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A purpose-driven CD and other ideas for advancing economic justice and diversity

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In this news roundup, economic justice and diversity topics abound, with some ideas on what banks can do on both fronts.

Digging into Wells: Wells Fargo’s phony-accounts scandal appears to have entered its final phase as the Office of the Comptroller of the Currency seeks to collect $37.5 million in civil penalties from a handful of the bank’s former high-ranking executives in an upcoming trial. Carrie Tolstedt, who ran the bank’s retail and small-business lending operations from 2007 to 2016, faces a $25 million fine. The OCC alleges that Tolstedt was “directly and significantly” responsible for the pressure that led employees to open accounts without customers’ knowledge in order to meet unrealistic sales goals, but Tolstedt contests the charges. The trial for Tolstedt and other former Wells executives, including the general counsel, James Strother, and the auditor, David Julian, is set for July 2021. To settle civil charges of his own, former Chief Executive John Stumpf agreed in January to pay $17.5 million and accepted a ban from the banking industry. Criminal charges are also a possibility for Tolstedt.

Seeding change: The $13.2 billion-asset Berkshire Bank is promoting a certificate of deposit that will be used to fund small-business loans to borrowers sourced through The Runway Project, a nonprofit that helps entrepreneurs of color get early-stage funding. The CD initiative was one idea shared in a panel discussion that Berkshire convened with civil rights leaders to brainstorm ways banks can partner with others in the private and public sectors to foster economic opportunity for struggling communities. Malia Lazu, the Boston bank’s chief culture and experience officer, said she initially organized the virtual town hall because low-income families have been especially hard hit by the pandemic and many minority-owned businesses are at risk. “When we looked at the wealth gap, we found a couple ways families get on that ladder: home equity, homeownership and business ownership,” Lazu said.

Five things banks can do: Banks have a “disproportionate responsibility” to help reverse the economic inequities that plague minority communities, Jennifer Tescher, CEO of the Financial Health Network, argues in this op-ed. She offers five immediate courses of action: Proactively support Black employees during these especially trying times by encouraging self-care; openly acknowledge the company’s role in past practices like redlining and examine existing lending practices to identify and remove obstacles to providing more loans to minority communities; increase lending to Black-owned businesses, which are denied bank loans at triple the rate of businesses with white owners; conduct an honest and open pay-equity review; and diversify executive ranks.

Why ‘working on diversity’ is not good enough: Mellody Hobson, president and co-CEO of Ariel Investments and a board member at JPMorgan Chase, issued a call to action for corporate America when asked during a CNBC interview for her “personal and visceral reaction” to the footage that showed the killing of George Floyd by a Minneapolis police officer. “There’s despair and sadness and certainly a level of anger. And I’m horrified. I watched someone be murdered over eight and a half minutes. Murdered, not die, not killed. Murdered,” she said, before challenging companies to stop being complacent about the lack of diversity in the executive ranks. “Saying ‘we are working on diversity’ in a company is unacceptable to me – because in corporate America, we don’t ‘work’ on anything else. … If you don’t get it done, you get fired.” Hobson urged companies to hold themselves accountable by setting targets for diversity, just as they do for every other aspect of business. “Corporate America is run by all-stars; they are used to winning. If we do that like we do everything else, we would see this needle move. Because so much of this unrest, this civil unrest, is tied to economic inequality. That’s just a fact.” Watch the full video interview here.

Mellody Hobson, president of Ariel Investments.
Mellody Hobson, president of Ariel Investments.

As if on cue: After previously vowing to improve diversity, Wells Fargo CEO Charlie Scharf has put some money where his mouth is by tying executives’ pay to actual results. The pay packages for members of the operating committee will take into account metrics for increased representation and inclusion of diverse employees. Among the newly announced goals is doubling the ratio of Black managers from the current 6%.

Responding to an ‘overwhelming’ crisis: Bank of America Vice Chair Ann Finucane is overseeing its upsized effort to help improve the economic prospects of people of color. It has doubled a previous $500 million commitment, pledging $1 billion over the next four years toward affordable housing, small-business lending, and economic development in minority communities. “You’ve got a pandemic, you have a recession, and you have this moment this issue cracked open for all the world to see of racial injustice,” Finucane said in an interview with American Banker. “This is a lot for anybody to digest. But in the Black and African-American community, it is overwhelming.”

Parting advice: Nothing is easy in a pandemic, and that includes retiring. Beth Mooney stepped down as KeyCorp’s chairman and CEO in April and capped her four-decade career in banking not by meeting with employees, customers and civic leaders, but through handwritten notes and Zoom meetings in quarantine. Mooney took the role in 2011 and became part of a new generation of leaders that helped reshape the industry in the wake of the Great Recession. Much like the financial crisis, she believes this is another defining moment for the industry and corporate America more broadly. “American businesses, we have a role to play to bring this economy back and to bring it back safely and in a way where we can provide livelihood and support our employees,” Mooney said. “We also have a broader sense of how [the pandemic is] hitting communities and different kinds of businesses and vulnerable populations. If anything, this is going to be another of those moments where you evolve, and define corporate responsibility, not retreat.” Read American Banker’s Q&A with Mooney here.

