Shundrawn Thomas, president of $1.1 trillion Northern Trust Asset Management, has been writing letters to the industry calling for more accountability in diversity and leadership.
In Part 1 of this series, taken from an edited interview with Thomas, he explained his reasons for writing them and called for more empathy. In Part 2, we discussed how minorities have a mantle of responsibility on their shoulders when they come into positions of power and how women and minorities can create positive mentoring relationships. In Part 3, Thomas outlined an action plan for effective discussions and relationships to advance diversity within firms. In Part 4, Thomas discusses how to advance diversity, equity, and inclusion (DE&I) for both investors and leaders and the broader community.
In the earliest stage of the pandemic, Thomas penned an open letter to business and civic leaders issuing an urgent call for more compassionate leadership. In particular, he emphasized the unequal toll exacted on marginalized communities and the responsibility of leaders to respond in word and deed.
In the aftermath of the killing of George Floyd, Thomas authored three more deeply personal open letters addressing systemic racism, encouraging readers to transform the current social justice moment into a sustainable movement, and advocating for them to break their silence.
In this final part of the series (taken from an edited interview with CIO managing editor Christine Giordano), Thomas continues to outline what he’s been up to, lay out a path for the years to come, and explore how he hopes to add diversity to the finance community, as well as other areas of society.
Christine Giordano: There are some broad questions on inequities and racism that I’d like to address, beginning with the wealth gap. In 2019, the median white household held $188,000 in wealth, 7.8 times that of a typical Black household. Most corporate leaders would agree that if we’re going to see real progress in overcoming racial inequality, this huge wealth gap is going to have the have to narrow considerably. Of particular relevance to our readers, how can investing play a role in closing that gap?
Shundrawn Thomas: The biggest contributors to that wealth gap all come back to equity ownership.
So what you find is whether we look at equity ownership in terms of real estate or homeownership, incentive compensation, or the big category of net wealth that you’re referring to, what we most directly impact is the ownership of financial assets, and then entrepreneurship. So think about those buckets. Our starting point, particularly for Blacks and Hispanics, is that they are disadvantaged in every single one of those categories.
The first thing that we can do in our business, since we are not only in the business of investing, but also in the business of ideas—we have access to insights and information—we can share this with minority communities, helping people in the areas of personal finance and investing, whether we do that through initiatives directly with our organizations or whether we do it through how we use some of our personal time and how we volunteer.
With respect to financial assets, the earlier that we can get people investing, the better they can take advantage of the beauty of compounding. It’s a wonderful thing. And, actually, it’s a win-win for us in our businesses, because many diverse communities are under-invested; they have a low share of their resources put in financial assets. It’s a tremendous business opportunity.
But how often do we say we’re going to target those communities and look at them as places where we not only can help the communities, but can expand where we do business? Now, to do that, we should have more people in our businesses that are from those communities, because it will connect us to those communities and those business opportunities.
That’s doing well while we’re doing business, but a lot of firms aren’t focused on that.
I think the last part of creating equity is how we create it from entrepreneurship. So, as a company, we should think about who are we investing with? Who are we doing business with?
And are we investing with a more diverse set of business owners that include women and ethnic minorities? Because when we do that, we’re doing two things: We’re allowing them to create more equity in their businesses, which is going to spread to their communities, and we’re also creating more assets for them to invest—by the way, including with us. So those are the ways of really tackling this head-on from where we sit that I think we can play a role.
CG: As a global asset management firm leader responsible for overseeing more than a trillion dollars, how do you see this responsibility intertwine with your responsibility to advance diversity, equity, and inclusion?
ST: I look at all three angles: diversity, equity, and inclusion. From diversity, the first thing that comes to mind is representation—so I have a responsibility to say, “What do we look like?”
As we look across our organization from top to bottom, do we have diverse representation in every area, including gender and ethnic diversity? And what are we intentionally doing to make sure we have the broadest set of diverse representation? Now this is very important: We’re not doing it in any way that disadvantages anyone. But we are doing things intentionally and purposely, asking ourselves: “Are we making opportunity accessible?” Because while opportunity abounds, it is not necessarily equitable. And we have a responsibility to make that equitable.
From an inclusion standpoint, what kind of culture, do we have?
When I transitioned to this role three and a half years ago, we talked about our values and our culture, and we came together and agreed on a set of shared values: passion, competence, intellectual curiosity, but the fourth of the five is diversity, and the fifth is humility. So what are we doing in terms of our culture to reinforce an environment where people feel included?
The final thing is equity, for which a key component is: How do we treat our employees? Are they getting equitable opportunities? That helps them in the communities that they’re connected to.
Also, as an asset manager, sometimes we’re investing in our proprietary products, while other times we invest with other managers. We also partner with other organizations.
And so, in thinking about diversity, equity, and inclusion, are the people we partner with diverse? One of the realities in the financial services and investment management business is that there is so little diversity there. But we affect that by who we choose to invest in, invest with, and invest alongside.
CG: Corporate leaders and financial services often point to a lack of qualified candidates as a reason for their lack of people of color in senior management positions. Northern Trust Asset Management has very diverse executive and management teams. How are such mosaics of diverse representation best created and what steps can corporate America take to assure that momentum continues? Particularly over the last six to nine months, that trend continues and we’re seeing a lot more diverse corporate boards. Things are opening pretty wide. And you’ve described this as making the moment a movement.
ST: You oftentimes hear a retort when it comes to ethnic minorities or women: They lack qualifications or we can’t find them. Look at the last six to nine months—this is a great example. For years, people have been talking about the need to have more diversity in corporate boardrooms. And it seems like almost magically in the last year, we’ve been able to now accelerate that trend. Do we think overnight that all these wonderful people just became qualified?
