By Donald O. Johnson, J.D., LL.M., CPCU*
The CPCU Society created a Diversity Task Force in 2001. It was charged with “recommend[ing] ways to increase minority and gender participation at the local and national levels of the CPCU Society by creating a positive and environment for participation.” The Task Force’s recommendations had to consistent with the Society’s strategic plan goals of increasing visibility of the CPCU designation and providing educational programs.
In 2003, the CPCU Society revised its mission statement to include diversity and created the Diversity Plan Development Task Force. In 2005, the Board of Governors approved the formation of the Society’s first new standing committee, the Diversity Committee.
At this juncture, the Diversity Committee believes it is appropriate to reiterate the importance of diversity to the Society and its members. This paper discusses one aspect of the importance of diversity, addressing the question of whether a business case can be made for the CPCU Society’s pursuit of greater diversity.
An initial step in evaluating whether a business case for diversity can be made is defining the meaning of diversity. Professor Cedric Herring provided a useful definition of the term diversity in his August 2006 paper titled Does Diversity Pay?: Racial Composition of Firms and the Business Case for Diversity (referred to hereinafter as "Does Diversity Pay?)1 Defining diversity, Professor Herring wrote:
[A]t its base the term merely refers to variety. Diversity is an all-inclusive term that extends beyond race and gender and incorporates people in many different classifications. It includes age, . . . sexual preferences, . . . and a myriad of other personal, demographic, and organizational characteristics. Generally speaking, the term workforce diversity refers to policies and practices that seek to include people within a workforce who are considered to be, in some way, different from those in the predominant group.2
Diversity proponents often assert that increased diversity leads to improved organizational performance because it opens an organization to talented people from new groups who bring different knowledge, talents, and community contacts to an organization and who cause the organization to consider its assumptions more carefully before making decisions.
Critics of the “business case for diversity” theory are not convinced that greater diversity leads to these purported benefits. Moreover, they sometimes are concerned it may lead to conflict, less organizational cohesiveness, and special privileges for some groups.
This paper demonstrates that the long-term value of, and respect for, the CPCU professional designation and the Society can be maintained and will be enhanced by continuing to promote diversity within the Society and support it outside the Society.3
II. Three Scholarly Studies Support the Business Case Theory
With regard to hard evidence, a consensus appears to exist among scholars that few studies have used quantitative data and objective performance measures from real organizations to evaluate whether diversity results in improved organizational performance or financial results.4 This makes it more difficult to answer the business case question.
Study Harvard Business School
One study that used real data and analyzed an organization’s actual operations was conducted by two
B. The Herring Study
In his aforementioned paper, Does Diversity Pay?, Professor Herring reported on a more detailed analysis that used actual data from the 1996-1997 National Organizations Survey. The survey was comprised of data from 1,001 organizations from a random sample of 15 million organizations in Dun & Bradstreet’s Information Services database.
Professor Herring’s paper is based on data from 251 for-profit businesses that provided information about the racial makeup of their employees, their sales revenue, their number of customers, their market share and their profitability. The study involved thorough statistical analyses of these and other relevant factors, all of which are explained in detail in his paper, and considered whether more racial workforce diversity results in businesses’ having: (1) greater sales revenue; (2) more customers; (3) larger market share; and/or (4) higher profitability in comparison to its competitors.
Professor Herring found that the results of his study were consistent with the proposition that more racial workforce diversity results in a business organization’s increasing all of these numbers. He, consequently, concluded that “[t]here is now tangible evidence that there is a positive relationship between the racial diversity of firms and their business functioning.”7
Study Wharton Business School
In 2006, a team of researchers – Diversity Analysis Research Team (DART) – concluded a five-year study at an ivy league university concerning whether greater diversity may lead to conflict.8 The researchers, which included academics and an external professionals, collected and used hard data on diversity management and its effect on performance.
DART found that work groups whose members have different levels of education and work experience perform well if group members engage in constructive debates because such communications improve the groups’ performance. The researchers also found that work teams whose members share similar vales and goals are less likely to have conflicts concerning the tasks to be undertaken, the manner in which tasks are to be performed, and team members relationships with one another. DART, however, also found that work groups that were chosen primarily for demographic diversity were more likely to have relationship conflicts.
