GOVERNANCE
A rigorous governance structure supports how we work, enabling us to guard against risk and capture opportunities, and allowing our clients to trust us to deliver long-term value.
Our stewardship of sustainability matters begins with stringent oversight of our operations and extends to our active ownership of the assets we manage and the community investments we make to advance sustainable practices and drive positive change.
Matters of sustainability are taken into account at the highest levels of our organization in strategic decision-making. Our Board of Directors and its committees engage in active oversight of matters of significance to the corporation and its subsidiaries. The Human Capital & Compensation Committee provides oversight of talent management and DEI practices. The Business Risk Committee provides oversight of certain financial and operational risks associated with climate-related events and other environmental factors through its oversight of the corporation’s global risk-management framework and risk-management policies. The Corporate Governance Committee provides oversight over a variety of matters relating to corporate governance, human rights, philanthropy and sustainability.
Our head of Corporate Sustainability, Inclusion and Social Impact, who reports directly to our chairman and chief executive officer, is responsible for the design and implementation of our enterprise sustainability strategy and also chairs the Enterprise Sustainability Council, a group of senior employees that enable the development, implementation and execution of Northern Trust's sustainability and ESG strategy.
To further strengthen our commitment to sustainability, we have also appointed our first chief sustainability officer (CSO), who reports directly to our head of Corporate Sustainability, Inclusion and Social Impact. The CSO role, beyond leading the Enterprise Sustainability Council and other group-wide sustainability working groups, is critical to further drive and embed sustainable practices across Northern Trust. This is done by strengthening our governance suite, interpreting an ever-evolving sustainability landscape, advancing our sustainability agenda and delivering on our commitments, while helping us consistently earn our clients' and community partners’ trust.
During 2022, our governance of sustainability matters was strengthened through the creation of the EMEA ESG Taskforce—a forum developed to coordinate activities across the region and provide linkage to the Enterprise Sustainability Council and legal entity governance bodies.
The EMEA ESG Taskforce is comprised of employees from each of the organization's EMEA locations and business lines / functions, and helps to educate, coordinate, review and escalate ESG-related matters from EMEA while acting as a forum for cascading information developed at enterprise level.
Sustainable ESG Products and Services HighlightsTo meet investors’ growing demand to better align investment strategies and values, our Wealth Management business is also helping clients via a goals-based framework through select ESG investment products and superior evaluation and reporting capabilities. The idea is simple yet powerful: This is intended to ensure ESG-labeled products deliver on what they promise.
We continue to see benefits from our relationship with a leading ESG data provider to allow for analysis of ESG products or client portfolios. This capability is enhancing the experience for clients by allowing them to better understand their exposure to key ESG risks and opportunities.
Our Asset Management business employs a robust four-step investment approach—analyze, measure, monitor and engage—that enables advanced monitoring of ESG commitments and risks.
Learn more about our Asset Management business' 2022 Stewardship Report.
Our board of directors, through its Human Capital & Compensation Committee, also engages in active oversight of our DEI strategies, programs and initiatives. Our regional chief DEI officers are responsible for the design and execution of DEI strategies across North America, EMEA and Asia Pacific (APAC).
Our DEI governance structure is comprised of several councils that help facilitate the development and execution of strategy and building an inclusive culture. These councils include:
The Global Executive Diversity, Equity & Inclusion Council is responsible for providing strategic oversight on the global diversity, equity and inclusion priorities. It is chaired by Chief Executive Officer Mike O’Grady, and Kimberly Evans, our head of Corporate Sustainability, Inclusion and Social Impact.
Business Unit Management Councils are responsible for the execution of the strategic initiatives and communication of DEI policies, practices and procedures to foster an inclusive culture within each business unit. Each of these councils is chaired by a business unit president.
Regional Diversity, Equity and Inclusion Councils are responsible for collaboration across the business units and regions. These councils, chaired by senior leaders within the business, provide oversight and connection with the business resource councils and employee activities.
