that a company in every industry is being disrupted. So, looking for people who have good technological expertise, who've worked at startups or just understand how to be adaptive. I think those people are very coveted these days. And I think we've seen that evidenced in our board candidates who were the most requested people among our board candidates. One thing I've learned just myself and that I'll impart on anyone who's listening and curious is that there really is a difference between being a board director and being a part of the executive management team.
Betty Liu:
And I think what I've heard from CEOs is that sometimes for first time board candidates, they confuse the two and take a more active role in trying to manage the CEO or manage the management team. And that's what the CEO is for as a board director, you're there to uphold the culture, support the CEO, and also advise them on strategy. And that's a very different role than maybe some first time board candidates realize. They think being on there, they need to make an impact by managing the CEO. And that usually has the opposite effect and creates poor dynamics.
Sharon Bowen:
I agree. I think you have to be a good read on your environment that way. And I think sort of the, when people talk about fit, what they really, really mean is at the end of the day, if the company's going through a crisis. Send someone that I can look to, who's going to give me good advice, good counsel. Or someone who's willing to learn and sit in the trenches. I would also say it's a two-way street. So, you may be looking for a board, but you need to be doing your due diligence as well.
Sharon Bowen:
As a board candidate, what are you looking for in a company and what are the attributes that you're trying to seek. So, I tell people, treat it as a job interview as well, in that sense. Don't pick the first board just because it's the only board that's out there for you. If it's a bad fit, it's hard to get off of a board. Once you said yes, and a bad fit is not a good thing. And so I would urge them to take the time and to do the due diligence as well.
Duriya Farooqui:
Yeah. I think that my general sense is that in addition to the specific expertise on cyber, on technology, on finance, for example audit committee chairs and those committees are really important for public companies. I think the generalist skills that still kind of matter are operating either experience or exposure. So, you can appreciate how a large company operates and really what the CEO has to think about from a strategy perspective. To being able to ask the right questions and add value in a boardroom setting, to Betty's point. You're not really, you're not managing the team, you're operating at a level where you're representing shareholders and asking the right questions is probably sort of the most important skill in the context of the boardroom. And then lastly, engaging and being seen in settings where you have a seat at the table, when you have a chance to have a seat at the table, sit at the table and let people actually see how you engage.
Duriya Farooqui:
I think that is probably the best sort of advice I can give to people who have a network who say, well, how do I leverage the network? Or have they seen you engage in a setting which is akin to what a board conversation is going to look like? And I think that makes a huge difference. But I think also oftentimes women and people of color may not actually view themselves as a great candidate. So, reach out to someone who serves on a board that's in your circle and then get some experience.
Duriya Farooqui:
Get on a nonprofit board, lead a committee on a nonprofit board, whether it's a college or a cause that you really care about. And then we heard from Christina and others today that private equity companies are also now shifting their perspective in terms of wanting some in the candidates on their boards. That is great training ground, whether it's a private equity company or a startup. But building some of those muscles so that it's not going to be a complete surprise, how boards operate, what kind of structure they use, and typically the challenges they face and how you as a board member can and contribute and steer the ship forward.
Josh King:
When you have a chance to sit at the table, sit at the table. Excellent advice to go out on. Thank you so much for joining us inside the ICE House. Betty Liu, Sharon Bowen, and Duriya Farooqui for joining us inside the ICE House today.
Sharon Bowen:
Thank you.
Duriya Farooqui:
Thank you.
Betty Liu:
Thank you.
Sharon Bowen:
Thank you for having us.
Josh King:
That's our conversation for this week. Our get guests were Betty Liu, Sharon Bowen, and Duriya Farooqui co-chairs of the NYSE Board Advisory Council. If you liked what you heard, please rate us on iTunes so other folks know where to find us. And if you've got a comment or a question, you'd like one of our experts to tackle on a future show, email us at [email protected] or a tweet at us at ICE House Podcast. Our show is produced by Kearney Ferguson and Pete Asch with Production Assistance from Ken Abel. I'm Josh King, your host signing off from the library of the New York Stock Exchange. Thanks for listening. Talk to you next week.
Speaker 1:
Information contained in this podcast was obtained in part from publicly available sources and not independently verified. Neither ICE, nor is affiliates, make any representations or warranties express or implied as to the accuracy or completeness of the information and do not sponsor approve or endorse any of the content herein. All of which is presented solely for informational and educational purposes. Nothing herein constitutes an offer to sell. A solicitation of an offer to buy any security or recommendation of any security or trading practice. Some of the preceding conversation may have been edited for the purpose of length or clarity.
