[House Hearing, 110 Congress]
[From the U.S. Government Publishing Office]
DIVERSITY IN THE
FINANCIAL SERVICES SECTOR
=======================================================================
HEARING
BEFORE THE
SUBCOMMITTEE ON
OVERSIGHT AND INVESTIGATIONS
OF THE
COMMITTEE ON FINANCIAL SERVICES
U.S. HOUSE OF REPRESENTATIVES
ONE HUNDRED TENTH CONGRESS
SECOND SESSION
----------
FEBRUARY 7, 2008
----------
Printed for the use of the Committee on Financial Services
Serial No. 110-86
DIVERSITY IN THE FINANCIAL SERVICES SECTOR
DIVERSITY IN THE
FINANCIAL SERVICES SECTOR
=======================================================================
HEARING
BEFORE THE
SUBCOMMITTEE ON
OVERSIGHT AND INVESTIGATIONS
OF THE
COMMITTEE ON FINANCIAL SERVICES
U.S. HOUSE OF REPRESENTATIVES
ONE HUNDRED TENTH CONGRESS
SECOND SESSION
__________
FEBRUARY 7, 2008
__________
Printed for the use of the Committee on Financial Services
Serial No. 110-86
U.S. GOVERNMENT PRINTING OFFICE
41-117 WASHINGTON : 2008
_____________________________________________________________________________
For Sale by the Superintendent of Documents, U.S. Government Printing Office
Internet: bookstore.gpo.gov Phone: toll free (866) 512-1800; (202) 512�091800
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HOUSE COMMITTEE ON FINANCIAL SERVICES
BARNEY FRANK, Massachusetts, Chairman
PAUL E. KANJORSKI, Pennsylvania SPENCER BACHUS, Alabama
MAXINE WATERS, California DEBORAH PRYCE, Ohio
CAROLYN B. MALONEY, New York MICHAEL N. CASTLE, Delaware
LUIS V. GUTIERREZ, Illinois PETER T. KING, New York
NYDIA M. VELAZQUEZ, New York EDWARD R. ROYCE, California
MELVIN L. WATT, North Carolina FRANK D. LUCAS, Oklahoma
GARY L. ACKERMAN, New York RON PAUL, Texas
BRAD SHERMAN, California STEVEN C. LaTOURETTE, Ohio
GREGORY W. MEEKS, New York DONALD A. MANZULLO, Illinois
DENNIS MOORE, Kansas WALTER B. JONES, Jr., North
MICHAEL E. CAPUANO, Massachusetts Carolina
RUBEN HINOJOSA, Texas JUDY BIGGERT, Illinois
WM. LACY CLAY, Missouri CHRISTOPHER SHAYS, Connecticut
CAROLYN McCARTHY, New York GARY G. MILLER, California
JOE BACA, California SHELLEY MOORE CAPITO, West
STEPHEN F. LYNCH, Massachusetts Virginia
BRAD MILLER, North Carolina TOM FEENEY, Florida
DAVID SCOTT, Georgia JEB HENSARLING, Texas
AL GREEN, Texas SCOTT GARRETT, New Jersey
EMANUEL CLEAVER, Missouri GINNY BROWN-WAITE, Florida
MELISSA L. BEAN, Illinois J. GRESHAM BARRETT, South Carolina
GWEN MOORE, Wisconsin, JIM GERLACH, Pennsylvania
LINCOLN DAVIS, Tennessee STEVAN PEARCE, New Mexico
PAUL W. HODES, New Hampshire RANDY NEUGEBAUER, Texas
KEITH ELLISON, Minnesota TOM PRICE, Georgia
RON KLEIN, Florida GEOFF DAVIS, Kentucky
TIM MAHONEY, Florida PATRICK T. McHENRY, North Carolina
CHARLES A. WILSON, Ohio JOHN CAMPBELL, California
ED PERLMUTTER, Colorado ADAM PUTNAM, Florida
CHRISTOPHER S. MURPHY, Connecticut MICHELE BACHMANN, Minnesota
JOE DONNELLY, Indiana PETER J. ROSKAM, Illinois
ROBERT WEXLER, Florida KENNY MARCHANT, Texas
JIM MARSHALL, Georgia THADDEUS G. McCOTTER, Michigan
DAN BOREN, Oklahoma KEVIN McCARTHY, California
DEAN HELLER, Nevada
Jeanne M. Roslanowick, Staff Director and Chief Counsel
Subcommittee on Oversight and Investigations
MELVIN L. WATT, North Carolina, Chairman
LUIS V. GUTIERREZ, Illinois GARY G. MILLER, California
MAXINE WATERS, California PATRICK T. McHENRY, North Carolina
STEPHEN F. LYNCH, Massachusetts EDWARD R. ROYCE, California
NYDIA M. VELAZQUEZ, New York RON PAUL, Texas
MICHAEL E. CAPUANO, Massachusetts STEVEN C. LaTOURETTE, Ohio
CAROLYN McCARTHY, New York J. GRESHAM BARRETT, South Carolina
RON KLEIN, Florida MICHELE BACHMANN, Minnesota
TIM MAHONEY, Florida PETER J. ROSKAM, Illinois
ROBERT WEXLER, Florida KEVIN McCARTHY, California
C O N T E N T S
----------
Page
Hearing held on:
February 7, 2008............................................. 1
Appendix:
February 7, 2008............................................. 45
WITNESSES
Thursday, February 7, 2008
Abdul-Aleem, Zaid, Vice President, Piedmont Investment Advisors,
on behalf of the National Association of Securities
Professionals.................................................. 33
Booker, Marilyn F., Managing Director, Global Head of Diversity,
Morgan Stanley................................................. 31
Corey, Walter E., Director, The Phoenix Foundation............... 27
Edwards, Ronald, Director, Program Research and Surveys Division,
Office of Research, Information and Planning, U.S. Equal
Employment Opportunity Commission.............................. 9
Graves, Don Jr., Graves & Horton, LLC............................ 35
Sims, Nancy A., President, The Robert Toigo Foundation........... 26
Thomas, Geraldine, Human Resources and Global Diversity and
Inclusion Executive, Bank of America........................... 29
Visconti, Luke, Partner and Co-Founder, DiversityInc............. 23
Williams, Orice M., Director, Financial Markets and Community
Investment, U.S. Government Accountability Office.............. 7
APPENDIX
Prepared statements:
Watt, Hon. Melvin L.......................................... 46
Waters, Hon. Maxine.......................................... 53
Abdul-Aleem, Zaid............................................ 56
Booker, Marilyn F............................................ 81
Corey, Walter E.............................................. 90
Edwards, Ronald.............................................. 97
Graves, Don Jr............................................... 100
Sims, Nancy A................................................ 108
Thomas, Geraldine............................................ 144
Visconti, Luke............................................... 151
Williams, Orice M............................................ 162
Additional Material Submitted for the Record
Watt, Hon. Melvin L.:
Written responses to questions submitted to Marilyn F. Booker 179
Written responses to questions submitted to Ronald Edwards... 183
Written responses to questions submitted to Orice M. Williams 184
Written responses to questions submitted to Nancy A. Sims.... 185
Letter from Hon. Michael Oxley, et al., to Hon. David M.
Walker, dated February 9, 2005............................. 197
GAO report entitled, ``Financial Services Industry, Overall
Trends in Management-Level Diversity and Diversity
Initiatives, 1993-2004,'' dated June 2006.................. 199
The DiversityInc Top 50 Companies for Diversity list......... 247
European Commission study entitled, ``The Business Case for
Diversity, Good Practices in the Workplace''............... 251
Washington Post article entitled, ``Most Diversity Training
Ineffective, Study Finds,'' dated January 20, 2008......... 314
Summaries of credentials of witnesses........................ 317
DIVERSITY IN THE
FINANCIAL SERVICES SECTOR
----------
Thursday, February 7, 2008
U.S. House of Representatives,
Subcommittee on Oversight
and Investigations,
Committee on Financial Services,
Washington, D.C.
The subcommittee met, pursuant to notice, at 2:33 p.m., in
room 2128, Rayburn House Office Building, Hon. Melvin L. Watt
[chairman of the subcommittee] presiding.
Members present: Representatives Watt, Waters, McCarthy;
and Miller.
Also present: Representatives Scott, Meeks, and Allen.
Chairman Watt. This hearing of the Subcommittee on
Oversight and Investigations will come to order.
Let me thank everybody who is here with us and apologize in
advance that we might get a call for votes at some point, but
we'll try to move as expeditiously and with as few
interruptions as we can.
I want to start by welcoming back my ranking member, who
has been out with some adversity, and we're delighted to see
you back. Since he left, I cut my moustache off and he grew
something on his face.
[Laughter]
Chairman Watt. So I was joking with him that I was trying
to grow up to be like him and he was joking with me that he was
trying to grow up to be like me, so we passed in the night, as
we often do here in the political world. But it is great to see
him back, and I know some of the adversities that he has been
through and our hearts and minds have been with him throughout
the ordeal, so welcome back.
I am going to recognize myself for an opening statement,
and then I will recognize the ranking member for his opening
statement.
This is the second in a series of hearings by this
subcommittee as we're currently constituted about diversity
issues in the financial services sector. Our first hearing held
last October explored the role that minority-owned financial
institutions play in our economy and the role that Federal
banking regulators play in preserving and promoting those
institutions.
Today's hearing is also a follow-up to hearings held in
2004 and 2006 by the subcommittee when my Republican colleagues
were in the majority, which focused on workplace diversity and
especially on the recruitment, retention, and promotion of
minorities and women to mid- and senior-level management
positions in the financial services sector.
We continue the subcommittee's review of diversity issues
in the financial services sector because we believe that being
proactive on diversity is legally required and necessary, and
because there is growing evidence that diversity is critically
important to our global competitive advantage in the financial
sector as well as in other business sectors.
In June 2006, the U.S. Government Accountability Office
issued a report entitled, ``Overall Trends in Management Level
Diversity and Diversity Initiatives 1993-2004.'' And the
subcommittee held a hearing to review that report on July 12,
2006. The report was requested after a July 15, 2004,
subcommittee hearing that reviewed challenges faced by the
financial services industry in obtaining and maintaining a
diverse work force and challenges faced in getting access to
capital by minority-owned businesses.
The 2006 GAO report examined workplace diversity trends for
various sectors of the financial services industry and found
that overall diversity at the management level did not change
substantially from 1993 to 2004, and that the marginal
improvements that had been made were not uniform across various
parts of financial services sector or across racial and ethnic
minority groups.
Sadly, the GAO's follow-up data for 2006 shows that
diversity at the management level in the financial services
industry has remained about the same as reflected in its 1993-
2004 report. The GAO report suggests that depository
institutions such as commercial banks and insurance companies
have generally been more diverse at the management level over
the years than the securities sector and the holdings and trust
sector, which includes investment trust, investment companies,
and holding companies.
There is some suggestion, as some witnesses testified at
the subcommittee's 2006 hearing, that even the modest growth
reported in senior management level diversity may have been
overstated due to the fact that the officials and managers
category used in the Equal Employment Commission's EEO-1 form
included lower and mid-level management positions that may have
higher representations of minorities and white women.
The Equal Employment Opportunity Commission uses the EEO-1
form to collect demographic data annually from private
employers with 100 or more employees and from Federal
contractors who have 50 or more employees and are prime or
subcontractors on a government contract over $50,000.
Effective with the 2007 reporting year, a revised EEO-1
form now divides the category officials and managers into two
subcategories: The first is the executive senior-level
officials and managers; and the second is the first mid-level
officials. I'm happy to have Mr. Ronald Edwards representing
the EEOC today to discuss this revised EEO-1 form, and to give
a preliminary assessment of the utility of the new form in
making a better assessment of diversity in the management
ranks.
We are fortunate that several groups and foundations in the
private sector have also been conducting studies and research
about diversity in corporate America and about diversity in the
financial services sector in particular. DiversityInc, one such
company, is perhaps best known for its annual DiversityInc top
50 list of companies. DiversityInc grades companies on CEO
commitment, human capital, corporate communications, and
supplier diversity.
