One big question for the year ahead is whether businesses actually follow through on the promises around racial equity they made in the wake of George Floyd’s killing. To get a viewpoint from the finance industry, I spoke with Lata Reddy, senior vice president of Inclusive Solutions at Prudential Financial. Reddy is a former civil rights attorney whose brief at Prudential includes diversity, equity, and inclusion (DEI), philanthropy, and impact investing. Here is a transcript of our conversation, edited for clarity:
What are the takeaways for DEI from 2020?
All of the events of 2020 confirmed that there is a very broad swath of our population that did not recognize the level of inequity that exists in society. In other words, a lot of people woke up to the fact that there are people who lead very different lives. Related to that is the awareness that the reasons for that are structural. That it’s not about individual responsibility and the whole “bootstraps” kind of mentality, but that it’s people getting a crash course in US history around the persistence of these barriers that were erected a long time ago. If not literally sanctioned by law, there are vestiges of these things that exist in too many places that continue to create those structural barriers to prevent people from succeeding. That was a big one of the big things to come out of 2020, for sure.
What will the lasting impact of that realization be?
It’s a tale of two cities. There’s the reactive performative nature of some of it. And then there’s the other part, which is, ‘I thought we were doing so much, but it’s clearly not enough and what more do we need to do?’ There’s certainly a sense of urgency as exhibited by the nature and the scale of some of these commitments. And maybe a recognition that the response should be commensurate with the harm, in the sense of legacy companies and others who have been around long enough that we’ve ridden the waves of history, the good, the bad, and the ugly. Recognizing that, you need to to understand your own history, own your history, and respond accordingly.
To your point, finance is a sector that has historically excluded different groups, especially Black Americans. Has Prudential focused on any specific aspects of that?
We have. Access to capital is a big part of our focus. We have our own balance sheet that we think about in regard to that, and then certainly as an asset manager we think about what our core capabilities are and how we can address these issues in a systemic way, or that gets to the systemic issues but that makes sense for us and where we can have the biggest impact or fill a gap. We think about, and have thought about for many years, entrepreneurs of color, small businesses, certainly in our own backyard of Newark, emerging managers, investing in first-time fund managers who don’t have the track record, but need to get the track record to get additional capital. How do you think about those leverage points in that cycle to provide the most benefit?
What are the specific measures that you think have been the most exciting or innovative in 2020?
Maybe the most exciting or important thing is the nature of the conversations that are being had within the institutions themselves, and then this reckoning that we’re all going through. Because there’s no silver bullet. There’s no one thing that anybody can do that’s going to really move the needle in a way that other things might not. So it’s a ‘both and’ strategy. You’ve got to do all these things, but I think the biggest game changer or potential game changer is the fact that we are talking about race within the workplace. That’s something that never used to happen. People were very uncomfortable. It was taboo.
People didn’t know how to do it. People don’t necessarily know how to do it now, and they’re not really comfortable, but they’re doing it. That to me is important and a big win. The next step of that is to ‘normalize’ that, so that it doesn’t become episodic, with this huge spike in conversation and then it goes away. It needs to be a sustained listening, learning, continuing to iterate. All of us are on our own journey. We have different entry points. But being responsible for continuing that on.
It’s exciting to see the investments in Black banks. That’s something Prudential had been doing for the last decade, or longer than that. And it’s great that people understand the value of those banks and the value they bring to communities, the historic nature, of why they were created in the first place. Understanding that it’s important to invest in them. Even though there’s a major branch of a major bank on every corner now in most communities, these other institutions played a vital role locally. There are things like that that I could point to.
When you mention talking about race within the workplace—are there areas where that conversation is especially important?
You hear people are tired about talking about it, or it’s exhausting emotionally. But then you think about the people who are living it. They don’t have the opportunity, Black colleagues don’t have the opportunity to shut off the conversation because it’s their life. What 2020 did was crack open the recognition that this is real. If it’s happening to that extent in the outside world, it must be happening within the four walls of these institutions. It can’t be that our employees are saying, this is my experience—we can no longer discount that. That created the willingness to listen and the desire to understand and the need to understand.
But ultimately, and this is about DEI in general, it’s not diversity for diversity’s sake. The end game is much bigger than that. These conversations are creating the foundation to get to that bigger goal. The more colleagues within an institution understand the lived experience of our Black colleagues, our Latinx colleagues, and so on—the more people understand the clear and present and current danger that exists, the more they’ll recognize that we need to think about it in the context of our work differently. If people think slavery happened 300 years ago and that’s not our world now, why are we talking about this? There’s been an opportunity to educate people about the barriers that persist, how different institutions created them, how we may or may not have been complicit in that, and therefore what we need to do now to take action to address that.
The good news is what you find is that’s hugely motivating for employees. They want it, everybody wants to be connected to a sense of purpose. That’s a pretty compelling purpose right there. So people have by and large been energized by the conversations and welcome the chance to address it.
A researcher recently noted to me that workplaces are the most diverse experiences that most people have in their lives, which adds importance to the conversations there…
It really does. And it’s something we’ve been thinking about a lot because on top of the fact that people aren’t used to speaking about race in the workplace and many don’t think it’s appropriate—you don’t talk about politics, religion, things like that—many people live lives that are very segregated. It might not be intentional. That’s been interesting too, to see people awaken to that as well. All of a sudden they’re looking around and realizing, wait, the schools my kids go to, the church we go to, the supermarket we shop in—the only people I see are people who look like me. That helps people recognize the structural piece of that.