Based on these and other findings, DART concluded that, among other things, demographic diversity alone is not sufficient to ensure innovation and improved group performance. The researchers concluded that, to increase the likelihood of increased performance, group members also should have diverse levels of education and diverse work experiences and similar values and goals. DART advised that, to achieve the benefits of diversity, an organization’s leaders should develop team goals and values, identify ways to reach these goals, maintain open communication channels to facilitate constructive debates by team members, and select group members who will work well in this type of environment.
D. A Business Case Can Be Made for Diversity
DART’s conclusions and those drawn by the two university studies are not determinative and may be disputed by others who are skeptical about the claimed business benefits of increased diversity. However, despite the arguments that skeptics may make, these three studies support the proposition that a “business case for diversity” can be made. As discussed below, other evidence also supports the conclusion that diversity is good for business.
III. Many Major Corporations Have Expressed Their Support of Supplier Diversity
In addition to seeking to increase the diversity within their workforces, many Fortune 500 companies are encouraging their suppliers to increase the diversity of their workforces. Two of the clearest examples of these efforts are the 1999 pledge titled Diversity in the Workplace: A Statement of Principle (the “Statement of Principle”) and the more recent 2004 pledge titled A Call to Action - Diversity in the Legal Profession ( “A Call to Action”).
In 1999, more than 400 Chief Legal Officers of Fortune 500 companies signed the Statement of Principle, which Charles R. Morgan, then Chief Legal Officer for BellSouth Corporation, developed as a reaction to the lack of diversity at law firms that provided legal services to their companies. Although it is not common knowledge among the general public, such law firms employed a very small percentage of minority attorneys (by any definition of the term minority) and invited a far smaller percentage of them to become partners in the firms.9
These Chief Legal Officers notified the law firms that represented them that their companies “recognize that diversity makes for a broader, richer environment which produces more creative thinking and solutions. Thus, we believe that promoting diversity is essential to the success of our respective businesses. . . .”10 They encouraged the law firms to increase the diversity in their workplaces and advised them that, when selecting outside counsel, the companies would “give significant weight to a firm's commitment and progress in this area.”11
The Statement of Principle was an historic first step by corporations to attempt to affect the lack of diversity at the law firms they retained. Over the next five years, metrics revealed that the demographics at most of these firms had not changed significantly for most minorities -- white females being the underrepresented group that experienced the most progress -- at either the associate-attorney (i.e., employee) or partner levels.
As result of this lack of progress, Rick Palmore, the Chief Legal Counsel of Sara Lee, Inc. and a board member of the Association of Corporate Counsel, authored A Call to Action, which reaffirmed the Chief Legal Officers’ commitment to diversity in the legal profession and warned that the signatory companies “intend to end or limit our relationships with firms whose performance consistently evidences a lack of meaningful interest in being diverse.”12
Both the Statement of Principle and A Call to Action reflect the belief of numerous leading corporations that diversity is important and that it has an impact on business performance. Among the signatories to A Call to Action were the Chief Legal Officers of New York Life Insurance Company and Aon Corporation.
IV. Some Major Insurance Industry Companies Support Greater Diversity in the Industry
Like their counterparts in other industries, some major companies in the insurance industry have declared their commitment to diversifying their workforces and are taking actions in that direction. These companies include the Chubb Group of Insurance Companies; Aon Corporation; and American International Group, Inc. (AIG). They are promoting diversity because, among other things, they believe that a business case for diversity can be made.
A. Chubb Believes a Business Case for Diversity Can Be Made
Chubb began its formal diversity initiatives in 1996, with the establishment of a Chief Diversity Officer position and, as a result, it has substantial experience in this area. Chubb has focused on diversity because it believes that having a diverse workforce is good for business.
Chubb defines diversity very broadly to mean people who have different perspectives, including people of different races, genders, ages, physical abilities, and sexual orientations, and people from different geographic areas and different departments within the company.
Chubb believes that the competitiveness in the insurance industry requires Chubb to recruit and retain the most talented workers available. To accomplish this goal, Chubb believes that it must recruit from the widest available talent pools. It believes that diversity leads to innovative thinking and the development of innovative products that would not occur if Chubb restricted its employee recruitment to a homogenous group.