In addition to the top 50 list, there are top 10 lists for
specific racial and ethnic groups, women and people with
disability, and other categories. In 2007, over 300 companies
submitted questionnaires and other data to be considered for
DiversityInc's list. I am proud that Bank of America, a
financial institution headquartered in my congressional
district, was rated number one on the DiversityInc top 50 for
2007, and I look forward to hearing from our witness today, Ms.
Geri Thomas, Global Head of Diversity at Bank of America, about
how they achieved that ranking.
Also testifying at today's hearing is a representative of
the Robert Toigo Foundation. Toigo conducts research into
specific topics concerning diversity within the financial
services industry. It completed a valuable study in November
2006 entitled, ``Retention Returns: Insights for More Effective
Diversity Initiatives.'' That study focused on retention of
minority finance professionals. The study concluded that
retention is increased if minority professionals receive
visible significant assignments that are valued at the firm, if
they have genuine mentors and receive objective performance
standards that are applied fairly and consistently, and if they
see visible commitment to diversity from the top, which
translates down to middle management.
Fostering a diverse workforce is critically important, not
only for minorities and women, but for U.S. firms seeking to
compete in the 21st Century global market. With increased
globalization, international firms with diverse workforces are
competing vigorously with U.S. companies for revenues, profits,
and talent. Indeed, the European Commission issued a
comprehensive study in September of 2005 on the diversity
efforts of leading financial and manufacturing firms in Europe.
The European Commission study provides many important examples
of innovative best practices in the areas of recruitment and
retention of diverse staff and management.
It is noteworthy that in the European Commission study, 83
percent of the respondents believe that effective diversity
initiatives positively impacted the bottom line. Among the most
important benefits they reported were enhanced employee
recruitment and retention from a wider pool of high-quality
workers, improved corporate image and reputation, greater
innovation, and enhanced opportunities.
Similarly, the DiversityInc representative will testify
that the DiversityInc top 50 regularly outperform the S&P 500
in terms of return on investment. In the final analysis, if we
can't make the legal, ethical, and moral case for U.S.
companies to pursue diversity aggressively, perhaps they'll
take note of the impact of diversity on the bottom line.
I have referenced a number of things, and before I yield to
you, let me just ask your unanimous consent to insert the
following documents into the record:
A letter dated February 9, 2005, from our former House
Financial Services Chairman, Mike Oxley; our former Ranking
Member and our current Chair of the Full Committee, Barney
Frank; the Oversight and Investigations Subcommittee
Chairwoman, Sue Kelly; the Oversight and Investigations
Subcommittee Ranking Member, Luis Gutierrez; and Oversight and
Investigations Subcommittee member, David Scott, to the GAO,
which requested a report on racial, ethnic, and gender
diversity in the financial services industry, including
professional accounting services firms, and access to capital.
Second is the July 12, 2006, GAO report, entitled ``Overall
Trends in Management Level Diversity and Diversity Initiatives
1993-2004''.
Third, the DiversityInc top 50 list for each year 2001-
2007.
Fourth, the September 2005 European Commission study
entitled, ``The Business Case for Diversity Good Practices in
the Workplace''.
Fifth, the January 20, 2008, Washington Post article
entitled, ``Most Diversity Training Ineffective, Study Finds,''
just to make sure we are giving equal time to all points of
view here.
And I would reference, without submitting into the record,
House Report 110-278, ``Financial Services Diversity
Initiative,'' that accompanies H. Con. Res. 140, which was a
resolution that we passed in the House encouraging diversity in
the financial services sector.
And finally I will submit, with unanimous consent,
summaries of the credentials of each of our witnesses today,
and I hope they will forgive me for not reading their entire
vitae, resumes--whatever they are called--CVs. That's what
they're called? Curriculum vitae. Okay. Whatever they are
called, you know what I mean.
I'm going to put them in the record rather than reading
them. That's the bottom line, so we can spend most of our time
talking about the issues here today.
With that, I appreciate my ranking member's indulgence, and
I yield to him for an opening statement in such matters as he
may have to say.
Mr. Miller. Thank you. You sound the same, although you do
look different. But the women are keeping you straight on your
side, I see, with your language on this, so keep it up, women.
I want to thank you, Mr. Chairman, for holding this hearing
today. It's important to discuss diversity in the financial
services sector, and this is an appropriate venue to have that
happen.
I can only imagine that with the global economy we live in
today, it would only benefit a company to diversify their
workforce in an effort to meet the financial needs of their
clients, customers, and community. As we will shortly hear in
testimony from some of our witnesses, there is a clear economic
advantage to diversifying companies. Today's white collar work
pool is dramatically different than in the past. Educated men
and women from a vast array of backgrounds are changing the
face of the business world today.
In 2004, however, concerns were raised in this committee
that the financial services sector was lacking a diverse
workforce. And members had requested at that point in time--I
was one of them--that the Government Accountability Office, the
GAO, provide the overview of diversity in this industry.
The following year, the GAO reported that during the period
from 1993 to 2004, the U.S. Equal Employment Opportunity
Commission, the EEOC, data actually showed that management
level representation by minority men and women increased
overall from 11.1 percent to 15.5 percent.
While I understand that there is some concern with this
data, and with the overall recruiting and retention rate of
minorities in the industry, I believe that these numbers
actually indicate a positive trend toward greater diversity in
the financial services sector.
The GAO reported that between 1993 and 2004, the
representation of African Americans and Hispanics increased by
a percentage, and then Asian representation increased by 2
percentage points in management level positions across the
financial services industry. Their report also shows that
representation by white women remained constant, and
representation by white men declined by 5 percent.
While the stated percentages may not seem extremely
significant, I think we need to take into consideration the
overall growth of management level positions in the financial
services industry.
According to the information I received from the GAO this
morning, there was an 18 percent growth rate in total
management level positions in this industry from 1993 to 2004.
The minority growth rate during this time period was about 65
percent, which is much faster growth rate than the overall
development of these positions.
It also seems to me that we need to take into consideration
the total population of the United States and take into account
that these numbers may actually reflect the minority and non-
minority ratios of populations across the country.
In addition to exploring these issues today, I am looking
forward to hearing from the industry regarding their important
programs and further increased diversity within the workforce.
Private-sector initiatives are the crucial component for
diversifying the industry.
I also look forward to hearing from Mr. Don Graves, CEO of
Progress to Business, about his organization's crucial work to
help minorities in the workforce. Mr. Graves is a former
director of public policy for the Business Roundtable. In his
capacity at the Roundtable, he also served as the executive
director of Business Link, a public-private partnership created
to encourage business-to-business relationships between large
corporations and small businesses, especially minority and
women-owned businesses and those located in economically
distressed areas.
I am pleased to have Mr. Graves here today in addition to
the other witnesses. I look forward to hearing from all of you
from the private sector efforts to monitor and increase
diversity within the financial services sector.
And I guess, Mel, it's like two people reading the Bible.
Both of them come back with a different opinion. I thought it
was pretty good and you had some problems with it, so I guess
we're going to have some witnesses here that are going to try
to tell both of us that we're wrong and point some light on
what we're doing that's good and beneficial. I yield back.
Chairman Watt. I'm so happy to have you back. We're going
to be a lot more cordial and congenial even than we usually
are. So we're just joking, you all; we have a wonderful
relationship.
I neglected to welcome one of my Charlotte constituents,
Dr. James Daniel, who is a minister and a business person who
has done a lot of work in the area of diversity, who found out
about this hearing and flew in today just to be here to hear
what we were doing, and to keep track of--check on his Member
of Congress too, no doubt.
We have been joined by the gentlelady from New York, Mrs.
McCarthy, who is a member of the subcommittee. Do you care to
make an opening statement? She is an avowed opponent of opening
statements. We are delighted that you are here and I hope you
won't object to the next unanimous consent request that I am
getting ready to make.
Since we talked about my good friend--Mr. David Scott from
Georgia--before he arrived, he started this process by joining
in the request of the GAO that they do this report, and he is
here with us. He is not a member of our subcommittee, but he is
a member of the Full Committee on Financial Services, and I
would ask unanimous consent, if Mrs. McCarthy won't be too
offended, that we allow him to make an opening statement since
he got us off to the start on this when he was on the
subcommittee.
I will recognize the gentleman for 5 minutes.
Mr. Scott. Well, thank you very much, Chairman Watt, first
of all for the hearing and for your graciousness in allowing me
to be a part of this subcommittee.
As America and as this Nation, our strength is our
diversity. That has been the hallmark of our advancement.
There's no greater need for that diversity than in the
financial sector. That is especially true today as we are
witnessing one of the most significant downturns in our
economy. And at the core of it is the financial services
industry, and at the core of that is some failures within that
industry that certainly have diversity in terms of the problem.
If you look at so much of the problems that we are now
incurring in our financial services industry, a lot of it has
to do with some failures on our parts to really look at
inequities in our financial system, and how we structure loans,
how we structure mortgages, predatory lending, the
``targetness'' of it. And needless to say, I have long felt
that sometimes you can avoid some of these problems if you have
a rich diversity of thought and opinion, and people of
different cultures and races within the decision-making
capacity.
So this is an important hearing to address diversity in the
workplace, or the lack thereof. And this hearing's topic of
diversity in the financial services industry, of course, has
been of particular interest to me for several reasons, the most
important reason being the need to open up access to capital in
minority communities. As Mr. Watt has said, I have been on this
track for a long, long time, as an entrepreneur, as one who is
a graduate and received my MBA from probably, I say the top
school of finance and business in the world, which is the
Wharton School of Finance at the University of Pennsylvania.
But my thesis work was done in this area, and my title that
Mr. Watt--my title of my thesis was, ``A Light Out of the
Darkness,'' which was to bring some greater diversity at every
level in terms of the workplace.
As I said, America's strength is that it has always been a
place of diversity, and we are proud of this fact, and this
should be reflected in the workplace, especially in the
financial services sector.
I understand the unique challenges facing minorities, being
one myself and having gone through this. In the financial
services businesses, I know the need. We do not have enough
diversity in key decision-making positions within the financial
services industry, which is the heart and soul of our free
enterprise capitalistic system.
And I hope that this hearing will shed more light and give
us a renewed commitment to really make sure diversity is really
taking place, and I'm hoping for some new ideas and solutions
today, addressing this issue. More must be done to open the
doors of opportunity for the rest of America to include all of
America, and this is a fight that this committee under the
leadership of Chairman Watt and our subcommittee as well the
leadership of the chairman of our Full Committee, Chairman
Frank, in terms of this fight.
I am pleased, Mr. Chairman, that you have chosen to hold
this important hearing. I appreciate the opportunity to
participate, and I do look forward to the testimony of our
distinguished witnesses. Thank you.
Chairman Watt. I thank the gentleman for his continuing
interest and commitment in this area. I wasn't aware of his
thesis, but I learn something new about the gentleman every
day, which is good. So perhaps we'll look at putting that in
the record too, if the gentleman--I know he's too modest to
suggest such a thing, but we'll talk about that later, and
maybe if it fits--we won't force it, but if it fits, that might
be a good thing to do.
I am pleased now to introduce our first panel of witnesses.
We have two panels, the government witnesses and the private
sector witnesses.
The first witness--and again you all forgive me for the
abbreviated introduction, but I don't want us to run out of
time this afternoon--our first witness is Orice Williams, who
has been with us before. She is the Director of Financial
Markets and Community Investment at the U.S. Government
Accountability Office, and we welcome her.
And our second witness on this panel will be Mr. Ronald
Edwards, Director of the Program Research and Surveys Division
with the Office of Research, Information and Planning at the
Equal Employment Opportunity Commission.
Welcome, both of you. And we will start with Ms. Williams.
Before you do that, let me do my protocol stuff here. Without
objection, your written statements will be made a part of the
record. Each of you will be recognized for a 5-minute summary
of your testimony, and your full statement will be in the
record, and of course if you spill over a little beyond the 5
minutes, we'll count that from the time we saved from the
introductions.
