While the Civil Rights Act of 1964 made it illegal for any business, private or public, to practice discriminatory hiring (and firing) practices, it wasn’t until a series of high-profile lawsuits rocked the financial industry that businesses started caring more about diversity. A 2016 article in the Harvard Business Review reported that in the late 1990s and early 2000s, Morgan Stanley shelled out $54 million—and Smith Barney and Merrill Lynch more than $100 million each—to settle sex discrimination claims. In 2007, Morgan was back at the table, facing a new class action, which cost the company $46 million. In 2013, Bank of America Merrill Lynch settled a race discrimination suit for $160 million. Cases like these brought Merrill’s total 15-year payout to nearly half a billion dollars.

The article went on to state, “It’s no wonder that Wall Street firms now require new hires to sign arbitration contracts agreeing not to join class actions. They have also expanded training and other diversity programs. But on balance, equality isn’t improving in financial services or elsewhere.”1

In December, 2022, the U.S. Government Accountability Office (“GAO”) published an Overview of Representation of Minorities and Women and Practices to Promote Diversity. The The GAO noted that the financial services industry provides services that help families build wealth and is essential to the economic growth of the country. GAO analyzed data from 5 of its reports on EEOC data, interviews with representatives of financial services firms from 2007 to 2020. Results were divided into two topics: Trends in management-level diversity in the financial services industry and diversity and inclusion efforts by private and public financial services entities.

Trends in management-level diversity in the financial services industry

The GAO reported only slight increases in representation of minorities (racial/ethnic groups other than White) and women in management positions from 2007 to 2020. For instance, for senior management positions:

  •  EEOC data (for 2007–2015) showed that Asian representation increased from 4 to 5 percent. Black and Hispanic representation was about 3 percent. Female representation remained around 29 percent in that period.
  • EEOC data (for 2018–2020) showed representation for both minorities and women was relatively flat or marginally increased. Black and Hispanic representation remained at about 3 and 4 percent, respectively. Female representation increased from 31 to 32 percent in that period.

Diversity and inclusion efforts by private and public financial services entities.

GAO’s more targeted work highlighted “industry challenges” in recruiting and retaining women and minorities and using the services of minority and women-owned businesses. GAO stated that it examined diversity efforts of the Federal Home Loan Banks, Fannie Mae, and Freddie Mac. GAO also reviewed practices for selecting minority and women-owned asset managers and recruiting women with science, technology, engineering, and math degrees. Challenges included high levels of competition for diverse talent and bias in selecting service providers (preference for larger firms with brand recognition). Key practices to address these challenges included conducting targeted outreach and communicating diversity and inclusion priorities and goals within their organization.2

Are the GAO’s findings, in step with other organizations’ findings?

In January of 2022, the Consumer Financial Protection Bureau (“CFPB”) issued a report that analyzed publicly available diversity and inclusion information of financial institutions by industry segments (the mortgage industry and depository lenders comprising the vast majority thereof).

The sample was comprised of 270 regulated entities, including both depository and nondepository institutions. The CFPB found that there were correlations between assessment data submitted by the institutions themselves and the CFPB’s research of entities’ diversity and inclusion policies and practices. As expected, smaller institutions had fewer diversity and inclusion programs and policies; however, as pointed out in the report there are opportunities for small institutions to increase their efforts without expending significant resources. Larger depository institutions consistently outperformed all other institutions in terms of overall diversity and inclusion efforts. There are opportunities for large non-banks, mid-size and small institutions to update their public websites to highlight their efforts on diversity and inclusion and to better demonstrate diversity and inclusion commitment.
One area of the CFPB’s focus for this report, “Practices to Promote Transparency of Organizational Diversity and Inclusion”, is of particular interest, as it underscores what I believe to be “lip service” to the financial services industry’s commitment to diversity with no “teeth”.

The CFPB reported that this area of its study had the highest percentage of entities with public information, which is no surprise, as it is free self-promotion for rhetoric. Forty-three percent (43%) of sampled institutions had a diversity and inclusion statement on their careers page, which “went beyond required Equal Employment Opportunity disclosures to emphasize a commitment to a diverse and inclusive workforce. Similarly, 31% of institutions sampled had a statement affirming a commitment to diversity and inclusion listed as a “core value,” and 22% of institutions had a statement directly authored by a senior leader (i.e., President, CEO) affirming commitment to diversity and inclusion. Twenty percent(20%) of entities published specific information about development and mentorship programs (outside of Employee Resource Groups), which may help attract more diverse talent. However, opportunities exist for companies publishing their diversity and inclusion strategic plans. Almost half of sampled depository lenders published this information, but few institutions publicized any strategic goals for improving workforce diversity and inclusion.” 3 

In March, 2021, CNN Business released the results a study conducted by the Committee for Better Banks (“CBB”) a coalition of bank employees, consumer advocacy groups, and labor organizations, which gave a final overall grade of “C” for diversity and inclusion to the collective financial services industry. Interestingly, no bank received an overall grade higher than a “C” and, as a whole, the industry received “D’s” for Black and Latino representation and a “C” for Asian representation.4

Why and How Should the Financial Services Industry Heed the Call for Diversity?

Jennings Executive Search’s website discusses the benefits of diversity in the finance sector for boosted innovation, improved creativity, more committed employees and larger company profits. Jennings provides suggestions to finance companies for diversity improvement, as well: question your recruiting strategy, set diversity targets, use technology and implement sponsorship programs.5

Real World Experience

In my experience as an attorney who has represented many executives in age, racial, gender and sexual orientation discrimination actions against some of the largest banks in California during the past 15 years, the commitment to diversity and inclusion stops at self-promotional language. All too often, executives come to my law firm with complaints of being routinely passed over for opportunities to advance or being pushed out of their organizations, altogether.


The Financial Services Industry has a long way to go before its management mirrors the overall workforce population and takes advantage of the diverse talent pool available to it thrive into the future.

For effective, experienced executive legal counsel, contact The Law Offices of Katharina Martinka today!

Photo by Tim Mossholder on Unsplash