In summer 2020, State Street enhanced its commitment to advancing racial justice both inside and outside the organization. As part of this effort, the company launched “10 Actions Against Racism and Inequality” and made these commitments public to increase accountability and motivate peer companies to take action too.
Commitment #7 tasked the Asset Stewardship team at State Street Global Advisors, one of the world’s largest asset managers, to leverage their engagements with thousands of investee companies to glean best practices for advancing racial and ethnic diversity, equity and inclusion. The Asset Stewardship team chose to focus on the topic of board oversight, given the team’s governance expertise and the relative lack of literature regarding this dimension of diversity. The State Street team partnered on this effort with Russell Reynolds Associates due to their board governance expertise and extensive relationships with corporate directors, and the Ford Foundation, given their connection to movements for racial justice. The three organizations worked together on this study of the best practices for effective oversight of racial and ethnic diversity, equity and inclusion.
We first consulted academic and policy experts to identify the main risks and opportunities related to strong oversight of racial diversity, equity, inclusion and justice. We then conducted interviews with 27 experienced directors from S&P 500 and FTSE 100 companies. These conversations informed the development of this paper, and our analysis of directors’ comments resulted in our enclosed “10 Responsibilities of Boards in the Effective Board Oversight of Racial and Ethnic Diversity.”
Board oversight is about ensuring that management is focused on risks and opportunities that are relevant for the firm. Our hope is that boards will incorporate this guidance into their oversight practices in a way that is tailored to their particular company’s context. We believe the following insights provide a view into boardroom discussions and also offer a roadmap for how companies can more effectively manage and mitigate risks related to racial justice, thus making our world more equitable.