So you are recognized for 5 minutes, Ms. Williams.
STATEMENT OF ORICE M. WILLIAMS, DIRECTOR, FINANCIAL MARKETS AND
COMMUNITY INVESTMENT, U.S. GOVERNMENT ACCOUNTABILITY OFFICE
Ms. Williams. Thank you.
Chairman Watt, Ranking Member Miller, and members of the
subcommittee, I am pleased to be here this afternoon to discuss
GAO's 2006 report on diversity in the financial services
industry, and provide some updated statistics.
In particular, I would like to highlight trends in
management level diversity and discuss diversity initiatives,
and some of the challenges companies face.
First, our analysis of EEOC's data on workforce
demographics revealed that between 1993 and 2004 overall
management level representation by minorities and women in the
financial services sector had not changed substantially,
although there was some variation by racial and ethnic group.
In updating similar statistics for 2006, we found that little
has changed.
For example, all minorities at the management level had
increased from about 11 percent in 1993 to 15.5 percent in
2004. This number had increased to 16.1 percent in 2006. While
changes in some of the job categories limits our ability to
trend this data directly, the 2006 data are still generally
comparable.
Across racial and ethnic groups, African Americans, Asian
Americans, Hispanic Americans, and American Indians experienced
varying levels of change over this period. The trend for white
woman has remained relatively constant at slightly more than
one-third. However, it is important to keep in mind that
management is defined very broadly and includes everyone from
the assistant manager of a small bank branch in Charlotte to
the CEO of a Fortune 500 company.
Therefore, these statistics may actually overstate the
amount of diversity among senior managers in the financial
services industry. However, in 2007 EEOC began to collect this
information in such a way that we hope will allow for a more
focused analysis on senior management in the future.
In addition to evaluating the industry as a whole, we also
looked across sectors and found that certain sectors such as
depository institutions and insurance within this industry were
more diverse at the management level than others.
Now let me turn briefly to corporate diversity initiatives
and programs. We spoke with dozens of firms and trade
associations to obtain their views and perspectives about
diversity. We found that many had programs or initiatives to
increase workforce diversity and that they face a variety of
challenges.
For example, we heard from several firms that diversity
initiatives cannot be treated as programs. Instead they have to
be viewed as long-term commitments that may start at the top,
but must permeate the entire organization. We found that many
firms had programs that focused on attracting, recruiting, and
retaining a diverse workforce. This included offering
scholarships and internships to students to attract them to the
financial services industry, recruiting from a diverse pipeline
and fostering a working environment of inclusion that allowed
all employees to thrive.
We found that some firms are trying to develop performance
measures to gauge the effectiveness of their diversity efforts,
which can be challenging.
Some common measures identified were tracking employee
satisfaction survey results, and the representation of women
and minorities in key positions.
These measures become more important as some companies are
beginning to hold senior managers accountable for fostering a
more diverse workforce, including linking managers'
compensation to their performance in promoting diversity.
However, we found that financial institutions face a
variety of challenges that may provide insights into the
statistics I mentioned earlier. In particular, we heard that
maintaining a critical mass of minority employees needed to
establish a visible presence, effective networks, and mentors
for minority and women candidates has been an ongoing
challenge.
Finally, firms noted that building a pipeline of diverse
talent was also a challenge. Specifically, the financial
services industry requires that many senior officials possess
certain skills and credentials and the possible pool of
candidates may be constrained by this requirement. For example,
of accredited business schools, about 19 percent of graduates,
one potential talent pool for the industry, are minorities.
This concludes my oral statement, and I would be happy to
answer any questions at this time. Thank you.
[The prepared statement of Ms. Williams can be found on
page 162 of the appendix.]
Chairman Watt. We thank you very much for your testimony,
and we'll first hear the testimony of Mr. Edwards and then
we'll open it up for questions.
Mr. Edwards, you are recognized for 5 minutes.
Mr. Edwards. Thank you very much. Good afternoon, Mr.
Chairman, and members of the subcommittee.
Chairman Watt. We need to either have you turn that on or
pull it a lot closer to you.
Mr. Edwards. Is this better?
Chairman Watt. Yes.
STATEMENT OF RONALD EDWARDS, DIRECTOR, PROGRAM RESEARCH AND
SURVEYS DIVISION, OFFICE OF RESEARCH, INFORMATION AND PLANNING,
U.S. EQUAL EMPLOYMENT OPPORTUNITY COMMISSION
Mr. Edwards. My name is Ron Edwards, and I am the Director
of the Program Research and Surveys Division of the Office of
Information and Planning at the Equal Employment Opportunity
Commission. Among our Division's responsibilities is the
implementation of the Equal Opportunity Survey Program, that
collects workforce data from employers in various sectors of
the economy.
Key among these efforts is our collection of data from the
private sector in the EEO-1 report. We appreciate the
opportunity to address the subcommittee today.
The EEO-1 report, as the chairman had pointed out earlier,
requires private employers to provide account of their
employees by job category, race, ethnicity, and gender. EEO-1
employment data are collected annually by the EEOC for its own
programs and for those of the Office of Federal Contract
Compliance Programs, OFCCP, at the Department of Labor.
Private employers are required to file the EEO-1 report
when they have 100 or more employees or when they are Federal
contractors or subcontractors with 50 or more employees and
contracts totalling $50,000 or more. Data are collected for
each employer who meets these criteria; an employer who has
multiple establishments is required to file a separate report
for each establishment where they have 50 or more employees.
The workforce data are reported on a matrix that captures
employee counts by job category, race and ethnicity, and
gender. The EEO-1 report must be filed annually. It is filed
every year by September 30th; that is the deadline. The
employment data comes from a payroll period in the months of
July, August, or September.
The Commission is required by law to maintain this data
confidentially, and they can only be released under very
limited circumstances. In 2006, we collected data from about
50,000 employers that covered about 55 million employees.
Both the EEOC and the OFCCP have used this data since 1966.
Our EEO-1 data are used for a variety of purposes. EEOC uses
the data to support its enforcement program. We also use the
data to analyze employment patterns such as the representation
of minorities and non-whites in various industries or regions
of the country.
A number of the studies that we have published using the
EEO-1 data recently are posted on our Web site, EEOC.gov. It is
our understanding that the OFCCP uses EEO-1 data to determine
which contractors' or subcontractors' establishments to select
for contractor evaluations.
The EEOC also encourages employers to use our EEO-1 data
for self-assessment. We post aggregate EEO-1 data on our Web
site, and upon request we will provide customized tables to
employers so they can compare their own EEO-1 reports and
workforce data to data aggregated for their competitors in the
labor market.
Finally, a wide range of academic researchers use our EEO-1
data for various research purposes, and the areas come from
economics, sociology, public policy, public administration, and
they use the data to publish research as a result of that.
Prior to 2007, we collected data using nine job categories,
and those job categories were: Officials and managers;
professionals; technicians; sales workers; office and clerical
workers; craft workers; operatives; service workers; and
laborers. And beginning with the 2007 survey, we then divided
one of the job categories, officials and managers, into two
separate job categories.
Those two job categories are defined as being executive or
senior-level officials and managers, and the second category is
first or mid-level officials and managers.
Executive or senior-level officials and managers are those
individuals who plan, direct, formulate policies, set strategy,
or provide overall direction in developing and delivering
products, with guidance from a board of directors or some
similar governing body.
The job titles that we might expect that come from that job
category are things like chief executive officers, chief
operating officers, chief financial officers, presidents,
executive vice presidents, chief human resources officers, and
chief information officers.
In the securities industry, we recognize that these job
titles may not be prevalent, and so we might expect to see
things like managing directors or job titles like that in this
job group.
But the key fact is what is the function of the job. If the
job is to provide overall direction for the entire corporation,
then we expect these individuals to be classified here.
It's easy to think of the first or mid-level officials and
managers as being everyone who is left out of the first
category. But more precisely, they are the individuals who
oversee and direct the production and delivery of products,
services, or functions at a group, regional, or divisional
levels in organizations.
This category would include first-line managers, production
managers, store branch managers, and in the finance industry,
they might even include a job category like vice presidents.
We also made some other more technical changes to the 2007
EEO-1 categorization of jobs by adjusting some of these
categories. For example, we took the job title of purchasing
agent and moved it into the professional category from the
official and manager's category because it is more reflective
of the duties there, and we also more clearly defined things
like financial analyst and personal financial analyst as being
a professional job rather than an official's and manager's job.
However, the key thing to remember is for all these jobs
it's the function that defines whether or not they were being
included. If they are providing overall direction for the
corporation, again they would be in the first category of the
executive director, and in the second category it would be
those that are providing more local direction.
Thank you for this opportunity to testify today. I look
forward to any questions that you may have.
[The prepared statement of Mr. Edwards can be found on page
97 of the appendix.]
Chairman Watt. Thank you so much for your testimony and we
will now recognize the members of the committee for questions,
and as her reward for not making an opening statement, I will
recognize the gentlelady from New York, Mrs. McCarthy, first.
Mrs. McCarthy. Thank you, Mr. Chairman. Just to clarify, I
don't have anything against opening statements; I just think
that they should be reserved for the chairman and the ranking
member. Sometimes we sit here for an hour-and-a-half listening
to opening statements, and most of us come to actually hear the
witnesses so we can learn. So let me clarify that.
Ms. Williams, with your study, did you see any models that
were actually working where you saw larger corporations with a
better diversity because they made a commitment as far as
bringing diversity into their corporation?
Ms. Williams. Our approach to the work really divided those
two issues. We relied on the EEOC for the statistics about the
diversity within industry as a whole. We did not drill down to
specific company level data. So when we collected information
about what companies were actually doing, we gauged those
practices against best practices based on work that the GAO had
done more broadly on diversity management. We didn't actually
do any type of correlation comparison. But there have been
other studies that have attempted to do that.
Mrs. McCarthy. Well, I'm just wondering because if there
are models out there or corporations that are out there that
actually have good programs that have been working to bring
diversity into the place, that might be something that we could
look at and figure out, ``Okay, what are they doing and how can
we help other corporations bring that onto line?'' A lot of
times, they probably don't know where to start. I can't answer
for them.
When you were talking, Mr. Edwards, about government
contracting and trying to bring diversity into the government
contracting, when I was on the small education--on one of the
investigating panels that we had, we found that a lot of these
government contracting that were out there, they had
``minority'' but actually the minority was a front person for
someone else who was actually putting money or getting the
contract because they said they had a minority. Did you find
out in your research, or do you do that, as far as to see if
that's improved since probably about 2/04?
Mr. Edwards. Well, I think probably you're alluding to
something that the Office of Federal Contract Compliance would
do in their review of a Federal contractor as part of their
compliance reviews and examining their affirmative action plans
and things like that.
Mrs. McCarthy. Okay. When you started to look at changing
how you set up your--to finding the professional on the
different levels, did you find that a difference in the
diversity as far as the training programs going back up? You
know, you went to a lower level and then you went to the higher
level. Being here in Congress, we meet a lot of CEOs, and I
noticed that with a lot of the CEOs who come in to see us,
there is no diversity whatsoever.
So I am just curious what programs possibly they have,
because you do see a lot of minorities in mid level, but no one
seems to really make it to the top. And by separating, since
you did the examination, were you able to see that more
diversity was coming into the top?
Mr. Edwards. Well, we haven't had an opportunity to
actually examine the data yet; we are still collecting and
processing that data. But certainly that is one of the things
that we hope to do by having those distinct job categories. In
the past, we would have to do a comparison to a lower-level job
group like professionals, and now we think we'll be able to be
much more precise in our analysis.
Mrs. McCarthy. How long do you think that will take?
Mr. Edwards. We hope to have the data prepared by late
spring.
Mrs. McCarthy. This spring?
Mr. Edwards. Yes.
Mrs. McCarthy. Thank you, Mr. Chairman.
