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

EEO-1 data indicate that overall diversity among officials and managers  within the financial services industry did not change substantially from  1993 through 2004, but that changes by racial/ethnic group varied. Management-level representation by  minorities increased from 11.1 percent to 15.5 percent during the period,  while representation by whites declined correspondingly from 88.9  percent to 84.5 percent. Management-level representation by white men  declined from 52.2 percent to 47.2 percent during the period while the  percentage of management positions held by white women was largely  unchanged at slightly more than one-third. African-American representation increased from 5.6 percent in 1993  to 6.8 percent in 2000 but declined to 6.6 percent in 2004. Representation  by American Indians remained well under 1 percent of all management- level positions. 3). 4). However, officials from financial services firms and  trade associations also described the challenges they faced in  implementing these initiatives, such as ongoing difficulties in recruiting  and retaining minority candidates and in gaining commitment from  employees to support diversity initiatives, especially at the middle  management level. Officials from financial services firms also said that they had developed  programs to foster the retention and professional growth of minority and  women employees. First, the officials said that the industry  faces ongoing challenges in recruiting minority and women candidates  even though firms may have established scholarship and internship  programs and partnered with professional organizations. Minority- and Women- Owned Businesses Often Face Difficulties in Obtaining Capital, but Some Financial Services Firms Have Developed Strategies to Assist Them

Studies and reports, as well as interviews we conducted, suggest that  minority- and women-owned businesses have faced challenges obtaining  capital (primarily bank credit) in conventional financial markets for  several business reasons, such as the concentration of these businesses in  the service sector and relative lack of a credit history. Other studies  suggest that lenders may discriminate, particularly against minority-owned  businesses. However, assessing lending discrimination against minority- owned businesses may be complicated by limited data availability. However, some financial  institutions, primarily commercial banks, have recently developed  strategies to market their loan products to minority- and women-owned  businesses or are offering technical assistance to them. Equal Employment Opportunity Commission (EEOC). Appendix I: Objectives, Scope, and Methodology

The objectives of our report were to discuss (1) what the available data  show regarding diversity at the management level in the financial services  industry, from 1993 through 2004; (2) the types of initiatives that the  financial services industry and related organizations have taken to  promote workforce diversity and the challenges involved; and (3) the  ability of minority and women-owned businesses to obtain access to  capital in financial markets and initiatives financial institutions have  recently taken to make capital available to these businesses.
Why GAO Did This Study

During a hearing in 2004 on the financial services industry, congressional members and witnesses expressed concern about the industry's lack of workforce diversity, particularly in key management-level positions. Witnesses stated that financial services firms (e.g., banks and securities firms) had not made sufficient progress in recruiting and promoting minority and women candidates for management-level positions. Concerns were also raised about the ability of minority-owned businesses to raise capital (i.e., debt or equity capital). GAO was asked to provide an overview on the status of diversity in the financial services industry. This report discusses (1) what available data show regarding diversity at the management level in the financial services industry from 1993 through 2004, (2) the types of initiatives that financial firms and related organizations have taken to promote workforce diversity and the challenges involved, and (3) the ability of minority- and women-owned businesses to obtain access to capital in financial markets and initiatives financial institutions have taken to make capital available to these businesses.

What GAO Found

Between 1993 through 2004, overall diversity at the management level in the financial services industry did not change substantially, but increases in representation varied by racial/ethnic minority group. During that period, Equal Employment Opportunity Commission (EEOC) data show that management-level representation by minority men and women increased from 11.1 percent to 15.5 percent. 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. The EEOC data also show that representation by white women remained constant at slightly more than one-third whereas representation by white men declined from 52.2 percent to 47.2 percent. Financial services firms and trade groups GAO contacted stated that they have initiated programs to increase workforce diversity, including in management-level positions, but these initiatives face challenges. The programs include developing scholarships and internships, establishing programs to foster employee retention and development, and linking managers' compensation with their performance in promoting a diverse workforce. However, firm officials said that they still face challenges in recruiting and retaining minority candidates. Some officials also said that gaining employees' "buy-in" to diversity programs was a challenge, particularly among middle managers who were often responsible for implementing key aspects of such programs. Research reports suggest that minority- and women-owned businesses have generally faced difficulties in obtaining access to capital for several reasons such as these businesses may be concentrated in service industries and lack assets to pledge as collateral. Other studies suggest that lenders may discriminate in providing credit, but assessing lending discrimination may be complicated by limited data availability. However, some financial institutions, primarily commercial banks, said that they have developed strategies to serve minority- and women-owned businesses. These strategies include marketing existing financial products specifically to minority and women business owners.