Business Resource Councils (BRCs) are responsible for creating and implementing strategic plans for contributing to the organization’s success systems of inclusion by ensuring all of our employees have access to development opportunities, enhancing cultural understanding and providing diverse business insights. Employee-led, the councils work with our DEI team to align initiatives to corporate priorities.
Several senior-level company officers are responsible for overseeing the execution of our Human Rights Statement and our workforce standards. Northern Trust's Modern Slavery Act program recognizes our responsibility to respect human rights, as outlined in the UN Guiding Principles on Business and Human Rights. It reflects our commitment to conduct business in a way that respects human rights and the dignity and equality of all people. It also provides the framework for managing the risk of modern slavery in our operations and supply chains. We are committed to upholding the International Labor Organization's (ILO) standards and the Organization for Economic Cooperation and Development's (OECD) guidelines for multinational enterprises.
Employees worldwide may exercise freedom of association regarding collective bargaining and trade agreements as permitted by applicable regional laws. They receive training in anti-discrimination, DEI, awareness of modern slavery and its laws, and anti-harassment. We are committed to providing fair and equal wages to our employees, and offering competitive compensation and benefits to our workforce.
We engage suppliers to uphold our commitment to respect human rights. Our Supplier Code prescribes that our vendors must have adequate procedures to identify, prevent, mitigate and account for human rights risks in their operations and supply chains.
We expect all employees to uphold our core values, exercise the highest ethical judgment and comply with the laws and regulations that govern our business. All information should be treated appropriately based on its classification. Breaches of highly sensitive client or business information may result in disciplinary action. Employees are required to take the following seven courses annually:
Anti-Money Laundering (AML) & Economic Sanctions
Anti-Bribery, Corruption and Fraud
Global Privacy and Data Protection
Conflicts of Interest
Fraud Fighters
Information Security
Standards of Conduct
They are also required to certify their compliance with the Code of Business Conduct and Ethics. Each of the required training courses was completed by more than 99 percent of employees in 2022.
Additionally, some employees are required to complete targeted business- or location-specific training (driven by regulatory needs) along with periodic certifications and attestations regarding personal securities transactions, political contributions and the provision of gifts and entertainment. Employees in the APAC and EMEA regions complete expanded conduct and privacy training in accordance with the regulatory characteristics of those respective regions.
We continue to build and enhance our climate risk-management capabilities. Our climate risk-management efforts are overseen ultimately by the director of climate risk, who reports indirectly to the chief risk officer. The risk management function has created a dedicated climate- and sustainability-risk group to monitor, oversee and take account of the increasing impact climate-risk factors has, or may have, on operations, credit conditions and regulatory compliance across the globe.
Our Asset Servicing business is committed to supporting the efforts of our institutional clients to meet their sustainable investment goals, manage increasing regulatory demands and further enhance ESG and climate risk oversight frameworks. To do this, we offer a range of data, platform and reporting tools that support a range of pre-trade and post-trade functions. With the knowledge gained through these tools, our clients can understand evolving sustainability impacts of their investment portfolios, manage potential stakeholder concerns, and gain greater awareness of financial and reputational risks.
Northern Trust concentrates its public policy positions in areas most relevant to its businesses, including U.S. federal, state, municipal and European Union financial regulatory reform efforts. The Government Affairs Oversight Council oversees Northern Trust’s federal government advocacy and lobbying work as it relates to U.S. legislative and regulatory developments that impact Northern Trust’s business. We also work with the trade associations of which we are members, and meet directly with federal, state and municipal legislators, regulators and other government officials globally to discuss our positions and make recommendations for improved policy and regulation. At the U.S. federal level, we focus on proposed regulatory and policy changes that will affect our businesses by enhancing the safety of client assets and the financial system, as well as the strength of the global economy. At the state and municipal levels, we regularly meet with elected and appointed officials to discuss public policy positions that will affect our businesses. In appropriate circumstances, we file comment letters to proposed federal regulations, copies of which are publicly available.