Chairman Watt. I thank the gentlelady, and recognize the
ranking member for 5 minutes.
Mr. Miller. Thank you. We enjoyed both of your testimonies,
and I think, Mr. Edwards, you have a near-photographic memory
based on watching you review your notes there, and you seem to
go page by page.
Ms. Williams, diversity can be very difficult, and based on
what your statements were, you have proven that. Are there
limits to what Congress and the regulators can do to increase
diversity?
Ms. Williams. I think based on the body of work that we
did, we laid out the current situation and in terms of whether
or not it is able to be legislated, we really view that as a
public policy decision. So our purpose was to provide baseline
information for Congress.
Mr. Miller. I have a personal belief. It's like everybody
in my family is union except me, and unions don't like me
because I'm a Republican.
[Laughter]
Mr. Miller. But I have always believed that the best thing
I could do to help working people was to create the best
business environment we can create to produce more jobs--
Ms. Williams. Yes.
Mr. Miller. And more competition for labor. When you look
at this, would maybe our efforts be more appropriately applied
to creating an extremely robust financial services sector, and
would that not create the demand for diversity in and of
itself? Or do you have an opinion on that?
Ms. Williams. I really don't have an opinion on that.
Mr. Miller. Okay. You have stated here that the diversity
initiatives launched by the private sector have faced
challenges--
Ms. Williams. Yes.
Mr. Miller. Did you get into what those challenges are, and
how many of those can be dealt with?
Ms. Williams. We basically collected information based on
challenges that were articulated, and we broke them out into
specific categories. We did not then go on to address how they
could be best addressed, but laid out what they are based on
the information we collected from companies in the financial
services sector.
Mr. Miller. Okay. But you stated in the report that in
2004, the diversity increased to about 15.4 percent for
minorities, and in 2006, it increased to 16.1 percent. Is that
accurate?
Ms. Williams. The 15.5 percent is basically what the
percentage of the total workforce was at the time for
minorities.
Mr. Miller. And so, it is actually increasing. By 2006, it
increased to 16.1 percent.
Ms. Williams. Correct.
Mr. Miller. So it seems like we're going in a good
direction. I guess we need to better define what these
challenges are and how some of these challenges can be met.
Mr. Edwards, included in the GAO report, there is a finite
pool with a limited pipeline, as the GAO puts it, of minority
women candidates for senior management positions. Given the
limited pipeline, is the focus on raw numbers limited to what's
being used in this area? Is that what we're dealing with?
Let's see, your EEO-1 form that you're using, it breaks it
down into different categories, but we end up looking at a raw
number equivalent at the end.
Mr. Edwards. That's right. So that form is basically, you
can think of as being like a tally. And as far as the EEOC is
concerned on some of these issues, we certainly use that as an
important screening device, but we look at things like
pipelines and movement within companies and things like that in
our investigative process, we then go beyond that and get much
more detailed data about, you know, more specific job titles
and qualifications and things like that when we are conducting
an investigation.
Mr. Miller. Do you think that focusing on counting,
measuring, filling out forms gets you to the best way of
achieving diversity, or do we impose a burden on organizations
by requiring this? Or are there other ways that might better
achieve diversity in the marketplace, in your opinion?
Mr. Edwards. Well, I am trying to stress the fact that we
only use this as sort of an opening or a screening mechanism
that gives us an idea about what is going on within an industry
or within an employer's workforce. And we then seek much more
detailed information, when moving along.
I do think it has a real value for employers in terms of
being able to compare their workforce and what's going on with
their employees to, you know, other people who are like them
and that they compete with for workers in the labor force to
see how well they are doing.
Mr. Miller. It seems like, based on Ms. Williams' numbers,
that the numbers are increasing, but we need to get to the
bottom of what the challenges are and how to better deal with
those if the system is going to continue in that fashion. But
it seems like the challenges are the obstacle right now that
the sector is dealing with, trying to increase the numbers, but
the numbers have increased from the 1990's, when it started at
11.1 percent, to 16.1 percent in 2006. That is a pretty
significant increase on their part.
Thank you, Ron. Time has run out.
Chairman Watt. I thank the ranking member for his
participation, and I will give myself 5 minutes for questions
at this point.
Mr. Edwards, were you involved in the decision to separate
the top management category in the two different areas, or was
that decision made elsewhere?
Mr. Edwards. Well, it was certainly made within the
Commission, and our office was involved in participating in
that and in the regulatory process of getting comments on that.
Chairman Watt. Can you kind of give us a snapshot of the
reasons that was important?
Mr. Edwards. Well, mainly for a lot of the reasons that you
all have already stated here today, that we felt that the job
category was just very broad; it wasn't as probative as we had
hoped that it would be, and that we realized that with certain
issues, as people are making progress within the workforce that
this movement within the officials' and managers' category was
very important to deal with issues like glass ceilings that
different groups were confronting and those types of issues,
and we just felt that it would provide us a much better
analytic tool if we could just divide that job group into a
move reasonable and workable group.
Chairman Watt. And Ms. Williams, the tool that the GAO used
in making its assessment was primarily the EEO-1 reports?
Ms. Williams. Yes, totally.
Chairman Watt. Totally the EEO-1 reports. Okay.
You have looked at the new categories, I presume?
Ms. Williams. Yes.
Chairman Watt. Are they sufficiently descriptive, in your
estimation, to give us going forward a better picture of
diversity, or do we need to look at those? Does the EEOC need
to look at those further, and divide them into even more
categories?
Ms. Williams. Well, I think it is definitely a movement in
the right direction in terms of narrowing the range for the
definition of management. Whether there needs to be additional
breakout is unclear at this point because basically the EEOC
just started collecting this information in 2007. It will be
interesting to see what the statistics show this summer.
Chairman Watt. Did the EEOC consult with the GAO in trying
to figure out what the categories ought to be?
Ms. Williams. No, not to my knowledge.
Chairman Watt. Okay. And Mr. Edwards, has the EEOC had
enough time to make even a preliminary assessment of whether
this is going to be more effective than the prior mechanism
that the EEO-1 forms were using?
Mr. Edwards. I'd have to say not. Again, we haven't really
finalized the file yet and we won't get that until late spring,
probably.
Chairman Watt. And what kinds of things will you look at to
assess whether even more differentiation needs to take place?
Mr. Edwards. Well, I think we're going to first of all
start to look at, to make sure there is some differentiation,
what is the distribution of employees among those job groups
where those differences occur.
I mean there is an assumption, perhaps, that all of the
higher-level executive officials and managers will just be at
our headquarters facilities. So we want to check that out and
see if that's the case or if it's more widely distributed. Are
there variations among industries, so that there's a big
cluster in some industries and not in others?
So we want to look at the distribution of employees not
only within a firm, but also across industries and perhaps even
with different types of establishments.
Chairman Watt. Ms. Williams, you looked initially, I guess,
at the EEO-1 reports, but it sounded to me like you had some
discussions with the industry participants because you talked
about challenges that they are facing. The Securities Industry
and Financial Markets Association has suggested that diversity
decreases the more senior the level of management. In your
discussions with industry participants, were you able to
identify any of the reasons that is the case?
Ms. Williams. This was an issue that came up in
conversation because we did rely on SIFMA, the Securities
Industry and Financial Markets Association's survey. They did a
survey in 2005. They have done one in 2007, and it shows a
similar trend that the higher you go in the organization, the
smaller the number becomes in terms of minorities.
Anecdotally, we did hear that this was an issue. Some of
the reasons offered range from while they may be able to
attract minorities and women into the organization, there comes
a time that those hires will look around and they won't see
people who look like them at the highest levels in the
organization. They feel that they don't have a future, and they
will leave.
I also mentioned the critical mass issue. So one of the
things we heard is that there needs to be a critical mass of
minorities in the organization to create a sense of network and
connection in order for people to feel that they actually have
a future at the organization.
Chairman Watt. Okay. My time has expired. I guess we will
be getting into more of these kind of issues with the second
panel. I am pleased to welcome to the hearing a member of our
subcommittee, Ms. Waters from California, and I know she has
had an active interest in this area for years and years,
although she is younger than I'm making it sound like. Very
much younger, she says.
So I'll recognize the gentlelady for 5 minutes for
questioning.
Ms. Waters. Thank you very much, Mr. Chairman, and I do
appreciate that your subcommittee under your leadership is
delving into this issue. I must admit, it's one of the most
frustrating parts of our work. To constantly have to try and
not only seek the information relative to diversity in
financial services sector, but to have to do all of the other
work that goes along with public policy making.
As I have reviewed the report, and some of the testimony, I
think I understand the limits of the research. However, I'm not
sure, and I want to ask a couple of questions.
Ms. Williams, it appears that some of the challenges that--
well, some of the initiatives that have been taken by some of
the firms, such as initiatives in recruitment, partnering with
other groups and organizations, given incentives, pay
incentives--you reference all of that, but do you have any
documentation for any of that?
For example, in your research, if somebody said, ``We
partnered with these organizations in order to help us do
recruitment, to find professionals, etc.'', can you identify
the organizations that they say they partnered with?
Ms. Williams. Yes. Well, in conversations that we had with
the companies, we generally asked who they partnered with, and
then we would follow up with those organizations to get the
perspective--
Ms. Waters. Give me some examples of that.
Ms. Williams. Some of the organizations partnered with
Toigo, for example. If you would like other examples of where
there were relationships or connections established, I would be
happy to provide that for the record.
When we speak with the private sector, we generally keep a
lot of the information confidential because we can't compel
them to speak with us. So in order to encourage an open
dialogue, we agree to keep the information that we obtain from
them confidential.
Ms. Waters. All of the information that you obtain from
them is confidential information?
Ms. Williams. We find that we are able to collect a lot
more information if we collect the information, we assemble it,
and we provide it in the aggregate, so that's how we generally
provide our information.
Ms. Waters. What about our GSEs, for example, Fannie Mae
and Freddie Mac?
Ms. Williams. Yes.
Ms. Waters. You tell them you will keep that information--
they are semi-public--
Ms. Williams. They are slightly different, but the
organizations that we met with for this job were private
companies.
Ms. Waters. In the financial services industry?
Ms. Williams. Right.
Ms. Waters. All private?
Ms. Williams. Yes.
Ms. Waters. And they were able to give you the names of
groups and organizations they had partnered with, schools they
have done recruitment at, all of that kind of information?
Ms. Williams. Generally, when we talk to them, we
specifically ask--if they said they had partnered with an
organization, we would ask who they had partnered with. We
often found that it was also an organization that we had
contacted during the course of this audit, so we were able to
get the information from both perspectives.
Ms. Waters. If they tell you they recruited at certain
schools, for example, they recruited at Spelman and Morehouse,
you would know that?
Ms. Williams. Well, what we could do in that situation if
they told us that they recruited at Spelman and we wanted to
verify that, we would go to Spelman--
Ms. Waters. Have you ever done that? Have you ever gone to
Spelman or Morehouse to see if they had been contacted by any
of these Wall Street firms, for example, and whether or not
they had relationships with them, and they give you the number
of people who have been hired in the industry from the colleges
or universities? Do you have concrete information?
Ms. Williams. At that particular level, no. Generally at
the relationship level, yes.
Ms. Waters. What does that mean, at the relationship level?
Ms. Williams. That means if they told us that they had
partnered with Toigo, for example, we would know that they had
partnered with Toigo when we had a conversation with Toigo
about the--
Ms. Waters. Can you tell us, give me the names of three
firms they have partnered with, or nonprofit organizations,
without telling me which financial services firm is connected
to the organization? I'd just like to get idea of who they are
partnering with.
Ms. Williams. Sure. I would be happy to provide that
information for the record.
Ms. Waters. I want it now.
Ms. Williams. I am not in a position to give it to you now.
Ms. Waters. Okay. All right. What can you tell me--and the
reason I'm questioning in this manner is that we get a lot of
information similar to what you have in your reports that
talked about companies using compensation as an incentive to do
better in diversity, but we have no examples of it. We don't
know what that means. We don't know whether or not a company
has a program where they're compensating their mid-level
managers in a specific way or given bonuses. I just don't know
what any of this stuff means.
