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Building Board Diversity: FINRA’s Ongoing Commitment

June 15, 2021

Diversity has been a focus for FINRA’s Board of Governors for several years—and while the current Board makeup leaves a lot to be proud of, the important work of diversity remains a perpetual work in progress.

On this episode, we sit down with Marcia Asquith, Executive Vice President of Board & External Relations, and Jennifer Piorko Mitchell, Vice President of Corporate Governance and Deputy Corporate Secretary, to explore how FINRA has prioritized diversity in the boardroom.

Resources mentioned in this episode:

Episode 25: Behind the Scenes: FINRA's Board of Governors

FINRA Governance

2021 Election Process Overview

FINRA Indication of Interest in Service Form

FINRA’s Racial Justice Task Force

Statement of the FINRA Board of Governors

Listen and subscribe to our podcast on Apple Podcasts, Spotify or wherever you listen to your podcasts. Below is a transcript of the episode. Transcripts are generated using a combination of speech recognition software and human editors and may contain errors. Please check the corresponding audio before quoting in print. 


00:00 – 00:22

Kaitlyn Kiernan: Diversity has been a focus for FINRA's Board of Governors for a number of years, and the current Board makeup leaves a lot to be proud of, but no one is celebrating quite yet. On this episode, we talked to FINRA's corporate secretary and deputy corporate secretary to hear how FINRA's Board of Governors got to where it is today, but why the important work of diversity remains very much a work in progress.

00:22 – 00:32

Intro Music

00:32 – 00:49

Kaitlyn Kiernan: Welcome to FINRA Unscripted, I'm your host, Kaitlyn Kiernan. I'm pleased to welcome back to the show Marcia Asquith, executive vice president of Board and External Relations, and a new guest, Jennifer Piorko Mitchell, vice president of corporate governance and deputy corporate secretary. Marcia and Jen, welcome to the show.

00:50 – 00:51

Marcia Asquith: Thanks for having us.

00:51 – 00:52

Jennifer Piorko Mitchell: Happy to be here.

00:53 - 01:05

Kaitlyn Kiernan: So, Marcia, it's been two years since we last had you on FINRA Unscripted. So before we jump in, can you just refresh us a bit on your role as EVP of Board and External Relations?

01:06 - 01:41

Marcia Asquith: Yes, thanks, Kaitlyn. So as EVP of Board and External Relations, I also serve as the Corporate Secretary for FINRA and in that role I work with management and the Board of Governors in helping the Board oversee FINRA and implementing its strategic plans. I also have responsibility for many of our outward facing functions, including government affairs, corporate communications, investor education, member relations and education, and the international group, as well as the corporate secretary's team that Jen helps me lead.

01:42 - 01:50

Kaitlyn Kiernan: And Jen, this is your first time on FINRA Unscripted. So can you just tell us a bit about your background and your role?

01:50 - 02:17

Jennifer Piorko Mitchell: Sure. I support Marcia in overseeing the work of the Office of the Corporate Secretary. So I support her in the Board prong of her board and external relations responsibility. And that primarily involves supporting board member recruitment efforts, coordinating and facilitating FINRA's board meetings, running our corporate elections and providing governance advice and answers to questions on FINRA governance-related issues.

02:18 - 02:45

Kaitlyn Kiernan: And Marcia, the last time we had you on the podcast was Episode 25, and on that episode we talked a lot about FINRA's Board of Governors, its responsibilities and makeup and efforts that have been taken to improve transparency around FINRA's Board and what they do. So just to remind us, can you tell us a little bit about the overall Board makeup and how it's structured?

02:45 - 03:59

Marcia Asquith: Under our bylaws, our Board has to be a majority public. And when we say public, we mean not affiliated with a broker-dealer. So it's a term of art for us, but that's what we mean. On the industry side, we have both elected and appointed governors.

The current structure of our board arose in 2007 when we became FINRA and NASD consolidated with the regulatory function of the New York Stock Exchange regulatory arm. So there's a wide range of perspectives reflected in the bylaws that are required to sit on the Board. This includes an investment company representative, a floor broker from the New York Stock Exchange (that was understandable as part of the consolidation that they wanted to have that representation). And then we've always had either an independent dealer or an insurance affiliate. And I think that this just addresses the fact that while we're talking about diversity, there's a lot of diversity in business models in the brokerage industry. And then we have seven elected governors from certain size firms. So there are three large firm governors, one from the medium sized firm segment, and then three small firm representatives on the Board.