These beliefs are reflected on Chubb’s website where the company observes:
Those who perceive diversity as exclusively a moral imperative or societal goal are missing the larger point. Workforce diversity needs to be viewed as a competitive advantage and a business opportunity. That's why Chubb makes diversity a business priority and strives to achieve a fully inclusive diverse workforce.13
Chubb attributes much of the success of its diversity initiatives to strong support from senior management and its Board of Directors. The Board members include Karen Hastie Williams, the daughter of the late Judge William Henry Hastie, the former Dean of Howard University Law School, the first African-American federal district judge, and the first African-American federal appellate court judge in the
The strong support of senior management and its Board of Directors is demonstrated by Chubb’s positioning of a Chief Diversity Officer, Kathy Marvel, who, as a senior vice president, is a direct report to the CEO. The Board’s active involvement in Chubb’s diversity efforts includes receiving an annual report from its Chief Diversity Officer and participating in events directed at Chubb’s diverse employees.
Chubb promotes diversity through various strategies. One strategy focuses on developing the professional skills and experiences of the members of the diverse groups that it employs so that they will be qualified to fill high-level positions when openings exist. Chubb uses employee resource groups to identify potential barriers to diverse employees’ advancement within the company and to develop strategies for overcoming those barriers. These groups hold leadership conferences focused on providing skill-building sessions and networking opportunities.
In conjunction with this talent management strategy, Chubb’s Chief Diversity Officer also monitors company metrics to identify progress, trends and gaps within the major business units. This allows Chubb to develop specific strategies to increase the diversity in its less diverse departments, often by simply providing diverse slates of qualified candidates for key positions.
Another Chubb diversity strategy focuses on marketing to diverse consumers. In one instance, Chubb initiated an effort to determine how its west coast agents could appeal best to Asian-Americans consumers. In another case, a marketing program was created to target gay or lesbian consumers. Yet another initiative marketed D&O insurance to the Women Presidents’ Organization. Chubb’s employee resource groups were engaged to provide input and insights. The success of such initiatives supports Chubb’s belief in the value of its diversity efforts.
The quality of Chubb’s commitment in this area has not gone unrecognized. Catalyst, Inc. gave Chubb an award in 2006 for its recruitment, development, and advancement of women.14 Diversity, Inc. included Chubb on its list of the top 50 companies in the management and planning of diversity efforts in 2000, 2001, 2002, 2003, and 2005. Also, since 2005 Chubb has scored 100% on the Human Right’s Campaign’s Corporate Equality Index for providing a safe and equitable workplace for gay, lesbian, bisexual, and transgender professionals.
B. AON Believes That a Diverse Workforce Is Essential to Its Global Success
Aon Corporation began to focus on a formal strategy for increasing diversity in 2000. Aon’s efforts evolved over the years, and, in 2004, its CEO, Gregory Case, named Corbette Doyle the company’s Global Chief Diversity Officer, a position in which she reports directly to the CEO and Aon’s Board of Directors. Aon’s CEO and its board actively support the company’s diversity efforts, which is something that Aon believes is critical to the success of its diversity strategy. Of Aon’s fourteen board members, three are people of color -- one Asian, one Latino, and one African-American.
Aon defines diversity broadly. However, because Aon is a global company, its operable definition of diversity may vary somewhat from country to country with the variation being dependent on the laws of the country at issue. In the
Aon believes that a diverse workforce at all levels of the company and throughout its global organization is crucial to the success of its business. The company foresees an impeding shortage of workers worldwide over the next 20 years. The company also recognizes that, in the
Aon has taken numerous steps to accomplish its diversity goals. A central step was the creation of eight business networking groups: African-American; Asian & Pacific Islander; Latino; Age Related; Working Parents; Gay, Lesbian, Bi-Sexual & Transgendered; People with Disabilities; and Women. Each group’s goal is to support Aon’s four-part diversity strategy, which Aon describes on its website as: (1) talent supply and development; (2) cultural competence; (3) strengthening the business; and (4) connecting with the community.15
In connection with these business networking groups, Aon created a Global Diversity Advisory Group, a Global Women’s Development Group, and, in the
Aon has a product supplier diversity program. Aon believes that one successful aspect of that program is its management of its professional services vendors. Aon’s legal department, for example, tracks how much business the company does with minority- and women-owned law firms and how many hours minority and female attorneys at majority-owned firms are working on Aon matters. Aon uses a similar strategy with its accounting services providers.