Ms. Williams. Yes.
Ms. Waters. Can you tell me? Have you found companies that
actually use compensation as a way of providing an incentive
for their managers or executives, or the CEO, or anybody, to
increase its diversity and employment of minorities?
Ms. Williams. We did find companies that told us they do
use compensation as a way to--
Ms. Waters. Did you have any way of verifying it?
Ms. Williams. Did we have any of them provide documentation
on that issue, specifically?
I'm not in a position right now to say that we actually got
specific documentation from them.
Ms. Waters. You probably didn't, did you?
Ms. Williams. We were able to collect some documentation,
but I am not sure if it is specific to particular companies.
What we were told was consistent with what SIFMA reported in
its most recent survey, that there has been an increase in the
number of companies that are using compensation.
Ms. Waters. Thank you for your generosity of time, Mr.
Chairman. If I display a little bit of impatience, it is
because I have been here too long; I've heard too much; and I
hear too little.
Chairman Watt. Well, we thank the gentlelady for her
persistence and her patience over the years on this issue.
We have two members who are not members of the subcommittee
with us. Mr. Scott has been recognized for an opening
statement, and I would like the benefit of, since both of them
have been long-term involved in diversity issues, if I could
ask unanimous consent to allow them to ask questions of these
witnesses.
[Laughter]
Chairman Watt. In that case, I will recognize Mr. Scott
first, for 5 minutes.
Mr. Scott. Certainly, but before I ask my questions, I
certainly want to give recognition to the beard that now
accompanies my good friend from California. It is very
becoming, and go for it, my friend.
[Conversation off microphone]
Chairman Watt. You all missed the classic role reversal
before you got here. I became a Republican and he became a
Democrat.
Mr. Scott. I got it.
Mr. Miller. And we both did a very poor job at it.
[Laughter]
Mr. Scott. Who says bipartisanship doesn't work in this
committee?
Let me start by asking you this question, Ms. Williams.
What does your research reveal about the relatively flat
increase? I mean no increase basically during what, from 1993
up until now? What, and very briefly, what do you say accounts
for no increase? I mean that's a long time not to see an
increase. Why so?
Ms. Williams. We basically collected descriptive
statistics, so I can't tell you why that number hasn't changed.
Mr. Scott. Were you able to get into any defining moment
where you could define attitudinal issues, racism,
discrimination, prejudice, gender bias? Is there anyway that
you could say that is a reason?
Ms. Williams. In conversations with companies that have
been dealing with this issue, the closest we would come
anecdotally would be an observation that middle managers are
key in bringing about more diverse organizations and the buy-in
of middle managers are key because they tend to be the group
that has the greatest direct impact on the day-to-day lives of
employees who are being brought into organizations.
You can have a CEO who is committed to diversity, and if
his middle managers haven't bought into it totally and aren't
committed to it, then it makes implementing a diversity program
in an organization more challenging. That's one of the things
we have heard.
Mr. Scott. Okay. I'm glad we have put our finger on one of
the problem areas.
Now can you tell me the difference between the categories
of officials and managers, senior executives, and first middle
level? I mean, these are--what are these? I would think that,
you know, what's the difference here? Why this
compartmentalization of what looks like to be the same people,
but yet, you know--
Ms. Williams. Actually, I think I'm going to defer to Mr.
Edwards on this one--
Mr. Scott. Okay.
Ms. Williams. Because we use the EEOC's categories.
Mr. Edwards. Well, that higher level of group of managers,
those executive officials and managers, are really the people
who are providing direction in their field for the entire
corporation. Those are the individuals that we expect to be the
highest paid in those corporations and really to yield their
effect throughout the organization.
The mid-level, or first-line officials and managers,
generally speaking, are low-level managers, that although they
manage their operations, they're not going to have the
corporate-wide influence over the organization.
Mr. Scott. Okay.
Let me go to another set of questions in terms of
programmatic things where you're able to discover. For example,
are there budgets that have been placed within corporations for
diversity, budgets that break down, do they advertize their
diversity? Do they show in publications, in their advertising,
women and people of color in decision-making positions? Did you
find any way of measuring the level of which these companies
are communicating this out in their advertising and marketing
approaches?
Ms. Williams. That's not a specific issue that we drilled
down on.
Mr. Scott. Okay.
How close were you able to get to the issue of linking pay
with performance here? Ms. Waters touched upon that, and I just
couldn't get a clear answer here. I'm trying to figure, because
the one thing about the capitalistic system that we know is
this: Money talks.
So if, for example, we have no way of being able to
determine whether these companies or those in the financial
services industry put their money into budgets to promote
diversity, to reward diversity, what good is this report?
Chairman Watt. The gentleman's time has expired, and I'm
inclined to cut him off because I know that he's more likely to
get a cogent answer or response to that question from members
of the second panel of witnesses, because the two people you
are asking these questions to kind of put the numbers together
but haven't really been involved in the implementation of these
programs.
So if the gentleman would yield back, I think he might find
more fruitful territory with the second panel with some of
these questions.
I will now recognize the gentleman from New York, Mr.
Meeks, and I thank him for being here and for his interest and
commitment in this area.
Mr. Meeks. Thank you. I will be brief.
I want to follow up on something that Congresswoman Waters
talked about, because in the study--and I want to make sure I
understood--you're saying that there's no connections to what
universities that any recruitment was done in, that the GAO did
not talk to the company and say, ``Well, what university did
you go to recruit people for positions in the office?'' We
don't know that, what schools they went to, in the study?
Ms. Williams. We generally had a more general conversation.
For example, we would have asked questions about historically
black universities or universities that had a high Hispanic
population. In response to an earlier question about three
networks that companies told us that they partnered with or
outreached to from both directions, we did include in the
report, and I now have that information. They were the National
Black MBA Association, the National Association of Hispanic
MBAs, and Toigo. So those were three, and this is information
that we confirmed from both sides--not only the companies but
also from these organizations as well that they did have
partnerships with the corporations.
But in terms of specific universities, I think in some
cases we may have gotten information that they went to a
particular university and also some of the companies publicized
that information on their Web sites--where they actively
recruit.
Mr. Meeks. Managers are not probably what he wants to
happen, then he has the power to make sure that mid-range
manager is in place to do a program. What are your results on
that?
Ms. Williams. Well, just one point of clarification. The
statistics that we relied on were the statistics from the EEOC,
the EEO-1 data, and all of that information is aggregated in
the data that we had. So we could only turn to other
organizations that had collected information that had a greater
breakdown, for example, the SIFMA survey, where they actually
showed more of a pipeline trend.
Our analysis really covered that very broad range as
defined by EEO-1 in our statistics, so I'm not in a position
based on the analysis that we actually did to discuss the
internal pipeline. There we relied on other organizations that
had done internal pipeline information, and I think EEOC had
actually done a study where they looked at the internal
pipeline issue.
Chairman Watt. Mr. Edwards?
Mr. Edwards. Well, again, we were limited by the data that
we had, which was also EEO-1 data, but our study was a little
bit different than GAO's study, and what we were interested in
was comparing officials and managers to professionals to see if
there was, say, equity and the probability that if you looked
at women, were women as equally likely to be officials and
managers as white men were--those types of analyses.
And we found that there is a lot of variation among--also
we did our analysis at the firm level, so we determined that
there is a lot of variation among firms that this is difficult
to treat this industry as one holistic body, but that within
this there are certainly sectors in the industry where non-
white groups and women did better than other sectors of this
industry.
Mr. Meeks. So I think that you're telling me, what I'm
hearing is that we need a different kind of study then to
really evaluate what's going on here. Because if I'm hearing
right, the data that you're utilizing is limited. You're really
not focused on what the hindrances of hiring is. We may not
know whether or not the fruitfulness of recruiting at
historically black colleges and universities are.
So there's a lot lacking here. There's a lot more to be
done or we need to rely on some different information to really
get at the crux of what the problem may be in regards to
diversity in the financial services industry. Is that what I'm
hearing from you?
Ms. Williams. I do think data limitations is an issue.
Mr. Edwards. I would just add to that that there are
certainly a number of researchers who use our EEO-1 data,
academic researchers that I mentioned earlier, and these are
really, you know, the questions that you're asking are some of
the questions they're interested in as well, and they certainly
spend--they can spend years doing this, collecting data and
doing their analyses, and trying to get at some of the issues
you've raised.
Mr. Meeks. Except as I talk to some, you know, it just
seems to be, some of it seems to me we can get there if we're
focused on it--
Mr. Edwards. Right.
Mr. Meeks. And it just doesn't seem that we're focused on
it.
Chairman Watt. I thank the gentleman for his questions, and
I should point out that the staff has advised me that when the
ground rules were being written for the GAO study, the
committee sanctioned a level of confidentiality because they
thought it would yield more openness on the part of the
industry, and would enable GAO to go outside just the EEO-1
statistics, and actually talk to some of the companies, but in
all probability we won't be able to get specific--I mean we can
get general information like Ms. Williams has already give us,
but pairing it to particular companies we won't be able to get
out of this GAO study, because of the ground rules under which
the study was done.
So anyway, we have run out of time to ask questions of this
panel. Some members may have additional questions for this
panel, which they may wish to submit in writing, so without
objection, the hearing record will remain open for 30 days for
members to submit written questions to these witnesses and to
place their responses in the record.
We thank both of these witnesses for your testimony and
your openness, and you are excused, and we will call up the
second panel.
While this panel is getting seated and assimilated, I
wanted the members of the committee to know that we do have the
capacity to ask specific questions to the private sector about
their practices, so that might be something that we want to
look into outside the GAO study, but the GAO study had some
constraints around it that were designed to make it easier for
them to get information that might not otherwise have been
available to the GAO.
So there are still other possibilities that might exist.
The second panel is seated, and for those of you who were
not here at the beginning, we made a unanimous consent request
and submitted their full CVs, curriculum vitae, into the
record. So I'm going to give an abbreviated introduction of the
witnesses so as to conserve time.
Our first witness is Mr. Luke Visconti, who is a partner
and cofounder of DiversityInc, a Newark, New Jersey, based
multimedia company that focuses exclusively on diversity in
corporate America.
Our second witness is Ms. Nancy Sims, president of the
Robert Toigo Foundation, an Oakland, California, nonprofit
organization focused on leadership development in the field of
finance.
For our third witness, we are honored to have
Representative Allen here from Maine, who is the Representative
of the Phoenix Foundation, and I will recognize Mr. Allen for
an appropriately short introduction. I don't want him to do his
local politics here, but I recognize him for an appropriate
introduction.
Mr. Allen. Thank you, Mr. Chairman. Would we ever do local
politics here? Not at all. Dr. Walter Corey is a friend of
many, many years, a former tennis partner, and I just wanted to
say a few things about him. He comes as the director of the
Phoenix Foundation, which is a nonprofit organization based in
my district, with a mission to advance progressive social
change. Their ethical leadership training program uses
interactive role-playing situations and in-depth group
discussions to teach values-based leadership to government
groups, secondary schools, colleges, and graduate schools, and
increasingly the private sector.
In addition to fostering leadership and discussing
corporate ethics and financial literacy, the Phoenix Foundation
has made a commitment to gender, racial, and multicultural
diversity training. Walter got me involved in a course that he
was teaching to the students at Shephards High School, a
Catholic high school in Portland, Maine, and yes, I could see
the excitement in the eyes of those students. It was really a
very dramatic experience.
He is a graduate of Princeton, and in addition to a law
degree and master's degree in economics from Yale University,
he also has a master's degree in divinity and a doctorate in
ministry from the Bangor Theological Seminary, and I just
wanted to say to Walter Corey, it is a pleasure to have you
here, and I know the committee will be very interested in what
you have to say.
Thank you, Mr. Chairman. Was that appropriately brief?
Chairman Watt. It is a pleasure to have you here, Dr.