04:16 - 04:02

Kaitlyn Kiernan: And how many Board members are there total?

04:03 - 04:42

Marcia Asquith: Currently, we have 22 members on the FINRA Board of Governors. This includes Robert Cook, the FINRA CEO who has a seat on the Board. Then we have 10 industry governors, including seven who are elected and three who are appointed. Our Board is required to be a majority public, so we have 11 public governors at the current time. At any given point, we could have up to three more public governors on the Board. And we have at different times had 12, 13, and even at one point we had 14, public governors on the Board. So that exact public number fluctuates, but it never goes below 11.

04:43 - 04:49

Kaitlyn Kiernan: And on the public governor side, are those positions also appointed positions?

04:49 - 04:58

Marcia Asquith: Yes, the public governors are all appointed. They are nominated by our Board's Nominating and Governance Committee and then approved by the Board.

04:59 - 05:10

Kaitlyn Kiernan: One of the things that we discussed on that last podcast was efforts to increase the diversity of FINRA's Board of Governors. How have those efforts progressed over the last couple of years?

05:11 - 06:08

Marcia Asquith: I think that they've progressed terrifically. This is something that the Board has consistently recognized is important and has consistently been intentional about, especially under Robert's leadership and with our current Board chairperson, Eileen Murray. We've really made great strides. There are a lot of studies out there that talk about the increased diversity of boards and the better decision making that you get. I think that our Board has always recognized that.  But I think until you put that intentionality into the process that the Nominating and Governance Committee applies to its role of identifying and recruiting new governors until there's really the tone of the top to push that message down consistently, then we weren't always getting to the outcome that we would have liked. So I think that over the past three years, we've really made great strides.

06:09 - 06:12

Kaitlyn Kiernan: And how do you think about diversity?

06:13 - 06:42

Marcia Asquith: I think that in addition to the diversity that people think of normally when they hear those terms, I think we think of gender diversity, we think of racial and ethnic diversity, but we are also looking at diversity of firm types. We're looking at geographic diversity. We're wanting diversity in many different forms in order to have a more representative Board that really represents the investing public.

06:43 - 06:53

Kaitlyn Kiernan: When the board is looking to put forward someone for an appointed position, what sort of skills are you looking at and considering at that time?

06:55 - 07:56

Marcia Asquith: That can vary depending on who we are losing and what seat we're trying to fill. The Board uses a skills matrix which has expertise in different areas that the Board has found to be valuable in doing the job of overseeing FINRA. And so as we lose, people say with technology experience or people who have a regulatory background, having come from the SEC or the Fed or Treasury, then they may look for someone with that same type of background that they have found to be valuable or something comparable. While the public governors aren't affiliated or have any relationship with a broker-dealer, someone who has a knowledge of the industry is often desirable because FINRA is such a complicated organization and there is a lot of nuance in the type of work that the Board does in overseeing FINRA. So we have found that having some financial services expertise or at least knowledge, understanding has been helpful.

07:57 - 08:07

Kaitlyn Kiernan: So any time you're filling a position, you're looking to make sure that matrix you're hitting all the areas you're hoping to have filled in terms of experience and expertise.

08:08 - 08:43

Marcia Asquith: There are certain traits that are always desirable in a board member, people who are strong leaders. A lot of times boards look for people who have been CEOs of organizations. And I think that that can be important. I don't think that every board member has to be a former or current CEO, but someone who has experience leading an organization and can draw on that experience to help support FINRA's management is always valuable, but those types of leadership, as well as subject matter expertise with an overlay of other types of diversity, is how the Board goes about making that analysis.

08:44 - 09:09

Kaitlyn Kiernan: On June 11th of 2020, the Board made a statement that speaks specifically about increasing diversity on FINRA's Board and at FINRA more broadly. So while diversity has long been a priority for FINRA's Board, as you mentioned earlier, this was the first time there was that official statement of any kind about diversity. Marcia, can you talk a little bit more about that statement and what prompted that?