Since 2004, Aon has received a number of awards in recognition of its diversity efforts. They include awards from the Minority Corporate Counsel Association, the National Society of Hispanic MBAs, the International Association of Black Actuaries, and the National Association of African Americans in Human Resources.
C. AIG Believes the Benefits of a Diverse Workforce Far Outweigh Its Costs
AIG began its formal diversity program in January 2007 at which time it named Terri Austin as its first Chief Diversity Officer - a position in which she reports to one of AIG’s highest-level executives, AIG’s Executive Vice President and Chief Financial Officer. AIG’s CEO, Martin J. Sullivan, participated in planning the company’s diversity program and chose to build the program into the structure of the company. AIG created an executive steering committee composed of senior executives to develop strategic initiatives related to diversity. Each member supports the program within his or her business group.
Like Chubb, AIG defines diversity very broadly. In the
On its website, AIG shares its definition of diversity:
At AIG, diversity means the highest standards of inclusiveness and a culture that embraces differences. Diversity is about respecting and valuing these differences. AIG is committed to creating an environment where all employees can realize their fullest potential and where AIG will continue to flourish with the opportunity that diversity offers.16
The goals of AIG’s diversity program are to increase diversity in five areas: its employees, products, services, clients and vendors. AIG has researched diversity best practices and is implementing them to achieve these goals.
AIG believes that its diversity initiatives will benefit the company by broadening its market, increasing revenues, aligning its formal diversity practices with those of its clients, and demonstrating to its employees and others that AIG values and supports diversity. AIG believes that these benefits far outweigh the costs of the initiatives. AIG believes that organizations that have not begun to think about diversity are missing an opportunity.
AIG’s support has helped the Society acknowledge its commitment to diversity. AIG has done so by sponsoring the Society’s Diversity Reception at the Society’s Annual Meeting in 2006 and 2007. AIG plans to continue its support of the Society’s diversity efforts in the future.
In recognition of AIG’s diversity efforts, in 2007, New York Mayor Bloomberg gave AIG the Title I Americans with Disabilities Act Employment Award, and Black Professionals magazine named AIG one of the Top 100 Companies for Diversity in Corporate America. In 2006, AIG received the Commitment to Excellence Award from Abilities Inc. and the National Business and Disability Council for AIG’s commitment to employing disabled individuals.
AIG’s, Chubb’s and Aon’s diversity initiatives demonstrate that some companies in the insurance industry are responding to the same demographic and attitudinal changes in the United States that have affected other industries. The CPCU Society will be affected similarly because the majority of CPCUs work for, or provide services to, companies in the insurance industry.
V. The CPCU Designation and the CPCU Society Would Be Even More Respected and Valued If the Society Increasingly Promotes Diversity Inside and Outside of the Society
In an environment in which many companies in and outside of the insurance industry recognize the value of diversity, the CPCU Society must examine itself to determine what it must do to continue its success. The CPCU Shared Strategic Vision Task Force, which was composed of members of the CPCU Society and the American Institute for CPCU (AICPCU), studied the CPCU Society’s current characteristics and issued a draft report in June 2007. The draft report indicates that: (1) the Society has an aging population, with the vast majority of its member being in their 40s and 50s; (2) the number of new designees is decreasing, as is the number of CPCU examinations taken; and (3) more than 30 percent of CPCUs have let their membership in the Society lapse.
The Task Force’s draft report concludes that, among other things, the CPCU Society needs to increase its membership and attract a younger and more diverse group of insurance professionals. The report’s Draft Strategy #1 states that the CPCU Society and the AICPCU should work to “increase the number of industry professionals that take the first CPCU exam by 10 percent each year . . . .” Draft Strategy #3 adds that the CPCU Society and the AICPCU should “assist the industry to attract a stream of diverse, new talent through CPCU-focused programs to improve the image of the industry as an employer of choice.”
