Many banks, especially the largest, have invested considerable resources to develop and implement
Yet while some of these practices have created more diverse workforces, success has been limited in terms of expanding diversity and inclusion
Diversity in higher-ranking positions is growing, but there are still only a few women running banking organizations of any size, and even fewer Black and Hispanic executives.
This disparity extends into the line of business management, where diverse experiences and perspectives can have a meaningful impact on bank policies and strategies. This in turn drives more inclusive business practices in areas such as lending and community investment.
One may recall when Wells Fargo CEO Charlie Scharf received significant backlash last year for offering a well-meaning but ham-handed explanation that blamed the lack of progress on a
What he failed to mention is that there is no shortage of talented minority and women prospective executives, but that many banks have failed to tap that talent pool to populate their management ranks. Nor have they created effective career pathing processes to nurture and grow that talent once identified and acquired.
As the drumbeats for greater diversity and inclusion get louder — and the benefits become more evident — the question confronting bank executives is whether they will proactively steer toward diversity when filling the talent pool, or get run over by new government policies designed to force them to do better, faster.
Banking is already a highly regulated industry. The last thing it needs is a new rash of legislation or regulation designed to force bankers to do what they should be doing for their own self-interest.
However, if individual banks and the industry as a whole do not make meaningful progress in the areas of diversity and inclusion, various governmental entities will likely intervene. And if history is any judge, this intervention will not be positive.
Typically, bank legislation and regulation has focused on telling banks what they can’t or shouldn’t do in order to address a specific problem, or to reduce institutional and systemic risk. Government is singularly bad at telling banks what they should do, and more important, how they should do it. Regulation is generally punitive: It provides a stick when, in this case, a carrot is more effective.
As a result, individual banks and major trade groups need to take leadership positions that both result in tangible progress in the areas of diversity and inclusion, and forestall the need for additional government action.
The list of possible solutions and initiatives is large for both industry groups and individual institutions. Major trade organizations in particular can play a large role in advancing the industry’s diversity agenda.
The first thing they have to do, however, is get their own house in order. While some organizations have made significant progress in creating diverse leadership teams and boards, others have not. And in almost every case, diversity has focused on expanding the representation of women while minority executives and board members remain rare.
Other possible initiatives include: sponsoring industrywide studies that identify and publicize the performance advantages and competitive benefits of successful diversity programs; identifying and promoting best practices across the industry; and expanding recognition programs that identify and celebrate success.
Industry groups play a major role in influencing the need for additional legislation and regulation, but the ultimate responsibility for making meaningful progress in the areas of diversity and inclusion rests with individual bank leaders. They are also the key to eliminating the need for additional government involvement.
There is no shortage of available approaches and programs to address the shallow talent pool and expand opportunities for diverse employees. Training, compensation, communication, recruiting and onboarding, talent management, succession planning and many other types of programs can be leveraged to create more diverse workforces and management teams.
The challenge is not knowing what to do, but having the will to do it. The industry should not need government’s help in making meaningful strides to improve diversity performance. It’s time to step up, and for bankers to prove that they don’t need to be told how to be diverse. They should know it and show it.
Editor’s note: This op-ed is the second in a monthly series called "Deposits and Withdrawals" offering a point and counterpoint on a key topic. The first in this series can be found