09:10 - 10:27

Marcia Asquith: That came out of some discussions we had following what was going on in the country with the acts of violence against African-American communities and specifically the George Floyd matter. We as a Board were talking about how FINRA can be a leader in this area in terms of affirming our commitment to the principle of equal justice and continuing to increase the diversity of the FINRA Board, as well as working with others to help promote greater diversity and inclusion across the industry. As a regulator, we don't oversee the diversity of the industry, but I think that there is a recognition that we can be a thought leader in this space. So FINRA has taken a lot of steps to be transparent about what it's doing in this area in order to help inform discussions that others are having about this.

10:02 - 10:17

Kaitlyn Kiernan: You did mention a little bit before, Marcia, that this has been a priority for the current Board Chair Eileen, and then also for Robert Cook. What is the role in Board leadership in helping achieve goals like this around diversity?

10:18 - 11:32

Marcia Asquith: Eileen Murray, the chairperson of the Board, Kathy Murphy, the chair of the Nominating and Governance Committee, as well as our CEO, Robert Cook - they definitely set the tone. And by consistently reinforcing the importance of diversity in every conversation that either the Nominating and Governance Committee has or that the Board has around recruitment and identifying potential board members, they are continuing this ongoing effort to ensure that the Board doesn't lose sight of it.

I think that was another reason that the statement that the Board made was so important, because putting it out there publicly helps them hold themselves accountable and helps others be focused on it so that we don't lose sight of it. It's easy when we go through all the factors that I mentioned earlier that the Board is looking for in board members. It's easy to get lost in the details of what people's particular expertise or skill is. So if you don't consistently keep that overlay of the diversity lens on it, then it can sometimes get lost in the discussions. It just shows that we have to be intentional about it, that sometimes boards don't automatically think that way consistently. And so you need the leadership to set that tone.

11:33 - 11:43

Kaitlyn Kiernan: And Jen, how did FINRA go about the work of actually increasing the diversity of the Board? What role does the Board's Nominating Committee play in this effort?

11:44 - 12:40

Jennifer Piorko Mitchell: The Nominating Committee plays a large role in this effort. The Nominating Committee actually identifies and nominates the candidates for all the seats on the Board. And then the Board reviews the nominations and appoints the individuals for the appointed seats. There's an election process to fill those elected seats that Marcia mentioned earlier. But as Marcia mentioned, Robert and Eileen have really been setting the tone at the top and have been very intentional about it and so is the Nominating Committee. So diversity is one of the characteristics that the Committee looks at regularly as part of their matrix for identifying candidates for the Board. So they're looking at who's rolling off in the coming year. And gender diversity, racial and ethnic diversity is one of the factors that's considered in the whole process. The Nominating Committee also uses search firms from time to time to help identify candidates to fill spots on the Board. And they've really demanded diversity in the pools of candidates that the search firm presents.

12:41 - 13:06

Kaitlyn Kiernan: Jen, we also talked about earlier how the board is split between the public and the non-public. And then there's also the elected versus appointed, as you just mentioned. How does the existence of the seven elected positions that Marcia mentioned, how does that impact the Board and FINRA's ability to influence board diversity?

13:23 - 14:39

Jennifer Piorko Mitchell: That definitely has an impact on the ability to influence diversity, because any candidate that the Nominating Committee nominates for one of the seven elected seats on the Board, individuals can still petition to be added to the ballot. So essentially those seats go out for election and it's FINRA membership that elects the ultimate winner in that election. and who's going to take that seat on the Board. So while FINRA and the Nominating Committee doesn't have the final say in who's elected to fill these industry spots, we are very transparent about the election process overall and we provide multiple notices to the industry to ensure that anyone who wants to run for a seat has the information available to do so. So we actually just recently issued a special notice regarding the 2021 election process and overview. So it provides information on all the various elected seats, not just the Board, but also the SFAC, the NAC, the regional committee elections and the vacancies that are coming up. And then we provide additional notices at the kickoff of each election period.