Although the draft report does not address the issue, the latest available CPCU Society statistics indicate that 96 percent of CPCUs are white, 2 percent are African-American, 1 percent are Asian/Pacific Islander, and 1 percent belong to other racial groups.17 In comparison, the latest available EEOC reports state that racial minorities make up 16 percent of insurance professionals (i.e., those with no supervisory role) and 11 percent of officials and managers. Although the insurance industries’ percentage of minority employees is low, the industry is significantly more diverse than the CPCU Society is.
To achieve the Task Force’s goals, the CPCU Society must increase the number of white insurance professionals who become CPCUs and must attract a substantially larger number of insurance professionals from diverse demographic groups than now is the case. Reaching out to a more diverse group of insurance professionals will benefit the Society by: (1) making the Society more attractive to people in those groups and to insurance industry organizations that promote diversity; (2) increasing its membership; (3) expanding the talent pool from which CPCUs are developed; and (4) opening up the Society to new ideas and opportunities.
Thus, it clearly is in the Society’s best interests to increasingly promote diversity within the Society and support it outside the Society. That will help the Society achieve its goals of maintaining the CPCU designation as the most recognized, valued, and respected professional designation in the property and casualty insurance industry. To do otherwise would put the Society at odds with the direction in which the consumers of its members’ services – the insurance industry – and its potential future members – insurance professionals, students, and other members of the public – are moving, as well as with the sentiments of most current CPCUs who are members of diverse groups and many who are not.
VI. The Society’s Diversity Committee Has Identified Specific Actions Items
Given that the Diversity Committee understands that a business case can be made for increasing the diversity within the Society, the Committee recommended that the Society add a fifth strategy to the Society’s Strategic Plan:
Promote diversity by further developing the Society’s understanding of underrepresented groups by increasing the number of CPCU Society members from those groups, thus facilitating the Society’s ability to draw upon and benefit from a wider range of ideas, opportunities and concepts.
The Diversity Committee believes that implementing this strategy will create a more inclusive Society and will engage current members and attract new designees. To begin implementing it, the Committee developed an initial action plan designed to, among other things, inform Society members and the insurance industry about the Society’s diversity efforts, provide guidance to local chapters and leaders about how they can promote diversity, and build alliances with insurance industry-related organizations that share the Society’s belief in the benefits of diversity.
With respect to spreading word about the Society’s diversity efforts, the Committee will continue to host and obtain a sponsor for the Diversity Reception at the Society’s Annual Meeting and will continue to maintain the Committee webpage, posting diversity-related content. The Committee also will work with the Society’s national leadership to schedule periodic meetings between the Society’s leaders and the Chief Diversity Officers and other prominent executives of companies in the insurance industry to familiarize them about the Society’s diversity efforts and identify areas in which the Society and they can work together to promote diversity within their ranks.
Regarding providing guidance about how to promote diversity, the Diversity Committee has developed a preliminary “Diversity Toolbox,” which suggests actions that local chapters and leaders can take to encourage members of diverse groups to participate more actively in chapter affairs, to attract additional members from these groups, and identify future chapter and national leaders. For example, the toolbox will include suggested outlines of diversity programming that local chapters can present to their members, lists of potential speakers for chapter functions addressing diversity-related issues, and suggested outlines of insurance-related presentations that chapter members can make to diverse student groups at local colleges and universities and to diverse trade associations.
Finally, with reference to alliance building, the Committee, among other things, will post the website addresses of relevant insurance industry-related organizations, such as the National African-American Insurance Association, on its webpage and encourage local chapters to contact such organizations in their area to spread the word about the Society’s interest in diversity and in promoting excellence in all aspects of the insurance profession. An ultimate goal of the Diversity Committee’s alliance with numerous diverse insurance organizations is to host a Diversity Conference under the auspices of the CPCU Society.
The Diversity Committee believes that these initial actions, although modest, will have a significant effect on the Society’s image as an inclusive organization of insurance professionals who have exceptional knowledgeable about the insurance industry and unquestionable integrity. The Committee is dedicated to refining its recommendations over time and building upon them in order to achieve its mission, which, at its root, is to strengthen the Society and the CPCU designation.
