Letter to Hugh

The Inclusion Initiative & a better world

Darling Hugh,

You saved me from isolation and irrelevance when we met at The Hotchkiss School in 1981. A bit of eurotrash from Madrid, raised in Dictator Franco’s traditional Spain, I was lost amid all the preppies in that Connecticut boarding school. You offered me your beautiful (like all of you) hand in friendship and I survived my oddity, with the help of our escape once a term for wild nights at Studio 54 in New York.

What I never realised till recently is how deeply you affected my life, all the way up to the present day. I thought the personal motivation for being a Diversity & Inclusion campaigner came from being a woman and an immigrant in the City. You, in fact were the springboard. Although I had guessed, it took a year for you to tell me you were gay, out of fear that I would turn away in disgust as others had. Your East Coast establishment upbringing did not help.

Only now am I aware that the horror of realising how cruelly you had been hurt and excluded has led me through the years to this week in 2020, with the launch of The Inclusion Initiative (TII) at the London School of Economics. The research centre, which I co-founded, will bring behavioural science and data together to create more inclusive cultures in the City for sustainable profits.

We are already working on a four-year project with Women in Banking and Finance, The Wisdom Council, and a number of firms ranging from BlackRock to Barclays, to evaluate the causes of gender difference in progression and then trial and evaluate solutions. And we are in talks with a number of financial and professional services companies on partnering in projects from making venture-funding more open to BAME entrepreneurs, to disrupting how new work projects are assigned and how employees are rewarded, to better measuring the link between culture and risk.

Words or acronyms like ‘data’ and ‘LGBT+’ seem so cold, and if I wrote about another project to use ‘AI’ to promote inclusion in the workplace, these terms would be meaningless to you. ‘Profitability’, however, would be a familiar word. The aim of The Inclusion Initiative is, ultimately, to create more inclusive workplaces in order to boost the bottom line, a point amply demonstrated in studies from McKinsey and others.

In a business sector dependent on innovation and collaboration, diverse voices need to be heard. The mark of a good meeting is not necessarily one filled with bonhomie and agreement, while the mark of a good Chair is to create the psychological safety to allow all present to speak up. Behavioural science teaches us that discomfort is often the prelude to learning. Discomfort was the least of my feelings as I sashayed into the school cafeteria in a pretty dress on the first Sunday in the school year, to find America’s young elite dressed for brunch in the oldest sweatshirts and jeans they could muster. Sunday best had a rather different definition in Connecticut than in the Madrid of that era.

There is a world of difference in LGBT+ rights in the developed world and in business compared to the early 1980s. The City now has its own Pride in the City organisation to promote Diversity & Inclusion. Yet only last year an openly gay candidate to be Lord Mayor of the City of London was asked in his interview process how he would prevent the role being “hijacked” by the gay community, while the US Labor Department proposed a rule cancelling an executive order banning anti-LGBT+ discrimination among federal contractors.

I last saw you, Hugh, in New York in 1988. You told me you were HIV positive and I asked what that was; its ravaging effects in the gay community had yet to be felt and chronicled in Europe, and you were ablaze with apparent health and on your way to being a successful painter. Over the next years you chronicled the AIDS era in figurative, bleak works which you described as having that ‘soft glow of brutality’ characteristic of American painters like Edward Hopper.

I called in 1995 to say I was coming over to New York again. But you had died at 32 years old of AIDS-related complications. I wish you could have lived on to find a partner, and to walk down the street hand in hand, to entertain at home and to call him your husband. The jargon of inclusion should not hide the fact that we are creating a better world.

Karina Robinson is Co-Director of The Inclusion Initiative at the LSE along with Associate Professor Grace Lordan. Hugh Auchincloss Steer’s work hangs in the Whitney Collection of American Art.

From Competitor to Collaborator

Dealing with the S in ESG 

Rare it is to hear business call for more government regulation. Yet this is the plea heard in private conversations with some of the largest financial companies in the UK, as they face undeliverable expectations to be at the forefront of solving rising inequality, racism and environmental disaster.

“The To-do list for corporates will continue to grow. We are having to deal with issues like racial injustice [because] governments aren’t,” says the CEO of a FTSE-100.

The financial crisis led to an upsurge in regulation, ranging from capital adequacy to conduct rules. Regulators like the Financial Conduct Authority in the UK and the Securities and Exchange Commission in the US became ever more powerful. An unwelcome outcome for financial institutions, but one they fully understood and accepted, even as their compliance departments doubled and tripled in size.