This is one of the reasons that FINRA has really focused on increasing diversity in our Advisory Committees. And those pools of individuals who serve on our Advisory Committees often move on to run for other FINRA's positions like the Board. So we look to increase diversity at these almost feeder committees. And individuals who serve on these committees often rise up and become board members in the future, whether they run as petition candidates or are nominated by the Committee. So we really look at increasing diversity in all of the areas that FINRA engages with the industry.

14:40 - 14:53

Kaitlyn Kiernan: This really is a long term effort where it's not just about the diversity of the Board right now, but it is, like you said, developing a pipeline that ensures that there's the opportunity for diversity for years to come.

14:53 - 14:54

Jennifer Piorko Mitchell: That's exactly right.

14:55 - 15:08

Kaitlyn Kiernan: And despite the fact that these elected positions are elected by the industry and not appointed by FINRA, like the other board positions, all three small firm governors are currently women. And that seems pretty noteworthy. Is that a first?

15:09 - 16:25

Jennifer Piorko Mitchell: That is a first. It's the first time that all three of our small firm governors were women. And a lot of credit has to go to the governors themselves. So our three current small firm governors are Paige Pierce, Linde Murphy and Wendy Lanton. And they each previously served on the Small Firm Advisory Committee, and they all either served also on the Regional Committees or the National Adjudicatory Council. So they all were very engaged with FINRA and in FINRA's committee process. So they were well known to FINRA staff and they were actively involved in providing input on FINRA rulemaking for a number of years. They each ran and were elected to seats on the FINRA Board and they also have been very supportive of each other and in identifying other diverse candidates to run for seats on the Board.

16:01 - 16:08

Kaitlyn Kiernan: So they are both beneficiaries of the pipeline you mentioned and also helping to build that pipeline for the future.

16:08 - 16:09

Jennifer Piorko Mitchell: Exactly.

16:09 - 16:28

Marcia Asquith: I like to think of that pipeline that Jen mentioned as our farm team system. There are a lot of ways that industry governors have been involved with FINRA over the years before they get elected to the Board. And that's also one way that FINRA learns people in the industry who can then be recommended for seats on the Board.

16:28 - 16:35

Kaitlyn Kiernan: And so, Marcia, why is increasing Board diversity such an important goal?

16:36 - 17:19

Marcia Asquith: We talked earlier about this belief that having a more diverse group of people in a room makes better decisions. There's been a lot of studies on both sides of that, but I think the majority of the literature supports that belief. Nasdaq, for instance, proposed new rules that would require listed companies to have, in most cases, at least two directors or explain why they do not, who are diverse. Our board has affirmatively recognized that there is a benefit to that. I think that because FINRA is a self-regulatory organization, we're seeking not only to represent the makeup of the industry, but also, more importantly, the makeup of investors that we protect.

17:19 - 17:26

Kaitlyn Kiernan: How would you say the FINRA Board meetings have changed since achieving greater diversity from just what you've seen?

17:27 - 19:06

Marcia Asquith: We both are demonstrating more publicly our commitment to fostering an inclusive and diverse workplace, and that stems from the statement that the Board put out a year ago that you mentioned earlier, Kaitlyn. I think that the diversity of the Board impacted the fact that the Board issued that statement. I don't know that we would have done that previously, but I also think it's a different time. And I think that it's hard to say whether the discussions at the Board are different because of what's been going on more broadly in the industry or because of who's in those seats. But I'm certainly happy that we have the expertise and the great knowledge that we have on the Board right now.

For instance, Camille Busette, who's on our Foundation Board and the FINRA Board is an expert in the financial capability of minority communities. She's a scholar in this area. And so she certainly brings a great perspective. We have a new board member, Deborah Bailey, who came from the Fed and has that expertise in supervision of firms. And so it's what I was talking about earlier. It's this diversity of all types.

So the Board, because we have pretty short term limits, our turnover is relatively high. And so it is a changing group of people. And so the discussions evolve that way. And I think the evolution of the discussions that the Board has isn't necessarily reflective of the diversity. But just because we have different people in those seats, the fact is those people are diverse, but they're also just bring a different perspective because of what their professional experience has been.

19:07 - 19:17

Kaitlyn Kiernan: Marcia, you mentioned that very short term limits. You've achieved a lot of success so far, but it seems like it's a work in progress. What are the goals for the future?