Corey, but you have put me the bind here of having put all of
these wonderful credentials of other people in the record and
not having stated them publicly. So I'm feeling a little like I
owe the other witnesses something.
So anyway, I spoke glowingly of Ms. Thomas, our next
witness, Ms. Geri Thomas, global diversity and inclusion
executive for Bank of America, which happens to be
headquartered in my district, and so I'm exercising some
restraint in introducing her too.
Our next witness is Ms. Marilyn Booker, the managing
director and global head of diversity for Morgan Stanley
Company, followed by Mr. Zaid Abdul-Aleem, vice president of
Piedmont Investment Advisors, who is appearing here on behalf
of the National Association of Securities Professionals--
Piedmont Investment Advisors is based in North Carolina also,
so we certainly welcome him here. And our final witness, Mr.
Don Graves, Jr., who is a partner in the law firm of--it is a
law firm, correct?--Graves and Horton, LLC.
With those abbreviated introductions, we hope we will get
through all of this testimony before we get called for votes,
and I will quickly recognize Mr. Visconti. Under the same
protocol as our first panel was recognized, your full written
statements will be made a part of the record, and each witness
will be recognized for a minimum of 5 minutes. Hopefully,
somewhere in that range, you can summarize your testimony.
STATEMENT OF LUKE VISCONTI, PARTNER AND CO-FOUNDER,
DIVERSITYINC
Mr. Visconti. Chairman Watt, Ranking Member Miller, and
members of the subcommittee, I thank you for the opportunity to
testify about the key findings of the GAO report on Workplace
Diversity and Financial Services. I'd like to stray a little
bit from my written comments, because listening to the
questions, I think it would be good to take a step back.
There is a business case for diversity. I run a business
publication, and we go to corporate America. The business case
for diversity, in short, is that in 1950, our country had nine
white people for every one person of color. Today, for
Americans under 40, there are less than 2\1/2\ white people for
every 1 person of color, and for children under 10, the ratio
is almost 1 to 1. By roughly 2040, white people will be less
than half of the population of the United States.
Going along with that, with the change in demographics, the
increase for African Americans, Latinos, and Asians in getting
high school, college, and post-graduate degrees is rising much
faster than their rise in the population, and correspondingly,
household income for households of color has risen at more than
twice than that of white households since 1990.
You could make a good economic case that our consumer
economy is borne on the shoulders of the rising income of
consumer of color and their opening opportunities in our
country.
I think that it is worth noting or asking, ``Exactly how
did this happen?'' Because if you think about General Motors in
1960, do you think they really cared about black consumers?
Well, most black people in this country in 1960 couldn't vote.
Most of them couldn't go to college; they weren't allowed to.
And none of them had access to capital like white people did.
In the civil rights era, Dr. King said that there were
three things that were necessary to make a citizen out of a
human being: access to the vote of the governmental process;
access to education; and access to capital. The vote and the
access to education was accomplished with the Voting Rights and
the Civil Rights Act.
Access to capital was started with the CRA of 1977. That
process isn't done yet. If you look at the business case for
diversity, companies don't need to look like their customers
when they hire, they need to think like them. The difference in
building a relationship respectfully with a person as they are
is the difference between a high-margin product and a
commodity.
That in a nutshell is the business case for diversity. Once
a year my company--and I'm responsible for all editorial
functions--and one of the two founders of the company, my
business partner, handles sales--we have such a strict line
between editorial and sales in our company, that when we
release the top 50 company for diversity, the press gets it
before my business partner does, and there is absolutely no
connection between doing business with my company and being on
that list. In fact there's a couple of companies on that list
that don't do business with us whatsoever.
Once a year we go out with a public announcement and
invitations for any company with more than 1,000 employees can
apply to be in our top-50 survey. There are about 200 questions
that revolve around four areas: CEO commitment; human capital;
supplier diversity; and internal and external communications.
In 2003, we had 118 companies participate. This year, we
will be close to 400. So the number keeps going up. There's no
fee to enter, and we give each company a report card so they
get something out of the process.
We promise not to tell any company that doesn't make it
onto the list that does apply, but we don't promise to not name
companies that don't apply. And I have some of those companies
in my written report for you.
The things that we look at to build relationships are three
areas: Trust; communications; and nurturing. CEO commitment is
the basis around which you build trust. There are companies,
all of the companies in our top 50, that bonus direct reports
to the CEO, either 10, 15, or 20 percent of those companies in
the top 10. Most of the companies also bonus layers of
management. And I'll give you an example of how that works when
it's an accountable basis.
The companies that bonus the CEOS to bonus direct reports,
that's not a give-me bonus. And for example, Pricewaterhouse
Coopers bonuses all of its managers on diversity
accomplishment, and only 70 percent of those bonuses are given
out.
So there is a direct level of accountability in the
companies that really mean this.
There are other things that go on. For example, personal
meetings with the Diversity Resource Groups, or the Diversity
Council, we measure all of these things. Personal association
with philanthropies that don't benefit the CEO's own group,
etc.
Communications is the second part of this trust,
communications, and nurturing. Communications includes things
like employee resource groups, otherwise known as affinity
groups, whereas although it is true that there is more
diversity at the bottom of organizations, that is a natural
effect of the age groups and the increasing diversity--people.
Employee resource groups are a way for the top layer to
meet with the bottom layer and share ideas. Pepsico, for
example, is I think the most aggressive user of employee
resource groups. They have gotten their best product launch
idea ever from their Latino Resource Group, guacamole flavored
chips, and they also had an idea to print the word
``cicerones'' on the sides of pork rind packages, and they sold
$6 million more in pork rinds, in one year, addressing the free
market.
Nurturing is the final step, and companies that are on the
top-50 list use things like mentoring and supplier diversity to
provide nurturing.
The point of this is that the GAO report is too broad.
Financial services is too wide of a category. You will notice
that there are a number of banks on our top-50 list, but no
brokerage firms except for Merrill Lynch. And I think there's a
good reason for that.
The banks, because of the involvement of the CRA, have
become involved with the community and are much more, you know
to overgeneralize probably, much more involved with diversity
management. The banks on our list are very aggressive on this.
The brokerage firms, I see no evidence of any involvement with
this, and in fact if you look at lawsuits, and we had an
interesting article from a woman whose mother is the chief
diversity officer of a bank, who was heavily recruited by a
brokerage firm, and was treated so horribly that she left
corporate America and is now in Princeton Seminary.
There's an issue here that her mom, knowing what a company
should be run like, was horrified as well. This wasn't one
person who maybe had stars in her eyes. This was terrible
treatment that was systemic and through that particular
company.
We chose not to name the company, because frankly I
couldn't care less about what their side of the story was, and
if we were going to write an article that named the company, I
felt it was fair to give them their say, and I didn't think it
would add to the article, so we didn't do it.
If you look at the GAO report and the astounding lack of
diversity and attention diversity by the brokerage industry, I
could make three recommendations. First is that the brokerage
industry should be compelled to release their EEO-1 data
publicly. There's no reason to hide this data. There's no
reason for it at all.
If you look at what has gone wrong in the brokerage
industry in just the last year, where they paid $39 billion in
bonuses they lost $80 billion in business because of things
like the subprime.
Chairman Watt. In the interest of time--
Mr. Visconti. I'll wrap it up--
Chairman Watt. --and fairness to the other witnesses, wrap
up as quickly as you can.
Mr. Visconti. Public data. The second step is pipelines.
It's not good enough to say you can't find them. Companies that
give out $40 billion in bonuses should be expected to build the
pipelines for the people to become educated to go there. And
that's not just going to blue chip HBCUs. That means going to
school districts like in Newark, New Jersey, and making sure
that the facilities are there for those talented kids to become
educated properly.
And the final thing is community involvement. I think there
should be a CRA for the brokerage community, because the lack
of access to sophisticated finances and financial instruments
is hobbling women and minority-owned business who don't have
access to this. It gives an unfair advantage to the insiders
that are already part of that industry. That's my statement.
Thank you.
[The prepared statement of Mr. Visconti can be found on
page 151 of the appendix.]
Chairman Watt. Thank you for your testimony and we look
forward to the round of questioning with you.
Ms. Nancy Sims, you are recognized for 5 minutes.
STATEMENT OF NANCY A. SIMS, PRESIDENT, THE ROBERT TOIGO
FOUNDATION
Ms. Sims. Thank you. Chairman Watt, and members of the
committee, I appreciate the opportunity to introduce you to the
Toigo Foundation and to share the perspective of this nonprofit
educational foundation, whose mission is to change the face of
finance.
We support some of the Nation's best and brightest minority
students attending the top business schools through
professional development, job access, and ongoing career
support, the latter being the most important, I think, as we
discuss workplace diversity, retention, and advancement.
Of the nearly 700 young men and women who hold the
distinction of Toigo fellow, 92 percent of those individuals
are in Finance Today. Forty percent of them hold positions of
vice president and above, and within that senior group, 12
percent are women of color. These percentages continue to grow
as this population matures and excels.
To accomplish our work, we partner with more than 200
financial services firms across all investment sectors, and
work with business organizations such as the New America
Alliance, the National Association of Securities Professionals,
and the National Association of Investment Companies.
Our ``Retention Returns'' survey presents a unique
perspective of the perspectives and viewpoints of individuals
for whom these diversity surveys are all about, a perspective
that is often overlooked.
Our survey findings indicate two important take-aways.
Tomorrow's leaders in finance are passionate about the
investments that they have made in their education and the
aspirations that they have for successful careers in finance.
And secondly, they want to see as well as be a part of the
change that brings about a more level playing field. The
``Retention Returns'' survey specifically wanted to look at a
critical population, respondents in the 4-to-8-year post-grad
space, which is roughly 40 to 45 percent of the Toigo alumni.
As it is that career marker that represents a critical turning
point during which many personal and professional decisions are
made around either staying or leaving an organization.
Key qualitative findings from our survey include what we
call a cycle of departure, a domino effect that results from
experiences that continue to occur, principally for
professionals of color that result from either limited access
to deals, which lead to limited visibility, limited
recognition, and ultimately disproportionate rewards.
We heard clearly from our respondents that these patterns
are both recognizable and avoidable. The most prevalent concern
that they had was performance management. A feeling that firms
in general are doing a very poor job of communicating and
defining what constitutes a model of success, and as well if
constructive feedback is warranted, a reluctance to be able to
share that information, so that they know how to turn their
performance around, stay with their organization, and move
ahead.
Mentoring and leadership support are vital. Certainly one
of the respondents told us, ``If you are not picked by a senior
person, protected and advocated for, then you are, in short,
ruined.'' The challenge remains that as a person of color, you
are less likely to be picked by a senior leader to be mentored.
In my time remaining, I would like to leave you with three
considerations. Buy-in and accountability at all levels, which
I think has been touched upon already. But the support or lack
thereof of direct managers or supervisors who have direct
control over the lives of our diversity candidates play a
profound difference in their success within an organization.
Small day-to-day indignities, inadequate performance
dialogue, and also the failure to assign key assignments, where
one can truly demonstrate their abilities, fly well below the
radar of any senior management mandate, and that must be
seriously and continuously examined.
Secondly, do not develop diversity programs as a quick fix
versus building thoughtful programs, which can be managed,
evaluated, and improved upon for sustainable and systematic
change.
And lastly, I would also offer that as we look and talk
further about the diversity workplace issues, that we go beyond
the data coming from the GAO report, or the EEOC, as there are
growing numbers of young professionals who have invested 3 to 5
years in larger institutional organizations and have chosen now
to work for smaller entrepreneurial enterprises. Within my own
organization, I have four alumni who are managing $2.7 billion,
and I am anticipating that population will continue to grow.
So it is important to look at mid-size and smaller
organizations who do not report EEO-1 data and to make sure
that we're capturing, because some of that data is a better
story to tell. Thank you.
[The prepared statement of Ms. Sims can be found on page
108 of the appendix.]
Chairman Watt. Thank you very much for your testimony.