Housing is segregated. It has been segregated for some time. That leads to the other things that you see. That’s why it’s so important to meet people where they are, because people live different kinds of lives. All you can do is say when you come within the four walls of our institution, these are the values we uphold that we believe in. And the ways of behaving that are expected from somebody who is a part of this institution. It becomes an interesting conversation, but it’s the one we have to be having.
People sometimes focus on the research that shows that racial or gender diversity generate better business results—but in many ways that’s beside the point. Where do you stand on messaging around diversity?
I’ve been on all sides of that. I started in my career on the moral-imperative side of this, and then moved to the business-imperative side. I’m now squarely in the ‘it’s both.’ It is both. That there are people who continue to think about it in one or the other way. I’s important to connect with both of those audiences where they are and bring them in based on whatever way they’re thinking about it.
The extent to which economic and racial barriers are overlapping has been even clearer this year. People who are more likely to get Covid or more likely to have economic hardships are people of color. How do you think about that in your work?
It is unfortunately a very strong convergence, with this K-shaped recovery and the fact that dynamic continues. We’re seeing that parts of the economy are improving and parts are not, and the parts that are not correlate with race, ethnicity, and income, and all of those things—so we’re just exacerbating the problems. A lot of the work needs to focus on access, on quality jobs, on benefits, on things that will get to some of the root causes for those communities to help change that trajectory.
Do you think the business response so far has been up to the magnitude of the problems?
It’s hard to say what would be adequate. What’s going to be most important is how it really gets institutionalized. I think what has got to come next is this has to be institutionalized. Because the initial upfront capital is not going to be enough, frankly. We’re talking about hundreds of years—but it is necessary to put that money up now, necessary but not sufficient. The sufficiency part will come in the institutionalizing the practices across our business systems, because that’s what is going to enable us to get to any sort of scale in addressing the issues and to do it in a way that becomes sustainable and ideally generational.
What is your outlook for moving forward with DEI and what needs focus?
I am cautiously optimistic. This phrase that a lot of us use is ‘turning this moment into a movement.’ There are enough people who are very focused on that, that we have some chance of that happening. Certainly generationally, as we see younger generations and in the diversity of people we saw on the streets. It was a wonderful thing to see from the standpoint of how coalitions are getting formed, how people are coming together on this critical work. As we head into the new year, now it’s really going to be about how we take action against that. The commitments have been made, the money has been put forward, how are we going to vote, use those resources? On the institutional side, it’s using the resources in ways that are meaningful and then begin to build those practices into our every day. Build, make inclusive leadership, a part of day-to-day decision-making. That’s gotta be a core capability that every company requires of their workforce–or their leadership, certainly, but I would say everybody.
What are the key ingredients of inclusive leadership?
There’s been a research that we’ve leveraged in this. It’s being curious, it’s asking questions, engaging, it’s having a commitment To this work at the outset. It’s about being courageous. These conversations about race are not easy. And so it’s easy to say we should have them, but actually having them does take courage. Those are some of the key attributes to being an inclusive leader and making sure that you’re bringing others along with you and understanding that it’s beyond people. For so long, this notion of diversity, equity, and inclusion has been focused on the people component. That is necessary, but not sufficient. What we’re trying to get to is how businesses operate.
Do you mean the financial commitments that Prudential and other businesses have made to deploy their assets?
Yes. And I think even broader than that, it’s a shift that people have been talking about even pre-Covid, this move from shareholder primacy to stakeholder privacy. What does that really mean in practice? It’s kind of going back to first principles, which was around driving progress and not just creating profits for ourselves. Moving back to that value creation versus extraction. I’m being extreme—obviously there are many good companies in the world right now doing great things. It’s usually not that binary at any one institution—but how do we think about quality jobs? How do we think about healthy communities? How do we think about the environment and inclusive economies, so that DEI, racial equity, whatever you want to call it, becomes a cross cutting theme? It runs across all of those things. It’s not a standalone thing—that marginalizes it. It’s core to everything that we think about. What we’re thinking about should be under this guise of long-term value creation in a way that benefits a broader group of stakeholders.
And it’s not just an HR department thing to deal with…
Exactly. CEO-led. This has to be CEO-led.
Is there anything people are missing in this discussion?
Maybe what could get lost is so much of this is what I’ll say is a retail operation. So we can make big commitments and put big money behind it, but it’s really the day-to-day. It is every interaction that one, as an employee of X organization, has on a daily basis and how you behave in that moment. That is the challenge. It’s how we all get smarter, how we continue to learn, and then how we actually put that to work on a daily basis. That to me is the thing that could get overlooked and that people need to pay real attention to.
Is there any key to making sure this happens in the day-to-day?
No, I think it’s coming at it from multiple perspectives and every opportunity you have to talk about that. As a practical matter, one of the keys is making sure you’re getting to the right levels in your organization, in the population that can have the biggest impact on that. What is the lived experience of our employees? That’s going to depend on their immediate supervisor. Their immediate manager, not the senior-most people at the firm. They have to set the tone from the top, but it’s going to play out very locally. How do you make sure people understand what the rules of engagement are? What the expectations are. That you give them the tools. And then that you hold them accountable at the back end.
So it’s the CEO and the middle managers who matter?
Exactly.
And are you anxious that this stays just a moment and doesn’t become a movement?
I’m absolutely anxious about that. I’m simultaneously committed that I will do my part at Prudential. And I know many people who are committed to that. But I am cautiously optimistic that we will be able to do things that will begin to create the foundation for that longer-term change. I think about what [the late] Congressman [John] Lewis said, this notion of it being a marathon. And the role for all of us just to do as much as we can to take it as far as we can, and then hand it off to the next generation and let them keep moving it.
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