19:18 - 21:04

Marcia Asquith: Well, I certainly hope that we're able to maintain our diversity and frankly, we might not be able to. It depends who are the governors who are elected. Right now, we have three small firm governors who are women, and chances are the next set of elected governors won't necessarily have that same diversity. And we may have more diversity, but it's not always a given that we will have that same type of diversity in the elected seats. So I think then it's even more incumbent on us to ensure that we keep the focus on the diversity in our appointed seats.

And while we're losing some terrific women this year, I think that the board really does have a challenge in front of it in terms of replacing people like Kathy Murphy from Fidelity. Her term is up in July. She's been a terrific champion for diversity on the board as leading the Nominating and Governance Committee as chair.

We're losing Amy Weber, who is an industry appointed governor, who's just been a terrific champion for women and has also just been wonderful to work with. So I think that as we lose appointed seats like Governors Amy and Kathy, then the board really is going to have to commit to finding qualified candidates who are also diverse.

While we're at a terrific point right now, I think it is a journey and I think that we will have ebbs and flows as the Board identifies candidates, because when it comes down to it, the Board is looking for the best candidates. And whether we can maintain the exact level of diversity that we have right now is still to be seen. And while that is a hope of ours, I don't think that it's realistic to think that we're going to have a one for one. When we lose a woman, that we're going to find another woman. I think it's going to be a balance and the Board is committed to continuing to get that balance right.

21:05 - 21:21

Kaitlyn Kiernan: And it's good that you're looking at multiple types of diversity, so you might lose a certain type of diversity, but maybe gain in another area as well. Just to wrap up a little bit, how has the board supported some of the broader diversity initiatives?

21:22 - 23:13

Marcia Asquith: The Board has been very supportive of Robert and his broader diversity initiatives within FINRA, as well as Rainia Washington, our new chief human resources officer who started while we've been in the remote work environment, both of them have really been supported by the Board and worked closely with the Board on implementing ideas in this area.

For instance, this year we're going to have a section on human capital disclosures for the first time in our annual financial report that will provide more information and transparency in this area. It will include information on our employee demographics and reflect our commitment to fostering an inclusive and diverse workplace and how we go about doing that. I think it's also reflective of our corporate values, which the Board has supported.

And the Board in July, at our strategic planning session, we're going to have a discussion on diversity and talk about some ways of the Board can show thought leadership in this area, both on a micro level for FINRA and how we look at this in terms of our workforce, but also on a more macro level and how we can help with the industry.

This has come up a lot when we've been talking about Securities Industry Essentials exam that we hope is going to help the industry increase its diversity by taking some of the barriers to getting licensed and to finding work with a broker-dealer, trying to knock down some of those barriers. And so some of the work that the Board is going to do is going to talk about how we can champion the SIE exam and get the word out about that. We've been working with a lot of Historically Black Colleges and Universities and helping them to focus on the SIE. So I think that there's going to be some improvement in the industry numbers that we hope can be tied to this exam and the work that FINRA has done here.

23:14 - 23:43

Kaitlyn Kiernan: And of course, you're also heading our Racial Justice Task Force with Rainia Washington, our chief human resources officer, like you mentioned, which has an entire industry workstream so we can link to a new page we have on our website so our listeners can learn more about that.

But also, just final question for listeners who might now be interested in learning more about getting involved with FINRA's committees or FINRA's Board, how can they learn more about that?

23:44 - 24:21

Jennifer Piorko Mitchell: If anyone's interested in learning about FINRA's committees or the Board or how to serve, you can go to the FINRA governance page on FINRA's website and that has information on the various advisory committees, FINRA's ad hoc committees, the Board of Governors. It shows who's currently on them, and it discusses the nomination and appointment process for the different groups. And there's also a link from that page to our indication of interest portal, where interested individuals can look through the various opportunities and throw their name in the hat for consideration for future vacancies on any of these committees or on the Board.

24:22 - 24:41

Kaitlyn Kiernan: Great. We will link to those in our show notes. That's it for this episode of FINRA Unscripted. If you don't already, listeners can subscribe to FINRA Unscripted wherever you listen to podcasts. If you have an idea for a future episode, you can email us at [email protected]. Until next time.

24:41 – 24:47

Outro Music

24:47 - 25:10

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