Restoring Trust in Public Companies Through Diversity

After the Cuban revolution, 6-year-old Luis Aguilar and his brother arrived in the United States with little more than the clothes on their backs, part of an exodus of children whose parents feared communist indoctrination. He worked his way through college and law school, becoming a partner in a prestigious law firm and corporate general counsel. Aguilar was sworn in on July 31, 2008, as commissioner of the U.S. Securities and Exchange Commissioner.

His commitment to diversity has been central to his career path. Today, he sponsors the SEC’s Hispanic Employment Committee, the African American Council, and the Caribbean American Heritage Committee. He’s served on the boards of the Mexican American Legal Defense and Educational Fund and the Georgia Hispanic Bar Association. “I think that our country is made stronger by its diversity,” he says. “I believe when you bring a variety of people together to talk about any issue, things are developed in a more effective manner.”

He sat down with DiversityInc CEO Luke Visconti for a candid and thoughtful interview. Here are key excerpts.

Visconti: You’re an immigrant from Cuba and from what I can understand you came over here alone as a little boy. Is that right

Aguilar: I did come over when I was 6 years old … my brother was 9 years old. We didn’t really come alone in the sense that a lot of other children were coming to the United States at the same time. This started roughly around November of 1960. About a year and a half after the revolution in Cuba, word got out that there was going to be an indoctrination camp created and that all the young kids were going to be taken to it. Many parents were fearful of that and started sending their children to the United States for something that they thought would be three months, four months, five months at the most. So, my brother and I did come by ourselves and found the generosity of this country to be outstanding because this country fed us, clothed us and started to give us an education. And they were doing it not only with us but with a lot of similarly situated children.

Visconti: My point in asking you about your immigration from Cuba is that you’ve served on boards like MALDEF and Girls Scouts of Northwest Georgia and you currently sponsor the SEC African-American council. Can you speak about the need for leaders to reach across race and gender and age to build bridges and create alliances

Aguilar: I think that our country is made stronger by its diversity. Any organization is made stronger by its diversity, and I interpret diversity very broadly … not only from different thoughts, different geographical backgrounds, different age, but also in the general sense of diversity like gender and ethnicity. I believe when you bring a variety of people together to talk about any issue, things are developed in a more effective manner.

Visconti: What role do you think your ability to be flexible and seek out differences and build bridges played in your overall career

Aguilar: It starts off with education, education, education. It starts with hard work. Because of my background, I actually began to put myself through school beginning in high school, through college, through law school. As I was going through that process, different people from different backgrounds reached out to help me. I can remember African-American friends who gave me good pieces of advice. When I was in high school, my parents moved to Miami and I stayed in Rome, Ga. Because I was not being supported by a taxpayer, the principal of our school was suggesting that I couldn’t stay in the school. A friend of mine went home, talked to his parents and his parents asked that I be brought over to dinner the following day. Halfway through the dinner, the woman says: “We understand your predicament. Would you come to live with us” You’re talking a Southern Baptist couple. There was a language barrier where my thick Hispanic accent barely made it understandable to this very Southern family. I may have been the only Hispanic they ever met, and during dinner they asked me to come live with them. Different people have reached across to build bridges and have been very instrumental in my life.

The Need for Board Diversity

Visconti: As an SEC commissioner, you’ve been advocating for more public board diversity. How would you respond to someone who said that board diversity is a luxury in these tough economic times

Aguilar: In these tough economic times, more than ever we need the strongest board directors we can possibly have. There are a number of studies that indicate a strong correlation between boards that are diverse and the performance of the whole organization … companies with better performance seem to have more diverse boards.

In 2003, the commission set forth a proposal regarding executive compensation, nothing to do with diversity, and a large majority of the comment letters that were received by the commission had to do with the need to disclose diversity on the boards. It wasn’t even asked. You’re hearing from investors that hold trillions of dollars in our public companies; you have to listen to those investors. It would be an abrogation of our responsibilities not to.