* Donald O. Johnson, J.D., LL.M., CPCU is a member of the CPCU Society's Diversity Committee and a director of the Society's Washington D.C. Chapter. He also is Of Counsel at McKenna Long & Aldridge LLP where he represents members of the insurance industry in property and liability insurance coverage and bad faith disputes. The CPCU Society and its Diversity Committee were responsible for the development of this paper. Board of Governors member, Bruce Hicks, and the Diversity Committee Chair, Stanley Lipschultz, deserve special mention. The views and opinions expressed in this paper are solely those of the author, the CPCU Society, and its Diversity COmmittee. They do not represent the views of McKenna Long & Aldridge LLP or its clients. Mr. JOhnson can be contacted at 202-496-7500 or email@example.com or firstname.lastname@example.org.
1 Cedric Herring, Does Diversity Pay?: Racial Composition of Firms and the Business Case for Diversity, 4 (Uni. of Illinois at Chicago and the Institute of Gov't and Public Affairs at the Uni. of Illinois August 2006), available at http://www.diversityinc.org/ssi/pdf/DoesDiversityPay0806.pdf.
3 As all CPCU Society members understand, ethical behavior is a core value of the Society and is one factor that sets the Society apart from many other business-related organizations. This paper, however, deliberately does not address ethical issues because its purpose is to focus solely on business considerations.
4 Does Diversity Pay? at 7; Thomas A. Kochan, Kateria Bezrukova, Robin Ely, Susan Jackson, Aparna Joshi, Karen Jehn, Jonathan Leonard, David Levine, & David Thomas, The Effects of Diversity on Business Performance; Report of the Diversity Research Network, Human Resource Management Journal, 2, 6 (Spring 2003), available at http://mitsloan.mit.edu/iwer/pdf/diversity_report.pdf.
5 Lagace, Racial Diversity Pays Off, Harvard Business School (June 21, 2004) (describing study conducted by Professors Robin Ely and David Thomas), available at http://hbswk.hbs.edu/cgi-bin/print.
7 Herring, Does Diversity Pay? at 25 (emphasis added).
8 Pamela Tudor, Katerina Bezrukova & Robert Holland, Sr., Diversity Analysis Research Team, Value Creation Through Diversity, The Wharton School, University of Pennsylvania (2007), available from Pamela Tudor at Pamela@theperformancebuilders.com or from Katerina Bezrukova at Bezrukova@wharton.upenn.edu.
9 "In 2006, minorities account[ed] for 5.01% of partners in the nation's major law firms, and women account[ed] for 17.90% of the partners in these firms. In 2005, the partnership figures were 4.63% and 17.29% respectively. The total change since 1993...has been only marginal. At that time, minorities accounted for 2.55% of partners and women accounted for 12.27% of partners. Looking at all lawyers represented, minorities [in 2006 made] up just over 10% of lawyers at these firms, women [made] up just under one-third of lawyers at these same firms..." NALP, Partnership at Law Firms Elusive for Minority Women -- Overall, Women and Minorities Continue to Make Small Gains (Nov. 6 2006), available at http://www.nalp.org.
10 Association of Corporate Counsel (formerly American Corporate Counsel Association), Diversity in the Workplace: A Statement of Principle (1999), available at http://www.acc.com/gcadvocate/diversitystmt.html.
12 Minority Coporate Counsel Association, A Call to Action - Diversity in th e Legal Profession (2004), available at http://www.mcca.com/index.cfm?fuseaction=page.viewpage&pageid=803; see also Minority Corporate Counsel Association, A Call to Action (2007), available at http:www.clocalltoaction.com (provides a current list of signatories to A Call to Action).
13 Chubb's Business case section on its website discusses many of the issues addressed in this paper.
14 Catalyst, Inc. is a leading nonprofit corporate membership research and advisory organization working globally with businesses and the professions to build inclusive environments and expand opportunities for women and business. Catalyst, About Catalyst (2008), available at http://www.catalystwomen.org.
15Aon, About Aon U.S., Diversity & Inclusion, Commitment & Strategy, Strategy (2008) (each part of Aon's four-part diversity strategy is described in detail on its website), available at http://www.aon.com.
16 American International Group, Inc., Corporate Information, Diversity (2008), available at http://www.aig.com.
17 Women constitute 34 percent of CPCUs.