Backstage: Moving the Needle on DE&I in Finance

THE WRAP-UP // Backstage

Two years after the death of George Floyd brought social justice and systemic racism concerns to the forefront of American corporate discourse, business leaders continue to drive progress within their spheres of influence, with diversity, equity and inclusion initiatives.

Three panelists offer their observations of how the corporate community has responded in the wake of Floyd’s killing, sound off on some of the barriers to implementing DE&I initiatives and provide practical advice for others in the corporate finance space pursuing similar goals. A condensed conversation that originally appeared on GrowthTV follows.

Managing Director, Palladium Equity Partners

Managing General Partner, MaC Venture Capital

Partner, Allen & Overy

Moderator KATIE MULLIGAN: Two years ago, the killing of George Floyd sparked racial justice protests, as well as a lot of corporate statements about commitment to diversity, equity and inclusion. Since then, how have each of you seen attitudes and strategies evolve, and have organizations followed through with the commitments they made?

DEBORAH GALLEGOS: I think that the attitudes have evolved to now acknowledging and recognizing that DE&I is an issue that needs to be addressed, so that’s very positive. One thing I think is also very positive is that people are now attaching metrics to measuring DE&I. And it’s not just a discussion that’s taking place, but it’s actually something that people are starting to measure, so that we can see progress going forward.

MARLON NICHOLS: For me, it’s about dollars flowing into Black and brown fund managers, and we have seen a small uptick there. I’d say there has been some traction. A number of corporations made pledges and they’re following through on that. The question is: What happens after that initial outflow of capital? Do you continue to participate? The jury’s still out on that, but there was an initial bump.

DARIO DE MARTINO: I think there’s been more sustained focus on systemic barriers. More resources are being placed to advance DE&I. There’s just a greater willingness to engage in DE&I. That said, if you look at demographic data about race, ethnicity and gender stats for large law firms two years ago and compare it against stats from this year and ask yourself what has changed,

the answer is, unfortunately, not that much. I recently looked at a few stats and unfortunately it appears that still 9 out of 10 top leaders are white. Over 80% of those of top leaders are male among attorneys who lead firm-wide practice groups or departments; 27% are white women; 6% are minority men and 4% are minority women. Even if it’s not as quickly as I would’ve hoped, we’re still moving forward.

KATIE: What are some of the impediments or barriers that continue to get in the way of progress on the DE&I front?

DARIO: I think the first one is a lack of representation. It’s hard to become what you can’t see. Representation is very important as it helps junior attorneys, investors and entrepreneurs to visualize examples of what they can aspire to become. So we need to increase the number of minorities, especially Black professionals, but also women and LGBTQ+ folks, and advance their careers at all levels. It’s important to consider that there’s also denial: Despite the fact that extensive research has shown that diverse teams are just better in every way, smarter, more innovative, more effective, a lot of people are still in denial and believe that inequality and oppression don’t exist.

MARLON: I think it’s really simple. If you think about what venture is, it’s all about relationships: relationship building and getting to a level of comfort with the folks that you invest in. When you have 90% of the decisionmakers in venture capital being white men, who primarily come from affluent families and neighborhoods, who went to Ivy League schools, it’s hard for someone with that profile to connect with someone that grew up in the inner city or that had to take care of their siblings, as well as put themselves through school. It’s a little bit difficult to make that connection. If we’re going to really see big changes in terms of who receives venture financing, the decision-makers are going to have to look different. The limited partners, corporations and endowments are going to have to start funneling more capital to diverse fund managers. I think it’s really that simple.

DEBORAH: I would agree with both Dario and Marlon. It’s basically about change, and people are uncomfortable with change. It’s really difficult to bring in somebody that doesn’t look like you or speak like you, so we have to get people more comfortable with

change. I particularly like change. I think it’s good. Diversity is great, as we all agree. It’s also that the excuses are too easy. A lot of what we see in our industry is, ‘Yeah, we’re doing a lot at our entry-level positions. We’re hiring new analysts. 50% of our analysts are diverse.’ But when it comes to the senior leaders, there’s no diversity there and it takes a long time to get to those positions. I’ve been in the business for 30 years, so you also have to be willing to make that change at the top. Because we don’t want to wait 30 years for change. KATIE: If we were to boil down some of what you’ve been talking about into actionable tips that readers can use within their own workplace to initiate and implement DE&I initiatives, what would you tell them?

MARLON: Where I play is early-stage investing. There’s a lot of research that says the first 10 employees are what matter the most. If you’re not starting from a diverse place, it’s going to be hard to build a diverse company. The thing is to hire senior diverse people— decision-makers who can affect your corporate culture in a positive way and then they can start to bring in folks to help the company become more diverse.

DEBORAH: In order to get past all the excuses, just look at the bottom line. Take a look at what a diverse board does for your corporation or your

company, the idea generation that comes out of a diverse staff, the new product development that comes out of people with different ideas. That will be the motivator to get you over the obstacles.

DARIO: My additional tip is: What gets measured can get improved. Measure DE&I stats, compare yourself to your competitors and hold yourself accountable. Have recurring meetings where you look at your numbers and then hold yourself and the decisionmakers accountable. //