The U.S. House Committee on Financial Services under congresswoman Maxine Waters issued a report this month that summarizes the Committee’s review of the diversity and inclusion practices in the U.S.’s largest banks. It found that although banks and other financial services firms tout their diversity and inclusion policies, the sector as a whole falls short — especially when it comes to achieving diversity in executive positions, board seats and suppliers.
This study was necessary to gather data because banks are not otherwise required to share data regarding their workforce diversity. The Committee report says although the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act) created the Offices of Minority and Women Inclusion (OMWI) to hold the industry accountable for diversity and inclusion, sharing this data is voluntary. Bank regulators including the Federal Reserve Board of Governors, Federal Deposit Insurance Corporation (FDIC), and Office of the Comptroller of the Currency (OCC) issued the Joint Standards, which made it optional for banks to comply with OMWI’s requests for data.
Waters and Diversity and Inclusion Subcommittee Chair Joyce Beatty asked 44 of America’s largest banks — all of which have at least $50 billion in assets — to disclose this data to the Committee. The report says all 44 banks responded the the request, but not all answered each question fully.
At nearly all banks, the Committee reports, the male, female and different racial demographics of banks’ employees overall roughly mirror those of the U.S. population. Most have even achieved pay parity between men and women. The biggest gaps occur further up the corporate ladder. The responses broadly show that while some banks are on target with recruiting diverse talent, offering employee resource groups and linking diversity and inclusion results with performance, most are lacking diversity in executive positions, boards of directors and suppliers.
Wells Fargo (No. 13 on 2019 Top 50 Companies for Diversity) reported that in its executive/senior levels and first mid officials and managers, men and women are represented equally and 33.3% of employees at these levels are minorities. Wells Fargo is the country’s fourth largest bank by asset size, worth almost $2 billion. Just over 23% of directors are women and minorities, respectively. TD Group US Holdings LLC (TD Bank is No. 19 on 2019 Top 50 list) is worth nearly $400 million. Just over 18% of TD’s directors are women and minorities, respectively. Almost 39% of TIAA (No. 15 on 2019 Top 50 list) directors are women and 32.3% are minorities. For KeyBank (No. 39 on 2019 Top 50 list), 35.7% of directors are women and 14.3% are minorities. Just over a quarter of HSBC (No. 40 on 2019 Top 50 list) executive and senior management positions are held by women and almost 24% are held by minorities. A quarter of directors are women and 8.3% are minorities.
Not all banks surveyed reported all of their diversity-related data. JP Morgan & Chase Co. which is worth over 2 and a half billion dollars, did not report its gender and ethnic diversity numbers to the Committee. It did, however, report its pay equity numbers, while HSBC and TIAA did not. Based on the data, the Committee found that large and mega banks have both achieved about 99% pay equity for men and women.
When it comes to diverse suppliers, KeyBank, JP Morgan & Chase Bank and others did not provide data. For those who responded, less than 9% are invested with diverse suppliers.
All banks disclosed in some way that they need to improve their diversity and inclusion practices, but according to the report, almost half did not specify the areas in which they needed improvement. Of those who did, the most common issues were in the competition for diverse talent, the lack of a consistent definition of diversity and inclusion, and issues with data collection and self-identification.
Of the practices that help champion diversity and inclusion, 43 of the 44 reported having practices in recruiting diverse talent. Thirty-six reported linking diversity and inclusion results to performance, but only 10 reported collecting data on diversity results.
To remedy the issues with diversity and inclusion in this massive industry, the Committee suggests measurement and transparency.
It recommends requiring banks to share their diversity and inclusion data with regulators and the public; to track and make efforts to increase spending with diverse suppliers; and to publicly disclose the diversity of their boards.
“A review of bank responses by the Committee confirmed that banks and other financial services companies must be more transparent with diversity data so that regulators, Congress and the American people can hold them accountable for real and intentional diversity and inclusion outcomes,” Beatty says in the report.
Measuring and reporting diversity metrics is a crucial first step in working toward diversity, and because these in-depth reports to OMWI are only voluntary, it’s difficult to accurately analyze where the work is needed — let alone make the changes.
It’s becoming increasingly well-known that diversity and inclusion have positive business results. A recent study showed investors saw tech and finance companies with gender diversity were more likely to see stock prices rise, which made them more likely to invest in these companies.
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A 2015 MSCI report also found companies that have women on corporate boards achieve more profitability, fewer controversies and better decision-making than those without female leadership.
Overall, more diverse employees and leaders allow for more diverse ideas and problem-solving.
“Banks and other organizations that continue to move too slowly on diversity and inclusion initiatives may find themselves losing competitive advantage and profitability,” Congressman Emanuel Cleaver said in the Committee report. “Employees may move out of a company if they don’t see a pathway to move up.”