A timely bank holiday: Many banks closed for all or part of Friday to observe a holiday that marks the end of slavery in the United States. “We cannot fix 400 years of injustice with one day,” said Stephanie Smith, chief inclusion and diversity officer at Cincinnati-based Fifth Third. “But we can start taking steps to acknowledge the fact that there is racial inequality and inequity in organizations, corporations and communities and we want to play our part in saying that we’re willing to recognize difficult moments.” Get more details on how and why banks celebrated Juneteenth here and here.

LGBT advocacy: JPMorgan Chase Chairman and CEO Jamie Dimon, along with other members of the company’s 12-person operating team, voiced support for LGBT rights in a staff memo, praising the U.S. Supreme Court’s decision on workplace protections for transgender people and criticizing the Trump administration’s move to eliminate nondiscrimination protections. “Our commitment to supporting LGBT+ issues is enduring because supporting our colleagues, suppliers and clients in the U.S. and around the world is, most importantly, the right thing to do, and it also makes good business sense,” the memo said. Dimon has challenged other CEOs to get more involved in social and public policy, saying progress on problems will be more difficult if companies and their leaders don’t step up.

Lawsuits alleging discrimination

Diversity dispute: A former managing director at Morgan Stanley, Marilyn Booker, claims in a lawsuit against the firm that she was fired for doing her job perhaps a little too enthusiastically. After 26 years at the company, 16 of which were spent as the head of global diversity, Booker says she was terminated for pushing to do more to promote people of color, an allegation Morgan Stanley says it strongly rejects. The court filing says Booker was belittled by white colleagues, had budgets for diversity repeatedly cut and was made to feel like the token minority at public events. It also says that only about 100 of Morgan Stanley’s 16,000 financial advisers are Black and that there are only 41 black managing directors among thousands across the company.

Unequal pay?: A handful of women are suing the law firm Jones Day alleging gender discrimination in its pay practices, and the National Law Journal did an update on some of the back and forth in the case here. A detailed review of the compensation compared with the Cravath system, which is often adopted by the largest law firms, suggests discrepancies in pay ranging from $4,000 to $220,000, according to this analysis.

Role call

Karen Peetz, formerly of Bank of New York Mellon and Wells Fargo, joined Citigroup in the newly created position of chief administrative officer. She is in charge of centralizing management of big projects in different parts of the company and reports to CEO Michael Corbat.

Karen Peetz
Karen Peetz

Mary McNiff moved into a new role as chief compliance officer for Citigroup, according to the same company memo that announced the hiring of Peetz. Both appointments took effect June 8. McNiff succeeds a retiring Mark Carawan in the compliance job. She had been CEO of Citibank, a title that Corbat now adds to his own list. McNiff ranked as our No. 1 Most Powerful Woman to Watch in 2019.

BNP Paribas has appointed Christina Cho and Anne van Riel to lead its sustainable finance capital markets business in the Americas. Cho and van Riel are based in New York and report to Dan Cozine, deputy head of global credit markets for the Americas.

American Express added Glenda McNeal to its executive committee. McNeal is president of enterprise strategic partnerships and the first Black woman to serve on the committee. She has been at the company more than 30 years in various roles, including sales, business development and marketing.

Natalie Lamarque has been named general counsel of New York Life and will also join the executive management committee. She previously served as deputy general counsel.

Beyond banking

A reward for good ideas: Melinda Gates and MacKenzie Bezos have teamed up to award $30 million in grants to organizations with the best ideas to help expand women’s power and influence in the United States by 2030. The Equality Can't Wait Challenge is part of a larger $1 billion initiative at Gates’ nonprofit Pivotal Ventures. Lever for Change will administer the challenge and will be accepting applications for grants through September. Winners will be announced in the summer of 2021.

Deja vu: This August marks the centennial of the 19th Amendment, which granted voting rights to women. The backdrop of this victory for women’s suffrage bears eerie parallels to present day, as the onset of the Spanish Flu forced women back then to practice social distancing while protesting. “American women campaigning for the right to vote found themselves engaged in three different battles — against the practical problems and the tragedies that the flu wrought, against the crisis of the then-ongoing World War I, and against those opposed to women’s suffrage,” writes Suyin Haynes for Time magazine.

Thanks for reading! Please keep an eye on our Women in Banking homepage for more updates, including the Most Powerful Women in Banking: Next list, which features high-achieving executives ages 40 and under. The 2020 list comes out later this summer.

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Diversity and equality Gender issues Racial Bias Wells Fargo JPMorgan Chase Small business lending Consumer banking