Dr. Corey, you are recognized for 5 minutes.
STATEMENT OF WALTER E. COREY, DIRECTOR, THE PHOENIX FOUNDATION
Mr. Corey. Thank you. Chairman Watt, Ranking Member Miller,
members of the subcommittee, and distinguished Members of the
House, Congressmen Meeks and Scott, thank you for the
opportunity to be here today.
For the past 5 years, we at the Phoenix Foundation have
been on the front lines of ethical leadership training in New
England. This 5-year hands-on experience has given us a
perspective on the attitudes and values of young, multicultural
adults who more and more define a major challenge of 21st
Century leadership; and that is how to manage lead teams of
diversity, diverse as the culture, race, gender, sexual
orientation, and experience.
It is difficult to pick up a business school publication
these days that does not somewhere in its pages refer to this
modern challenge of managing and leading such teams. Five years
of experience with our colleagues teaches us that this cohort
of young adults is a pivotal change agent in our society, and
especially in work places where an outworn culture confronts
them.
In our travels with this cohort, we have learned quite a
lot about who they are and how they perceive their needs in a
modern workplace, for we encounter them at three critical
areas: First, in college and university before they embark on
their careers; second, in graduate school as they are embarking
on their careers; and third, in seminar sessions after they
begin to settle into their careers.
Regardless of the venues in which we find them, these young
adults share a similarity of needs, attitudes, and values that
set them apart as Gen Yers. As they move from school to
workplace, they prize opportunities to do interesting work in
environments that welcome them. And they want to stay connected
to their values, to each other, and where possible to the
values of their employer. Simply stated, that is why they want
to fit in, to be members of a team they respect and eventually
they come to trust.
What they frequently encounter in run-of-the-mill
workplaces, that is a workplace saddled with an outworn
culture, is a coercive environment, where employee tastes,
values, and attitudes, especially if they are minority
employees, are out of step with corporate norms. These cultures
often lack a willingness to accommodate them, frequently
because most such cultures are without the capacity for
training and building teams of diversity, the critical
scaffolding in modern organizations.
We are now learning that businesses that lack transparency
about corporate values and their consistent application in the
workplace are challenged to retain the Generation Yers that
they have recruited, often at considerable expense. It cannot
be said often enough that the young adults we encounter esteem
workplace cultures that value diversity; in fact, in many parts
of the country, robust diversity policies have become a
critical litmus test to determine the health of corporate life.
We see it in Maine and we hear about it from colleagues
elsewhere. This month I heard about it from Michelle Landis
Dauber, a professor at the Stanford University Law School and a
faculty adviser to a group called BBLP, Building a Better Legal
Profession. Though formed on the west coast just last year,
BBLP is already a national movement of hundreds of law students
at schools around the country, students who are now surveying
law firms that recruit on campus, polling them on a broad range
of quality-of-life issues, alerted by the fact that associates
leave law firms at astonishingly high rates. Does this sound
familiar? Forty percent leave by the end of their third year,
62 percent by the end of their fourth.
BBLP ranks over 200 firms and financial centers like New
York, California, Massachusetts, Illinois, and Washington on a
number of issues, of which the most prominent is diversity
hiring among partners and associates. For their purposes,
diversity embraces gender, race, and sexual orientation. A low
ranking forebodes hiring difficulties for the firm, simply
because today's graduate wants to work in a firm that honors
diversity on its own account and is a proxy for enlightened
lifestyle policies within. It is of such importance in the
modern organization today that many graduates are willing to
trade dollars in return for an inclusive workplace, one that
welcomes them and is willing to accommodate their values.
Plainly put, law students are now connecting with their
peers across the country in networks that are calculated to
reform the culture of the large law firm. Student activism will
not end there, however. What is spreading among law school
campuses throughout the country is beginning to shift quietly
to business schools as well, first on the west coast and then
we have reason to believe eastward. And of course it is from
these graduate schools, law and business, that the financial
services industry draw their major recruitment.
Like it or not, change is on the way. Where, you ask, does
that leave values-based team leadership training? Where we left
it last month at Bowdoin College and elsewhere in New England.
That is to say, very much in the service of our colleagues,
students, and professors alike, who are intent on learning the
skills of values-based team leadership that embrace diversity
and enable them and their employers to flourish in what is fast
becoming the new American workplace.
That is part of the story described in my written
testimony, which I share with you today. This concludes my oral
testimony.
Again, thank you for the opportunity to testify.
[The prepared statement of Dr. Corey can be found on page
90 of the appendix.]
Chairman Watt. Thank you so much for your testimony, and I
now recognize Ms. Thomas for 5 minutes.
STATEMENT OF GERALDINE THOMAS, HUMAN RESOURCES AND GLOBAL
DIVERSITY AND INCLUSION EXECUTIVE, BANK OF AMERICA
Ms. Thomas. Good afternoon, Chairman Watt, Ranking Member
Miller, and members of the subcommittee. My name is Geri
Thomas, and I am the global diversity and inclusion executive
at Bank of America.
I'm glad to have the opportunity today to talk about our
commitment to diversity and inclusion, and to providing a
workplace in which all associates can reach their full
potential and feel valued. I have submitted for the record a
much more detailed description of all that we're doing at the
bank in regards to diversity and inclusion, as well as our top-
down leadership and engagement on these issues.
I am pleased to summarize them for you now. I am also
pleased to be here because of personal commitment to diversity
and inclusion, not just in the workplace but in every facet of
our society. As an Atlanta native, I was involved in the early
civil rights movement. I know from my own experience that
diversity is about inclusiveness, not exclusiveness.
As the global diversity and inclusion executive at the
Bank, I oversee company-wide diversity initiatives and serve as
a diversity resource to our senior leaders, business lines, and
associates. As you may be aware, Bank of America is one of the
world's largest global financial institutions. We have offices
in 31 States, in Washington, D.C., and in more than 20
countries. We have clients in over 175 countries, and
relationships with 99 percent of the U.S. Fortune 500, and 80
percent of the Global Fortune 500 countries.
We have 59 million consumer and small-business
relationships, 24 million online banking users, over 6,100
retail banking centers, 19,000 ATMs, and we are the number one
Small Business Administration lender to minority-owned small
businesses. We have more than 200,000 employees globally. In
short, our customer and employee base is very diverse.
So why is diversity important at Bank of America? Because
in order for us to meet our diverse customer needs and be
responsive to global business demands, diversity in people,
their experience, working styles, and business acumen is
critical to our success and growth of all of our businesses.
This diversity also helps us understand and meet the
development needs of our associates, and by having a diverse
associate base, developing products and services for our
equally diverse global customers, we grow as an organization
and deliver shareholder value.
Diversity and inclusion is not something that just happens.
It takes a deliberate effort and dedicated commitment to make
it work. It requires having strong leadership commitment from
the top of the organization and having diversity and inclusion
integrated into every business practice. At Bank of America we
have a strategic organized and formal structure for managing
diversity and inclusion.
It starts with our chairman and CEO, Ken Lewis, and expands
throughout the organization in a variety of ways, and is an
integral part of our core values that guide us as a business.
We approach diversity first through a formal management
structure, encompassing a cross-section of senior leaders. Our
global diversity and inclusion council members are directly
appointed by our chairman, and charged with developing and
implementing diversity initiatives that support a work
environment in which all associates are welcomed, respected,
and empowered to do their best work, and are rewarded for their
contributions.
This means ensuring qualified more diverse candidate pools,
management accountability in metrics, personal commitment,
promoting associate growth, engagement, recognition, and career
development through diversity training and other related
programs. It means expanding diversity focus beyond race and
gender, and helping associates better understand other working
cultures and traditions as we continue to grow our global
enterprise.
We have diversity business councils that integrate
diversity practices in their respective lines of business, and
employee networks that bring associates together to network and
share cultures internally and in the communities we serve.
At Bank of America, we value each person for what he or she
can contribute. We're not really concerned about family
backgrounds or what school they attended. It is with this
wealth of perspective that we will always be able to take
advantage of new opportunities, develop innovative products,
and help people find ways to live productive lives.
As mentioned in my written testimony, the Bank of America
Charitable Foundation and its community development activities
support diverse communities across the country in a variety of
ways. In 2007, our charitable foundation invested more than
$200 million in communities across the country, making the Bank
the more generous financial institution in the world, and the
second largest donor of all U.S. corporations in cash
contributions.
The Bank supplier to diversity program seeks and provides
diverse suppliers an opportunity to do business with our
company. Since that program began in 1990, we have increased
spending with diverse suppliers each year, reaching $1.3
billion in 2006. In order for us to meet the needs of our
diverse customer base, we must develop products and services
that address their unique requirements.
The bank actively hires bilingual associates to help us
design and deliver services to our diverse customer base around
the globe. Our ATMs and banking center materials are translated
into multiple languages to better meet the needs of the
communities we serve. Our accessible banking program empowers
disabled customers to access our banking products and over
11,000 talking ATMs. In addition, our credit card division
offers a variety of affinity cards that support a wide
assortment of diverse groups.
We have a long history of living our commitment to
inclusion, and as mentioned throughout this testimony,
diversity is part of the very fabric of who we are as an
organization.
As I hope you can tell, I am proud of the Bank's diversity
and inclusion efforts. At Bank of America, each person is
evaluated on his or her own merits. I'm proud that we have
created an environment where associates of diverse backgrounds,
viewpoints, and experiences can succeed, and where all
associates have the opportunity to achieve their full
potential.
That said, we still have work to do. Diversity is a
journey. We have the commitment from our executive leadership
as well as the right people and the right processes to know
that our diversity and inclusion efforts are making a positive
difference at our organization. We will continue to actively
promote and support diversity of thought and experience. It
makes us a better company, a better place to work, and a better
corporate citizen in the communities we serve.
Thank you for your attention to this issue, and I'll be
happy to take any questions that you might have for me.
[The prepared statement of Ms. Thomas can be found on page
144 of the appendix.]
Chairman Watt. Thank you for your testimony. Ms. Marilyn
Booker from Morgan Stanley is now recognized for 5 minutes.
STATEMENT OF MARILYN F. BOOKER, MANAGING DIRECTOR, GLOBAL HEAD
OF DIVERSITY, MORGAN STANLEY
Ms. Booker. Thank you. Mr. Chairman, Ranking Member Miller,
and members of the subcommittee, I sincerely appreciate the
opportunity to testify before you today on diversity in the
financial services sector. I appreciate this opportunity
because it sends a very positive and strong message that your
subcommittee is examining an issue that is so important to our
industry, so important to Morgan Stanley, and so important to
those who are choosing to make their careers in financial
services.
Diversity is something that Morgan Stanley and my
colleagues in the industry take very seriously, so the
opportunity to have an open dialogue with you on this topic
will go a long way in reinforcing our collective commitment.
What I would like to accomplish during the next few minutes
is to share a few of my thoughts relative to the key
statistical finding of the GAO report that from 1993 to 2004,
overall diversity at the management level in financial services
did not change substantially.
My first observation is that the financial services
industry is facing challenges in recruiting minority and women
candidates. Several years ago, the primary industries we
competed against for talent were other financial services firms
and a few companies within corporate America. The competition
today now includes hedge funds, private equity firms,
technology shops, and consulting firms, just to name a few. All
of these industries typically require a high degree of
specialization. Therefore, minority and women candidates with
the requisite skill sets are highly sought after and often
receive multiple job offers.
Further, given that the number of women and minorities
entering business school and acquiring the skill set has
remained stagnant for the last 5-plus years, combined with the
fact that they are spread out over several industries, the end
result is a diminished pool from which we have to chose.
It is my belief that recruiting a diverse talent pool takes
time and effort. Recruiting diverse candidates is a process
that cannot be done successfully in the same manner as general
recruiting. Diversity recruiting is about relationships; it is
about building trust. And it takes time to build those
relationships and time to build that trust. In spite of the
progress that has been made, and the presence of more women and
minorities in the financial services sector, these groups still
have skepticism about whether firms will care about them and
their careers.
