The investment industry’s failure to have wide-ranging diversity in its offices is negatively affecting Australians’ retirement outcomes, according to Mellody Hobson, president of Ariel Investments.
Hobson, who was named as one of Time Magazine’s most influential people in the world in 2015, will be sharing her insights into governance, marketing and financial literacy at the Conference of Major Super Funds in Adelaide on Wednesday.
Ahead of the conference, she spoke to Investment Magazine, saying the issue of diversity, particularly in relation to race and gender, had been coming up across many industries in the United States.
“There was so much talk around the diversity of the Oscars this year. Chris Rock made the point that this year, this is the 88th Oscars, which means there were probably 70 other Oscars where there were no black people nominated, so why are we protesting now?” Hobson said.
She added: “Sometimes an idea’s time has come. And I think it’s time for the investment industry to look around and hold itself accountable as it relates to these issues of race and gender.”
The moral argument aside, the industry’s lack of diversity limits its ability to market to different groups, argues Hobson. And marketing to everyone is a good thing, because it engages them in the process.
“To the extent that Americans or Australians retire comfortably because they made the right investment decisions, that’s good for all of society,” Hobson said. “So there is an imperative for everyone on this issue and I think it starts with diversity within the halls of our firms.”
Best practice on boards
Hobson has served on the boards of DreamWorks Animation, The Estee Lauder Companies, and Starbucks Corporation, and as chair of Ariel Investments, one of the largest African-American-owned money management firms in the United States.
In her assessment, governance best practice does not boil down to a simple phrase or couple of sentences. However, there are key themes running through all successful boards in the United States.
In Hobson’s experience the boardrooms which were very effectively run had a high level of candour and trust, “so that you are not in any way being managed in terms of what ideas or issues you bring up”.
“You have people on the boards who are highly competent, who are typically very accomplished in their area of expertise, and those areas of expertise are different around the table, so that you don’t have just one perspective that is represented,” she said.
She added another feature of best practice in America was for board members to be deemed independent.
“So conflicts of interest and related party transactions and all things like that are very transparent,” she said.
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Independence of boards
Observing the debate in Australia about independents on boards, she said radical change is always hard for any institution.
“And changing culture takes time,” she said. “It’s very hard to do overnight. My only opinion would be the independent issue sounds on the surface to make sense, and yet, within the culture and how the boards are currently arranged and positioned, it may be a bit too radical out the gate. There may need to be a glide path to the ultimate goal.”
She added a lot of what is successful in board rooms depends on it fitting inside the culture of the organisation.
“Being true to whatever your culture is, is as important as some of these buzz words,” she said.
Hobson will be giving the keynote speech at CMSF later this week. To register click here.