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Complying with the Diversity and Inclusion Standards

Complying with the Diversity & Inclusion Standards of Section 342 of Dodd-Frank Through Sponsorship Programs: Key Considerations for Development and Implementation

By Brian Pedrow, Dee Spagnuolo and Erin Clarke

In recent months, there has been significant discussion about the future of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (Dodd-Frank), which sets forth Diversity and Inclusion (D&I) Objectives in Section 342 that are applicable to the financial services and mortgage banking industries. Regardless of Dodd-Frank’s fate, it is clear that corporate America has embraced, and will continue to embrace, the importance of promoting D&I within their organizations. During this time of growth for corporate D&I strategies, employee sponsorship programs have emerged as a popular method for developing and promoting diverse talent.

Brief Background of the D&I Standards Under Section 342

In 2015, six federal agencies, including the Consumer Financial Protection Bureau (CFPB),[1] jointly issued D&I Standards(Standards) to implement Section 342 to address the under-representation of women and minorities in the financial services industries and within public companies. Based on recent data from the U.S. Equal Employment Opportunity Commission (EEOC) focused on the finance and insurance industries, white males comprise 31 percent of total workforce, but 64 percent of executive and senior level positions. In addition, women in these industries are 59 percent of the total workforce, but only 29 percent of executive and senior level positions. This disproportionate representation of women and minorities drove the passage of Section 342 and underlies the motivation for many companies’ decisions to implement formal sponsorship programs.

The Standards themselves outline four pillars to promoting D&I: (1) organizational commitment to D&I; (2) workforce and employment practices; (3) procurement and business practices; and (4) practices to promote the transparency of D&I programs. However, the most significant activity around these pillars has focused on workforce and employment practices. As with all four pillars, the workforce and employment section of the Standards outlines several assessment factors to promote D&I within a regulated organization. Sponsorship programs are one such practice that, in addition to bringing value to an organization, serve to satisfy this regulatory assessment factor.

Overview of Sponsorship Programs

As noted above, more and more companies are enacting sponsorship programs to comply with Dodd-Frank. Such programs can help provide significant advancement opportunities for women and minority employees. By increasing these opportunities for women and minorities who are generally underrepresented at management and executive levels, the companies are better able to recruit and retain top diverse talent, thereby increasing productivity and generating more innovative solutions to problems.

The overall goal of corporate sponsorship programs generally is to provide advancement opportunities for diverse employees to executive or managerial positions in the organization. The programs are able to achieve such results by granting talented individuals opportunities to develop their skill sets and increase their profile in the company. Through a sponsorship program, these opportunities are generated by “sponsors,” also known as “champions” or “coaches.” A sponsor is typically a senior (or executive-level) employee at the company who advocates on behalf of a more junior individual (a “protege”). Without the benefit of the formal sponsorship program, the protege would often be unable to find a sponsor. The sponsor may advocate for the junior employee in a variety of situations, including campaigning for a promotion or raise for the protege, or providing an opportunity for the protege to assist on higher profile projects within a company. Sponsors thus offer concrete guidance and support for career advancement.

Importantly, sponsors may also indirectly benefit from their role in the program. Through a sponsorship program, a sponsor is better able to build relationships with more junior employees, which may, in turn, create a more positive atmosphere within the workforce. Furthermore, by developing promising talent, an executive can increase junior executives and managers’ loyalty to the company.

To obtain the best results, a corporate sponsorship program should be supported by the highest levels of the company. Indeed, CEOs of large companies often serve as sponsors in sponsorship programs. By enlisting senior executives as sponsors, it enables the sponsorship program to be a part of the overall business strategy of the organization. In addition, many corporate sponsorship programs are created and monitored by corporate diversity and inclusion council.

A program’s success can be measured by the number of participants who are promoted into higher positions within the organization, although each company may choose to measure success differently. Such programs have resulted in concrete results for women and minority employees. For example, Accenture determined that approximately 80 percent of women in its global leadership program were promoted or received increased responsibilities.

How is a Sponsorship Program Different from a Mentorship Program?