Meanwhile, the E in Environmental Social Governance (ESG) became a major risk and reward factor for companies – consider the plummeting market capitalisation of coal companies and the general proliferation of environmental ratings. In this area, the change makers are the institutional shareholders rather than the regulators or government.

Covid-19 allied to Black Lives Matter has swung the spotlight onto the ‘Social’ aspect, ranging from the safety of employees in the pandemic, to key workers without proper contracts, to the minimal numbers of BAME executives in the City and Wall Street.

The backdrop to this is changes to the decades-old emphasis on an ‘efficient’ international economy.  Its weaknesses – gig economy workers who live pay check to pay check and an international supply chain too dependent on political goodwill – are now fully exposed. The shareholder-first approach is being subsumed into a multi-stakeholder approach.

The increased complexity of the new corporate model means that firms look more like universities, balancing the interests of a wide range of interest groups with the constant threat of a hostile social media campaign.

What happened at the London School of Economics a few years ago is a salutary warning. The union highlighted the appalling employment conditions of the prestigious university’s outsourced cleaners. The support of students and academics gathered pace. A couple of years later, in 2018, the cleaners won the battle to be taken on as employees of the LSE.

Interestingly, hedge fund Chanos is shorting gig economy comp­anies such as ride-hailing app Uber and online food-delivery platform Grubhub. It is betting that there is going to be a greater political focus on low-wage, precarious workers.

Boards of directors would prefer to have clearer regulation on ‘Social’ issues, such as outsourced workers. For instance, gender pay gap reporting, while not exactly welcomed with open arms by business in 2017, is now a regular part of the corporate landscape for all medium and large firms, helping highlight the continual need for action on diversity and inclusion. 

FTSE100 financial companies continually review and upgrade how they treat their permanent employees. In fact, boards at several banks have appointed designated Non-Executive Directors responsible for workforce relations in line with the revised UK Governance Code. More mental health support and flexibility on working from home are other measures implemented on the back of Covid-19 – with a decent salary as a starting point. Yet these benefits do not touch the outsourced workers like cleaners and security guards.

And yet one prescient FTSE-100 board director believes the rules are already clear: “The Board is accountable for the supply chain.” Speaking at a recent Oliver Wyman Forum event, where top executives and senior policy makers share experiences, she noted that issues related to multi-stakeholder capitalism had moved from sub-committees to main board level.

That includes tax avoidance schemes, with the most newsworthy instituted by Big Tech, yet just as prevalent at other large, global companies. Minimising tax through the use of complex schemes leads to jaw-dropping anomalies. Over 50% of the subsidiaries of foreign multinational companies report no taxable profits in the UK, for instance.

Paul Polman, the former head of Unilever, is not alone in believing that companies should embrace having to pay their fair share of tax on the back of a crisis which has seen massive spending by governments to avoid a 1929-style depression. This must include unlisted capital, such as private equity and hedge funds.

Building a level playing field and a sustainable economy means governments imposing tax reform and coordinating with other jurisdictions. The verdict so far: nul points.

Yet there are a few possible indicators of change: an OECD global tax rules blueprint might prosper if Joe Biden wins the US presidential election; the morally dubious sight of private equity firms accessing government cash could explode in a social media campaign; visionary CEOs are beginning to consider that a company’s approach to tax should be part of the ESG metrics by which investors judge them. 

Ensuring the heightened role of technology makes for an inclusive economic recovery is one of the biggest challenges facing financial services. Deepening social inequality, with Covid-19 disproportionately affecting women, BAME and those from poorer socio-economic backgrounds, sits uncomfortably alongside the accelerating digital take-up benefitting a small pool of winners. Many financial services companies are looking to cut their real estate footprint due to the permanent shift to increased home working, presaging waves of redundancies for their outsourced frontline workers.

Economist Noreena Hertz, in her recently published book The Lonely Century, writes about the neoliberal  mindset which dominated for four decades, leading to societies of unparalleled loneliness and the rise of right wing populism: “40 years of seeing ourselves as competitors not collaborators, takers not givers, hustlers not helpers.”

The effects of the pandemic have made even the most fervent small government activists mutate into advocates of big spending to stave off mass unemployment and depression. If that reversal is possible, so is the probability of legislation for the hidden workforce and international tax coordination. 

The future will involve collaboration, consensus and communication between government and the corporate sector to an unparalleled degree.  Not an easy way forward, but the only one to solve our societal problems.