Financial Services Industry and Diversity

We previously conducted work on the challenges faced in the financial  sector for promoting and retaining a diverse workforce, focusing on  private-sector firms.management level in the financial services industry did not change  substantially from 1993 through 2008 and that diversity in senior positions  was limited. For example, in 2011 the representation of women was greater in  professional positions (about 51 percent) compared to sales positions  (about 38 percent). Agency and Reserve Bank officials identified key  challenges to increasing workforce diversity overall and at the senior  management-level, including limited representation of minorities and  women among internal and external candidate pools. Senior Management-Level Representation of Minorities and Women Varied at Agencies and Reserve Banks, with Slight Changes Overall

Senior management-level representation of minorities and women varied  across individual federal financial agencies and the 12 Reserve Banks. In 2011, the  representation of women among senior management-level employees  ranged among the agencies from 31 percent at FDIC to 47 percent at  FHFA. In 2011, the representation of  minorities at the agencies ranged from 25 percent at NCUA to 44 percent  at the Federal Reserve Board. Most agency and  Reserve Bank OMWIs indicated that they had been conducting various  diversity recruitment practices prior to the enactment of the Dodd-Frank  Act—such as partnering with organizations focused on developing  opportunities for minorities and women. Most agencies and Reserve Banks have  developed and included a provision in contracts for services requiring  their contractors to make efforts to ensure the fair inclusion of women and  minorities in their workforce and subcontracted workforces. Similarly, according to Reserve Bank OMWI reports, Reserve Bank  contracting dollars paid to businesses owned by minorities or women  ranged between 3 percent and 24 percent in 2011 (see fig. With respect to our recommendation that each OMWI report on efforts to  measure the progress of its employment diversity and inclusion practices,  including measurement outcomes as appropriate, to indicate areas for  improvement as part of their annual reports to Congress, all the federal  financial agencies and Reserve Banks indicated that they plan to  implement the recommendation:  the OMWI Director of CFPB explained that its OMWI was the newest  of such offices because the agency was created with the enactment of  the Dodd-Frank Act and that it planned to include measurement  information in future reports;  the OMWI Director of the Federal Reserve Board stated that the  recommendation was consistent with its ongoing practices and that it  would look for additional ways to report on diversity practices;
FDIC’s OMWI Director agreed with the recommendation and stated  that it will include efforts to measure the progress of its diversity  practices in its annual reports to Congress;  the Acting Associate Director of FHFA’s OMWI stated that it would  include measurement information in its 2013 OMWI report to  Congress; the Executive Director of NCUA said the agency will work toward  reporting on its efforts to measure the progress of workforce diversity  and practices;  the Comptroller of the Currency stated that OCC had a well- developed diversity and inclusion program through which the agency  measures its progress and that OCC has included additional metrics  in its 2013 OMWI report to Congress;
SEC’s OMWI Director noted that the agency plans to incorporate  measurement information on its diversity and inclusion practices in its  future OMWI reports to Congress;
Treasury’s OMWI Director agreed with our recommendation and  stated that it was consistent with the agency’s efforts to use more than  demographic representation to measure the progress of diversity and  inclusion efforts; and    the Federal Reserve Banks’ OMWI directors noted that the banks  currently include some measurement information in annual reports  and said that they will consider additional ways to measure and report  on Reserve Banks’ diversity practices. Appendix I: Objectives, Scope, and Methodology

The objectives for this report were to examine (1) what available data  show about how the diversity of the financial services industry workforce  and how diversity practices taken by the industry have changed from  2007 through 2011; (2) what available data show about how diversity in  the workforces of the federal financial agencies and the Federal Reserve  Banks (Reserve Banks) has changed from 2007 through 2011; (3) how  these federal financial agencies and Reserve Banks are implementing  workforce diversity practices under section 342 of the Dodd-Frank Act,  including the extent to which their workforce diversity practices have  changed since the financial crisis; and (4) the status of federal financial  agencies’ and Reserve Banks’ implementation of the contracting  provisions of the Dodd-Frank Act related to the inclusion of women and  minorities. Appendix IV: Representation of Minorities and Women at Federal Financial Agencies and Reserve Banks

We reviewed agency and Reserve Bank reports and found that since the  financial crisis, senior management-level minority and gender diversity at  the agencies and Reserve Banks has varied across individual entities.
Why GAO Did This Study

As the U.S. workforce has become increasingly diverse, many private- and public-sector entities recognize the importance of recruiting and retaining minorities and women for management-level positions to improve their business. The 2007-2009 financial crisis has renewed questions about commitment within the financial services industry (e.g., banking and securities) to workforce diversity. The Dodd-Frank Act required that eight federal financial agencies and the Federal Reserve Banks implement provisions to support workforce and contractor diversity. GAO was asked to review trends and practices since the beginning of the financial crisis. This report examines (1) workforce diversity in the financial services industry, the federal financial agencies, and Reserve Banks, from 2007 through 2011 and (2) efforts of the agencies and Reserve Banks to implement workforce diversity practices under the Dodd-Frank Act, including contracting. GAO analyzed federal datasets and documents and interviewed industry representatives and officials from the federal financial agencies and Reserve Banks.

What GAO Found

Management-level representation of minorities and women in the financial services industry and among federal financial agencies and Federal Reserve Banks (Reserve Banks) has not changed substantially from 2007 through 2011. Industry representation of minorities in 2011 was higher in lower-level management positions--about 20 percent--compared to about 11 percent of senior-level manager positions. Industry representation of women at the overall management level remained at about 45 percent. Agency representation of minorities at the senior management level in 2011 ranged from 6 percent to 17 percent and from 0 percent to 44 percent at the Reserve Banks. Women's representation ranged from 31 to 47 percent at the agencies and from 15 to 58 percent at the Reserve Banks. Officials said the main challenge to improving diversity was identifying candidates, noting that minorities and women are often underrepresented in both internal and external candidate pools.
In response to the requirements in the Dodd-Frank Wall Street and Consumer Protection Act (Dodd-Frank Act), in 2011 federal financial agencies and Reserve Banks began to report annually on the recruitment and retention of minorities and women and other diversity practices. They all have established Offices of Minority and Women Inclusion (OMWI) as required. Many agencies and Reserve Banks indicated they had recruited from minority-serving institutions and partnered with organizations focused on developing opportunities for minorities and women, and most described plans to expand these activities. Some used employee surveys or recruiting metrics to measure the progress of their initiatives, as suggested by leading diversity practices, but OMWIs are not required to include this type of information in the annual reports to Congress. Better reporting of measurement efforts will provide Congress, agency officials, and other stakeholders additional insights on the effectiveness of diversity practices and demonstrate how agencies and Reserve Banks are following a leading diversity practice. Most federal financial agencies and Reserve Banks are in the early stages of implementing the contracting requirements required under the act. For example, most now include a provision in contracts for services requiring contractors to make efforts to ensure the fair inclusion of women and minorities in their workforce and subcontracted workforce and have established ways to evaluate compliance. The proportion of an agency's dollars awarded or a Reserve Bank's dollars paid to minority- or woman-owned businesses reported in 2011 OMWI reports ranged between 3 percent and 38 percent.

What GAO Recommends

Each agency and Reserve Bank should include in its annual OMWI report to Congress efforts to measure the progress of its diversity practices. The agencies and Reserve Banks agreed to include this information in the annual OMWI reports. Additionally, some agencies and the Reserve Banks described steps they have taken or plan to take to address the recommendation.