Sponsorship programs are often confused with mentorship programs, but the two programs have important differences. A sponsorship program provides a higher level of support to a protégé in comparison to the support provided to a mentee. A mentor ordinarily provides emotional support to a more junior employee and may provide career advice. By contrast, a sponsor is a senior employee who is charged with advancing the career of the protege. Thus, while a mentor may provide advice and counsel to an employee on his or her career, a sponsor will actually go to bat for his or protege to get the raise, the promotion, or the assignment on the highly visible company project.

Who Should Participate in Sponsorship Programs?

The objectives of and the participants in sponsorship programs vary from company to company. Some corporations have chosen to enact sponsorship programs that are available to all employees and do not focus on diverse groups or individuals. These programs, nevertheless, still serve to increase diversity by ensuring formal sponsors for all participants, including women and minorities. Other companies have taken the approach that certain portions of their employee population, such as first-generation college graduates, racial or ethnic minorities, and women, often face more significant barriers to developing sponsorship relationships organically, in part, due to the historical low representation of women and minorities, particularly in the financial services and mortgage banking industries. Those companies therefore develop sponsorship programs focused exclusively on diverse employees. Note, however, that programs that focus exclusively on the advancement of diverse groups—i.e., women or minorities—may be vulnerable to a challenge on discrimination grounds. Thus, any such programs must be considered carefully during the development and implementation process.

Furthermore, when creating a sponsorship program, companies must determine what seniority level is appropriate for engaging proteges. If a company seeks to increase representation of women and minorities in its executive leadership team, it might consider targeting proteges at the director or vice president levels. In contrast, if a company seeks to develop a longer-term pipeline of diverse talent, its sponsorship program might focus on entry-level or manager-level employees.

Sponsorship Program Components

Although the components of a sponsorship program may vary, the following elements are common:

  • Ensure that all participants in the program understand the program’s goals
  • Early in the program, engage in relationship building exercises between the sponsor and the protege
  • Ensure that the sponsor understands the protege’s interests and needs to help the sponsor develop a firm belief in the success and capabilities of the protégé
  • Develop a personal career plan for the protege with a time table that meets your organization’s needs
  • Require the sponsor and the protege to meet regularly to discuss progress under the plan
  • Identify opportunities for the protege to increase his or her profile in the company, such as committee participation, speaking opportunities, etc.
  • Involve the protege in high profile or key projects for the company
  • Assign proteges or groups to work on ongoing real-world business projects and challenges
  • Hold periodic meetings of all protege groups for action learning
  • Recommend the protege for a stretch position or assignment and guide the development of the skills needed for the project
  • Utilize surveys to gather feedback about the program, including with respect to whether the protege and the sponsor are fulfilling their commitments
  • Monitor turnover, retention, and promotions of proteges to determine whether your program is having a positive effect as compared to your baseline employee population

While there is no “one-size-fits-all” approach to developing and implementing a successful sponsorship program, most organizations must address the foregoing issues at some point during their experiences with such programs. Like all new ventures, identifying the right program for your organization will take time and some degree of trial and error. Fortunately, the D&I Standards under Section 342 of Dodd-Frank recognize this reality, and seek to promote flexibility for financial services and mortgage banking organizations at they identify their strengths and opportunities in the D&I space.


Brian Pedrow
Dee Spagnuolo
Erin Clarke

Brian D. Pedrow leads Ballard Spahr’s Labor and Employment Group and is a member of the firm’s Diversity Council.

Dee Spagnuolo is a White-Collar Defense/Internal Investigations Partner with a focus on internal investigations, and compliance and regulatory matters.

Erin Clarke is a member of Ballard Spahr’s Labor and Employment Group.

 They can be reached at Ppedrow@BballardSspahr.com, SspagnuoloDd@BballardSspahr.com, and ClarkeE@BallardSpahr.com.

[1] The other five federal agencies joining the CFPB were: the Securities and Exchange Commission; the Board of Governors of the Federal Reserve System; the Federal Deposit Insurance Corporation; the National Credit Union Administration; and the Officer of the Comptroller of the Currency.


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