The Corporate Governance Committee of our board of directors provides oversight of the political, lobbying and other public advocacy activities of Northern Trust, including significant trade association memberships.
Political Contributions by EmployeesNorthern Trust expects employees to seek guidance and pre-clear certain individual political contributions in accordance with the guidelines set forth in federal, state and municipal "pay-to-play" regulations and internal policies and procedures.
Corporate and Political Action Committee ContributionsNorthern Trust contributes corporate funds to industry trade organizations in support of the corporation’s public policy objectives. Participation in these organizations is important to gaining industry insight, fostering relationships and developing professional opportunities within the industry. The principal trade associations to which Northern Trust belongs are the American Bankers Association, the Bank Policy Institute, the Investment Company Institute and the Securities Industry and Financial Markets Association. We are also a member of the Illinois Bankers Association, the California Bankers Association and the Florida Bankers Association.
Northern Trust engages in the political process to advance and protect its long-term interests, without regard to the private political preferences of our executives. We do not contribute directly to political parties, committees or candidates for public office.
We do, however, sponsor both a federal-only political action committee (PAC) and a multi-candidate PAC, both of which are permitted to solicit segments of a restricted class of Northern Trust's U.S. employees for contributions used to support candidates who support legislation important to Northern Trust. All contributions to the PACs are voluntary; employees are neither favored nor disadvantaged based on their participation. The leadership of each PAC reviews proposed political contributions based on the public policy interests of Northern Trust.
Federal lobbying reports may be found on our Governance and Ethics page.
As detailed in our Supplier Code of Conduct, Global Procurement Policy and Third Party Management Practice Standards, Northern Trust expects our vendors to conduct business in an ethical, legal and socially responsible manner.
We regularly review our vendors' adherence to our policies and pursue corrective measures when necessary. We use the U.S. Office of Foreign Assets Control to screen each vendor for compliance with all economic and trade sanctions.
Northern Trust is committed to integrating ethical, social and environmental factors into our Global Procurement Policy.
Requiring any vendor providing goods and/or services outside of the U.S. to complete an anti-bribery questionnaire
Requiring vendors to obey the laws of the country of manufacture, sale and distribution
Promoting a Third Party Management Practice Standard that assesses risk, monitors performance and promotes continuous improvement activities
This process maximizes relationships with vendors resulting in ongoing risk mitigation and value delivery. We continue to invest in and review new vendor-management techniques and processes that will increase coverage to additional supply categories.
Provide and implement the process to monitor and manage vendors
Ensure consistency and compliance with regulatory guidance
Instill a continuous improvement philosophy into the vendor relationship
Ensure compliance with contractual terms and conditions
Using vendor segmentation
Applying a governance model appropriate for the vendor's designated segment
Administering jointly developed key performance indicators
Developing and implementing a vendor management plan
Assigning vendor managers responsibility for specific activities required by the segmentation
Monitoring and reporting on the status of open vendor issues
Business DiversityBusiness diversity is an essential component of a world-class, global procurement organization. How, and with whom, we do business reflects our commitment to developing and supporting diverse business owners.
Northern Trust collaborates with several organizations to encourage the economic development of our diverse vendors, including the National Minority Supplier Development Council, the Chicago Minority Supplier Development Council, the Women's Business Development Center, Chicago United, Financial Services Roundtable for Supplier Diversity, Disability:IN and the LGBT Chamber of Commerce of Illinois.
In 2022, we spent more than $133 million with businesses owned by minorities, women, veterans and LGBTQ+ and disabled people, as well as small business enterprises. To learn more about our business diversity efforts, we invite you to watch the video above.
For a further description of the risk management policies and practices of the Corporation’s management, including those related to information security, technology and cyber risk management, see the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Risk Management” in the Corporation’s Annual Report on Form 10-K for the year ended Dec. 31, 2022.
