On June 9, 2015, six federal agencies (Office of the Comptroller of the Currency, Board of Governors of the Federal Reserve, Federal Deposit Insurance Corporation, National Credit Union Administration, Consumer Financial Protection Bureau, and Securities and Exchange Commission) (collectively, “Agencies”) issued a final interagency policy statement (“Final Policy”) that established joint standards for assessing the diversity policies and practices for the entities they regulate, as required by the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (Act) (“Section 342”). The standards went into effect on June 10, 2015, so the regulated entities should begin to focus on implementing the new standards into their organizations.
To develop the Final Policy, the Agencies requested and received more than 200 comments on the Proposed Rule. The Final Policy reflects the input of more than 200 industry commentators submitted to the Agencies based on the proposed standards issued in 2013. The Final Policy includes the following changes and additions.
The Agencies received several comments from individuals who were confused about the legal obligations of the policy statement. Some commenters interpreted the proposal to establish new requirements and others interpreted the proposal to fail to create any new obligations. To alleviate the confusion, the Agencies clarified that the Final Policy creates no legal obligation and use of the proposed standards is voluntary.
Definition of Diversity and Inclusion
The proposal did not provide a definition of diversity. Due to concerns associated with differing interpretations of diversity, the Agencies added the following definition to the Final Policy: “diversity refers to minorities and women.” Minority was then defined as “Black Americans, Native Americans, Hispanic Americans, and Asian Americans.” Further, the Final Policy provides that regulated entities may apply a broader definition of diversity within their own organizations.
The Agencies also added a definition of inclusion to the Final Policy to emphasize the creation of an inclusive culture beyond just diverse hiring practices. The Final Policy defined inclusion as “a process to create and maintain a positive work environment that values individual similarities and differences, so that all can reach their potential and maximize their contributions to an organization.”
Like the proposed joint standards, the Final Policy includes metrics for regulated entities to use in assessing and their respective diversity policies and practices in the following categories:
- Organizational Commitment to Diversity and Inclusion;
- Workforce Profile and Employment Practices;
- Procurement and Business Practices – Supplier Diversity; and
- Practices to Promote Transparency of Organizational Diversity and Inclusion.
Although there were several changes made to the proposed joint standards, the general content and substance of the proposal remained the same. The most significant changes were in the Workforce Profile and Employment Practices Section.
Organizational Commitment to Diversity and Inclusion
The only change to the Organizational Commitment to Diversity and Inclusion standards was an emphasis that “the senior official responsible for an entity’s diversity and inclusion efforts preferably should have relevant knowledge and experience.”
Workforce Profile and Employment Practices
Many commentators expressed concern that the numerical data would not provide adequate insight regarding diversity efforts.
Several commenters on the proposed policy statement were concerned with the use of the EEO-1 report and Affirmative Action Plan (“AAP”) data. The commenters worried that numerical data would not provide helpful insight on the actual impact of diversity efforts. The Agencies decided to retain the proposed rule’s language regarding the use of the EEO-1 and AAP data, but transferred this information from the Workforce Profile and Employment Practices Standard to the introduction. Additionally, the Agencies encourage smaller entities not subject to EEO-1 and AAP data to use various analytical tools.
Two additional standards were added to this section as well:
- The first additional standard states that “the entity implements policies and practices related to workforce diversity and inclusion in a manner that complies with all applicable laws;” and
- The second new standard stated that the “entity ensures equal employment and does not engage in unlawful employment discrimination based on gender, race, or ethnicity.”
Procurement and Business Practices – Supplier Diversity
No substantive changes were made to this standard as the Agencies did not find it appropriate to dictate quantifiable targets for supplier diversity.
Practices to Promote Transparency of Organizational Diversity and Inclusion
No material changes were made to this standard, however, the Final Policy does not address the transparency standard of “current workforce and supplier demographic profiles” addressed in the proposed rule.
The Final Policy adds Self-Assessment as a fifth standard. The changes within the Self-Assessment focused primarily on providing specific details as to how to conduct the Self-Assessment. The Agencies suggested a timing provision in which the regulated entities will preferably conduct the Self-Assessment annually and monitor its diversity policies and practices on an ongoing basis. No further changes were made because the Agencies believe the regulated entities are in the best position to assess their internal diversity and inclusion policies and practices.
Disclosure of Assessment Information
Lastly, the Final Policy clarifies that the amount of information a regulated entity decides to disclose is within its discretion. Additionally, the Agencies retain the right under the Final Policy to publish information disclosed to them, but they will not disclose the actual entities or any other confidential information.
Click here to view the final ruling.