Diversity in the Financial Services Industry at the Management Level Did Not Change Substantially

EEO-1 data for 1993 through 2006 generally do not show substantial  changes in representation by minorities and women at the management  level in the financial services industry, but some racial/ethnic minority  groups experienced more change in representation than others. Figure 1,  which is based on information that we obtained in preparation for our  June 2006 report, shows that overall management-level representation by  minorities increased from 11.1 percent to 15.5 percent from 1993 through  2004. Specifically, African-Americans increased their representation from  5.6 percent to 6.6 percent, Asians from 2.5 percent to 4.5 percent,  Hispanics from 2.8 percent to 4.0 percent, and American Indians from 0.2  to 0.3 percent. In preparation for this testimony, we contacted EEOC to obtain and  analyze EEO-1 for 2006 and found that diversity remained about the same  at the management level in the financial services industry (see fig. 3) as it  had in previous years. However, it is too soon to assess the impact of this change on diversity  measures at the senior management level. Financial Services Firms Have Implemented a Variety of Diversity Initiatives

Minorities’ rapid growth as a percentage of the overall U.S. population, as  well as increased global competition, have convinced some financial  services firms that workforce diversity is a critical business strategy. Officials from several banks said that they  had developed scholarship and internship programs to encourage minority  students to consider careers in banking. Some firms and trade  organizations have also developed partnerships with groups that represent  minority professionals and with local communities to recruit candidates  through events such as conferences and career fairs. A 2005 industry trade group  study and some officials also noted that some companies were linking  managers’ compensation with their progress in hiring, promoting, and  retaining minority and women employees. Retaining minority and women candidates that are hired for key  management positions. Initiatives to promote management  diversity at all levels within financial services firms appear to face several  key challenges, such as recruiting and retaining candidates and achieving  the “buy-in” of middle managers. Without a sustained commitment to  overcome these challenges, management diversity in the financial services  industry may continue to remain generally unchanged over time.
Why GAO Did This Study

As the U.S. workforce has become increasingly diverse, many private and public sector organizations have recognized the importance of recruiting and retaining minority and women candidates for key positions. However, previous congressional hearings have raised concerns about a lack of diversity at the management level in the financial services industry, which provides services that are essential to the continued growth and economic prosperity of the country. This testimony discusses findings from a June 2006 GAO report and more recent work on diversity in the financial services industry. Specifically, GAO assesses (1) what the available data show about diversity at the management level from 1993 through 2006 and (2) steps that the industry has taken to promote workforce diversity and the challenges involved. To address the testimony's objectives, GAO analyzed data from the Equal Employment Opportunity Commission (EEOC); reviewed select studies; and interviewed officials from financial services firms, trade organizations, and organizations that represent minority and women professionals.

What GAO Found

GAO's June 2006 report found that, from 1993 through 2004, overall diversity at the management level in the financial services industry did not change substantially, but some racial/ethnic minority groups experienced more change in representation than others. EEOC data show that management-level representation by minority women and men increased overall from 11.1 percent to 15.5 percent during the period. Specifically, African-Americans increased their representation from 5.6 percent to 6.6 percent, Asians from 2.5 percent to 4.5 percent, Hispanics from 2.8 percent to 4.0 percent, and American Indians from 0.2 percent to 0.3 percent. In preparation for this testimony, GAO collected EEOC data for 2006, which shows that diversity at the management level in the financial services industry remained about the same as it had in previous years. Financial services firms and trade groups have initiated programs to increase workforce diversity, but these initiatives face challenges. The programs include developing scholarships and internships, partnering with groups that represent minority professionals, and linking managers' compensation with their performance in promoting a diverse workforce. Some firms have developed indicators to measure progress in achieving workforce diversity. Industry officials said that among the challenges these initiatives face are recruiting and retaining minority candidates, as well as gaining the "buy-in" of key employees, such as the middle managers who are often responsible for implementing such programs. Without a sustained commitment to overcoming these challenges, diversity at the management level may continue to remain generally unchanged over time.