Or do we think it’s more reasonably the case that they were always there, highly qualified in plain sight, but not necessarily either in the immediate networks of the people who currently occupy the seats, the incumbents? Or could it be, one of the things that I point out, that our existing talent practices at every level continue just to reproduce what we’ve already had?
I refuse to accept that there is a talent or a competence shortage.
But what I do believe is that our old talent management practices have to change, including where we look for and what we regard as talent and how we develop talent. All of those things have to evolve.
We saw it at our firm. Just over 12 years ago, I joined our asset management executive team. At the time, there were 16 members.
It was 15 white men and one gentleman of color transitioning out of team. So I was the only person of color. We had no women.
Now, this was early in the tenure of my predecessor and, to his credit, he began the process of diversifying the team. Obviously, he brought me onto the team.
And he brought the first woman onto our team and continued the trajectory. I’ve had the privilege of building on and really accelerating that progress. I have nine direct reports, five of them are women and three are ethnic minorities.
If we go to our more extended team, we have a diverse group of people with ethnic backgrounds across various categories. We did this on purpose and we didn’t compromise talent. This is really important: Once we decided we wanted to create opportunities for ethnic and gender diverse people on the team that are from different backgrounds, it connected the team to other places that the team was not connected to before. It gave the team other ideas that it wasn’t using before. That’s what companies need to do.
CG: How diverse is your executive board now?
ST: The board or our management group?
CG: If you could go into both, that would be great.
ST: Corporate boards historically don’t report their ethnic diversity, but we have numerous ethnically diverse members on ours, including three women and a number of ethnically diverse individuals. So if you were to look at the corporate board for Northern Trust Corporation, what you would see is wide diversity.
That’s also true for registered fund boards in NTAM’s business. For example, of the three independent directors that serve on our ETF [exchange-traded fund] board, one is an African American who’s the chair and another is Latina. As for our mutual fund board, we have seven independent directors, including four women, two of whom are African Americans. In total, women comprise half of the independent directors on our fund boards.
We have an extended management team of 17 leaders with nine being my direct reports. Of the direct reports, five are women and three are ethnically diverse. The larger 17-member team includes seven women and six people of color.
CG: And how has it helped your investment process?
ST: You must start with people who have the investment acumen, but I think where it’s helped our investment process, and business strategy is people bring different perspectives to problem solving.
How we build investment portfolios and how we design investment products has evolved. It’s pushed us into areas like sustainability. We’re one of the leaders, globally, in sustainability. We had 30% growth in our sustainable investing assets last year, and so we now have approximately $130 billion in sustainable strategies. We’ve been doing this now for decades, but part of the expertise and commitment was infused by the different kinds of people and the diverse perspectives of people that we have and what they bring to the table. They said why this was not only good from an investment merit standpoint, but why it would also offer value from other standpoints.
I think that comes when you have diverse people bringing different perspectives and backgrounds to the table as you’re making both investment and business decisions.
CG: And one of your common messages is that it is important for meaningful change to start at the top, particularly for senior management, rather than at the board level. And that management needs to be held accountable for measurable progress. Why so?
ST: This is your face to the marketplace. It is what people see when they pull up the proverbial page about Northern Trust Asset Management.
The old statement that a picture is worth a thousand words holds true, and so it is signaling powerfully something to your internal and your external constituents. The next thing is, if you’re going to have success in these areas—and I say this not in any judgmental way, but think about the challenge of trying to advance diversity if you’re sitting at a table with people that don’t have any diverse backgrounds and then think of how much more productive and effective you’d be if you have people that are bringing diverse backgrounds to the table.
The other reason it’s important to start at the top is that to have the moral authority for people to trust you and respect you, you have to have shown you’ve done it. So I would have no credibility in my own mind if I was going out to my organization of 930 people around the globe saying that they’ve got to be focused on and driving diversity, yet in the area that I have the most influence, that is the most proximate to me—the people that make up the management of our global asset management business and who are my directs—I have shown no capacity, no ability, no willingness to create diversity there. I’d be trying to lead without being an example.
The last reason is, if you have people that not only fit the picture but believe in the principles, then those people are going to practice it and replicate it throughout your organization.
CG: In a nutshell, what three core recommendations would you like to offer CIOs on advancing DE&I?
ST: The first is: They must start with thinking about representation at the top and who’s sitting around your proverbial leadership table. Think critically about that, expand the aperture or the breath of who you’re looking at and how you’re attracting those people.
And if your starting point today is where the team is not diverse, do not pass go, do not collect $200. Rather, diversify your leadership team.
The second thing reflects the thought of equity. I encourage CIOs to work with their partners in HR [human resources] and talent management to ask: What do we need to rethink about our hiring, our promotion, and our compensation practices that will allow us to create a more diverse and equitable inclusive environment? You have to do that consciously and talent management practices need to change.
The last thing is with respect to inclusion: It’s all about the dialogue. We’ve been talking about that this during our entire conversation. When you are the CIO or the CEO of an organization, you have the megaphone. It’s not a question of whether you have it, it’s a question of how you choose to use it. And so, articulate the values of your organization. Model both transparency and vulnerability. If you show your commitment to this, it will have an exponential effect on your organization.
CG: Thank you, Shundrawn, for sharing your insights with us.
ST: Thank you, Christine, have a great day.
A recording of the full conversation with Thomas can be found as a podcast here.
If you’re interested in hearing prominent CIOs discuss progressive moves toward DE&I, join us for our CIO Symposium DE&I panel on Thursday at 2 p.m. EDT. The live discussion will include Robin Diamonte, CIO of Raytheon; Bryan Lewis, CIO of United States Steel; and Doug Brown, CIO of Exelon. Allocators can register here to watch live or through a replay.