I am convinced that if you’re searching broadly for good candidates, you’re going to find a lot of capable women, you’re going to find a lot of capable Latinos, you’re going to find a lot of capable African Americans, a lot of capable Asians, a lot of capable Native Americans. And that’s not reflecting on the numbers that we’re seeing in the board of directors of public companies.

Diversity in the SEC

Visconti: Can you speak a little bit to your enthusiasm for diversity management at the SEC

Aguilar: I’m very enthusiastic about it. I served not only as a sponsor of the African-American council, but I’m also a sponsor of the Hispanic employment committee and a sponsor of the Hispanic-American heritage council. I have a long history of being active in minority communities. And when I was asked by the three groups to be their sponsor, I was delighted to do so. They’re doing important work.

If you look at the SEC, our diversity is not where it should be. We have, relatively speaking, a small number of African Americans, Hispanics and Asians, and even women. We need to be more representative of the United States of America, and so anything I can do to help increase that diversity, I view as an important thing. But more than that, it’s not just increasing the number; I’m just convinced that there is a lot of high-quality talent that exists, and we have to go out and find it. The fact that we are not [representative] of the United States of America tells me we’re leaving a lot of talent out of the door that ought to be brought in.

Visconti: Can you tell me a little about the new rules that the SEC is implementing that will be asking for some more facts and figures on representation in publicly traded companies

Aguilar: Section 342 of the Dodd-Frank Act is going to require the SEC as well as a number of other agencies to create an office for “minority” and women inclusion. That office will have three mandates. One is the internal recruiting and the internal diversity, both in terms of management and general hires. [Second] is we’ll look at the diversity of the contractors and people that provide service to the agency. And third, we’ll ask the head of this office to do an assessment on the diversity policies and practices of the entities that we regulate … However, the legislation was scant on explanation as to many of the provisions, so over the next six months we’ll be working quite hard to determine exactly what the mandate is and try to do it to the best of our ability.

Visconti: It’s one thing to go to law school and have positions of increasing responsibility, but how do you make the leap from board positions to being in the SEC How did you position yourself to have the career that you’re having

Aguilar: I’ve worked extremely hard, saying yes to almost any opportunity that came in front of me, not being afraid to fail and trying to fail as little as I possibly could. For me at least, because of that, doors opened and opportunities arose and I stuck my foot in the door to keep it from closing and, if I had to, kicked the door down.

I’ll give you one example. I had already become partner at some large firm and I had gone in-house as a very large global asset manager, but my career up to then has been pretty much as a lawyer. As part of my responsibility as general counsel, however, I was overseeing a lot of our salesmen taking a number of tests required for securities salesmen, and I was getting grief that I didn’t appreciate how difficult it was for them to have to take these tests. I went out and took all these tests myself so that the next time somebody complained about it, I could say, “I’ve taken these tests. If I can do it, so can you. So, go take your tests.”

A couple of years later, the CEO of the company decided to replace the current president at one of the broker dealers. He remembered that I had all the licenses you possibly needed and came and asked me if I could come and take over for a short period, which lasted over a year. People who had been looking at me as only a lawyer started to look at me differently, as someone who could actually do something in the business world. Subsequently, they did hire a new replacement, and a few months after that, the same CEO fired the person whom they had asked to run Latin America. By then, he thought of me as a business person, and he asked me to take over the Latin America division again for a time.

At the time I took over, there was a lot of analysis about what we should do, where we should go and what kind of activities we should be involved in, but there were no particular offices. Three years later, we had an office in Puerto Rico and an office in Buenos Aires, had helped privatize the Peruvian social-security system, and owned one of the two fund administrators in the country.

For personal reasons, I went back to being general counsel at this particular company. That was an opportunity for which I said yes that redirected me from just being perceived as a lawyer to being received more as a businessperson, which, ultimately, made me a more effective lawyer. When I was sitting down with heads of our business unit and would give them advice, they couldn’t say, “You don’t know what it’s like on the business side.” They knew that I knew and, therefore, were more willing to take my advice.

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