This means that these candidates do their homework. They
dig deep. You have to spend a great deal of time with them
because they want to probe your firm. They want to find out
about your commitment to meritocracy. They want to find out
about your commitment to diversity, and they want to find out
about your support systems. Therefore, the firms that do not
have the infrastructure to support this investment in time and
to support building these relationships will not be as
successful as those that do.
My final observation is that the management structure must
be engaged in implementing meaningful diversity initiates so
that employees at large feel engaged. We have all heard the
expression, ``People don't leave a company; they leave their
manager.'' Diversity is no different. An organization can have
all the top leadership commitment there is; however, if this
commitment is not communicated on a regular basis, the people
who are responsible for the day-to-day, the broader efforts to
have a more diverse workforce will be significantly challenged.
Firms can go a long way here, by being visible in their
initiatives, communicating them broadly, and demonstrating that
each employee, particularly managers, have a stake in the
diversity mandate.
To this end, Morgan Stanley has been proactive in having
visible initiatives and communicating them broadly. Some of our
visible initiatives include conferences for our minority and
women employees, focused on career and ``leadershipment''. We
also have very mature campus-recruiting programs that target
women and minorities. And our employee networks have been a
great way of building informal networking relationships and
providing an additional forum for professional development.
We are also very focused on talent management and
leadership development. It is my belief that if you have good
leaders in place, diversity will follow. Great leaders know
talent when they see it, and they create the conditions under
which people, all people, live up to their potential.
Further, we also feel it's important that our minorities
and women have access to senior management. Our CEO and other
members of top management have numerous events each year where
this is possible. This has been very helpful for our firm in
making sure that our diverse employees have the opportunity to
stay on the radar screens of the decision makers in the firm.
Once again, I would like to thank you, Mr. Chairman, and
your subcommittee, for the opportunity to testify here today.
Although we have made progress in a number of areas with
respect to diversity programs, and they are much more robust
now than they have been in the past, we do know that we can
always improve upon what is a solid foundation.
I welcome your support and hope that I can be helpful as we
continue to work on something that is very important to all of
us, diversity.
[The prepared statement of Ms. Booker can be found on page
81 of the appendix.]
Chairman Watt. Thank you. That's about as timed as I
could--
Ms. Booker. I know.
Chairman Watt. Just as the red light went off.
Ms. Booker. I timed it.
[Laughter]
Chairman Watt. Mr. Abdul-Aleem, you are recognized for 5
minutes.
STATEMENT OF ZAID ABDUL-ALEEM, VICE PRESIDENT, PIEDMONT
INVESTMENT ADVISORS, ON BEHALF OF THE NATIONAL ASSOCIATION OF
SECURITIES PROFESSIONALS
Mr. Abdul-Aleem. Thank you. Good afternoon, Chairman Watt,
Ranking Member Miller, and members of the subcommittee. I am
Zaid Abdul-Aleem, a member of the National Legislative
Committee of the National Association of Securities
Professionals, also known as NASP. I am also a senior vice
president at Piedmont Investment Advisors, a minority-owned
asset management firm.
Founded in 1985, NASP is an organization that supports
people of color and women in the financial services industry.
Based in Washington, D.C., NASP has 10 chapters at major
financial centers throughout the United States. Our members
include everyone from asset managers to broker dealers and
other professionals in financial services.
We have reviewed the GAO report and found that while many
firms have initiated programs to increase workforce diversity,
these initiatives still face challenges. We firmly believe that
the best way to fundamentally impact and accelerate diversity
is to do business with minorities and women wherever they are
found, both within majority-owned firms and minority or women-
owned firms.
We also believe that high-level sponsorship for managerial
diversity performance should be linked to compensation.
Beginning as early as high school, I received the necessary
high-level sponsorship to realize my potential. I recall one
day the CEO of Refco wanted to see me during lunch. I asked him
what he did for a living, and he explained that he watched a
computer screen all day. I knew there was more to it, and it
peaked my interest.
I was 18 years old, and the CEO of Refco had given me a job
as a runner on the Chicago Mercantile Exchange. Five years
later, I was working on the trading floor at Morgan Stanley,
when I heard a commanding voice call me. I turned amidst the
crowd of managing directors. The CEO of Morgan Stanley stood
over me, a first-year analyst. When he reached to shake my
hand, he raised his arm to push me, but I quickly got ``inside
hands.'' The CEO knew that I had played college football and
was testing my inside-hands technique. There we were, the CEO
and I fighting for inside hands.
That day he made a public commitment to my success. Our
interaction made it clear that we had a relationship and that
he was my sponsor. My colleagues knew that supporting me would
be consistent with the goals of the firm. As a result, I was
given opportunities to attend client meetings, work on a range
of transactions, on an occasion work directly for the CEO.
Through Morgan Stanley, I worked in capital markets,
corporate finance, and mergers and acquisitions while living in
the United States and globally in Africa, Asia, and Europe.
Eight years later, after leaving Morgan Stanley, I sat in
the conference room alongside my partner and CEO of Piedmont
Investment Advisors. We were at an introductory meeting with
General Motors Asset Management. The previous month I had met
the CEO of General Motors, who asked me for information on
Piedmont in order to put me in touch with the right people.
Those people listened to our pitch that day, and currently
Piedmont is one of its most successful money managers.
These stories reaffirm how high-level sponsorship for
investment and minorities and minority-owned firms can increase
diversity as well as generate successful business
opportunities. In each case, sponsorship came from the CEO
level. In addition to mentoring, the sponsorship included a
high-level public commitment, which ultimately encouraged upper
and middle managers to also embrace a diverse approach in
developing talent and pursuing good business opportunities.
The CEOs of Refco, Morgan Stanley, and Piedmont are my
trusted confidants to this day, and over time their sponsorship
has grown to include strategic, operational, and financial
commitments.
In light of the industry information on diversity, my
individual experiences, and other members of NASP's
experiences, I will cite three key steps to improve workforce
diversity.
Number one, link diversity components to the mid- and
senior management levels' compensation. Number two, target
recruiting efforts and establish partnerships with well-known
organizations that support women and minorities. Number three,
we recommend that the Federal Government include a significant
diversity component in selecting financial and investment
service providers. The legal service industry has a precedent
for this through a call to action adopted in 2004 in which
large U.S. corporations required their law firms to implement
measurable and quantifiable diversity.
In conclusion, increasing diversity within the financial
services industry is critical to the economic growth of this
country. A more diverse workplace facilitates competition,
pricing efficiency, and product innovation. The United States
enjoys the largest multi-ethnic and cultural country population
in the world. Realizing the potential of our diverse
perspectives, ideas, and solutions is absolutely necessary to
compete in the global economy.
Thank you.
[The prepared statement of Mr. Abdul-Aleem can be found on
page 56 of the appendix.]
Chairman Watt. Thank you for your testimony.
Mr. Graves, you are recognized for 5 minutes.
STATEMENT OF DON GRAVES, JR., GRAVES & HORTON, LLC.
Mr. Graves. Thank you, Chairman Watt, Ranking Member
Miller, and members of the subcommittee. I thank you for the
opportunity to testify before you today. I am Don Graves, a
partner with the law firm of Graves & Horton, LLC, a minority-
owned law firm here in Washington, D.C., and chief executive
officer of Progress Through Business, a nonprofit corporation
with centers around the country, focused on sustaining and
enhancing underserved communities.
Progress addresses the needs of low- and moderate-income
individuals and communities through a variety of business-based
approaches. In focusing on private-sector-led efforts in
diversity in the financial services sector, it is my hope that
the committee will glean useful and innovative approaches for
those within the industry and those of us who work with the
industry. There are a number of examples, and you have heard
some already today, of corporations that have developed
successful strategies in increasing diversity. In many
instances, it is not just a single company implementing new
approaches that is most successful, but groups of companies,
companies from a geographic area, or entire industry.
One of the things that I learned early on during my time
working for the Business Roundtable was that in working with
the chief executive officers of the Nation's largest
corporations, the ability of those chief executives and other
senior level executives to focus on any issue, project, or
program is limited. Where just 20 years ago, a CEO's tenure
averaged more than 8 years, the tenure of a CEO today is around
4 years. A CEO's time, as you might imagine, is constrained to
the point that their activities must revolve around increasing
shareholder value with a laser-like focus on the bottom line.
I don't raise this as a means of excusing corporations,
their CEOs, and senior executives from doing their best to
promote diversity, but rather as a means of suggesting that the
best way to promote diversity within the senior ranks of
corporations, be they within the financial services sector or
otherwise, is to prove the value proposition of diversity
itself. It is incumbent upon those of us who believe that
diversity makes sense for business, for the economy, and for
the country as a whole to help those CEOs and their senior
executives, their boards, and their shareholders to understand
that by increasing diversity within the company, they will also
improve the company's long-term financial position.
Former Federal Reserve Chairman Alan Greenspan perhaps said
it best: ``By removing the non-economic distortions that arise
as a result of past discrimination, we can generate higher
returns to human capital and other productive resources.'' I
have no illusions about the difficulty inherent in such long-
range strategies for today's chief executives and the companies
they lead.
Today's CEO is increasingly judged on short-term returns
and stock price movements. Business Roundtable President John
Castellani has addressed this issue this way: ``The fundamental
reality that CEOs face today is that they are long-term
managers who must depend on the short-term investors for much
of their capital and financial strength. That creates the
powerful temptation for companies to play to short-term
investors with short-term fixes to a company's results; but a
growing number of CEOs are putting up more resistance and
emphasizing their company's long-term strengths, including non-
financial strengths. They are just as committed to earnings
growth, but they just have a more grounded idea of how to
achieve and sustain that growth over time.''
Others on this panel have already provided a rationale for
diversity in the financial services sector, so I will use my
time to focus on solutions. This hearing was to focus in part
on private sector efforts to monitor increased diversity in the
financial services sector. In addition to those solutions being
offered by members of the panel today, I believe that as a
means of sharing learnings and best practices, we must look to
a number of existing efforts by the business community that
attempt to increase and monitor adversity.
With more than 17,000 members, the Greater Cleveland
Partnership is the largest private-sector economic development
organization in the State of Ohio, and one of the largest
regional chambers of commerce in the Nation. The organization
serves as a catalyst to increase economic vitality in Greater
Cleveland and the region. In addition, the Greater Cleveland
Partnership created the Commission on Economic Inclusion to
significantly improve the level of inclusion, the meaningful
involvement of minority businesses and individuals in the
economic engine that drives Greater Cleveland.
The Partnership and more importantly its leaders were
convinced that a key to long-term economic growth and stability
in the region was the ability of hometown corporations to
bridge the gap between local minority talent and employment
opportunities.
The Commission was created to serve as the vehicle that
could help build that bridge. What began with 28 large
corporations and governmental entities in 2000 has gone to more
than 100 large corporations and government members today. The
program strives to be a civic model for the development and
implementation of diversity and inclusion strategies that
advance productivity, innovation, and economic growth.
Additional examples can be found in my written testimony,
so I won't spend much further time on those examples.
A discussion of diversity in the financial services sector
must also include a discussion of diversity as it relates to
the provision of financial services in underserved and diverse
communities. Access to credit and capital is dependent upon the
ability of an institution to understand the marketplace and
provide products that meet the needs of consumers in the
community.
My own organization believes that economic development in
underserved and diverse communities can only be accomplished
through support of scaleable businesses. In the long term,
these businesses will be the true job creators and wealth
builders in minority communities. The ability of the financial
services industry to meet their credit and capital needs will
have a major impact on the success of those businesses.
Importantly, the lack of financial and business literacy is
one of the leading factors for individuals and businesses to
obtain credit and capital. Progress Through Business works
closely with employers and entrepreneurs to enhance that
financial and business literacy.
Another part of the problem is around the performance and
capacity of smaller businesses within those communities.
Without better information on performance and capacity,
financial markets cannot provide credit and capital and
potential business partners cannot in good faith engage those
smaller businesses.
Diversity in both the financial services workforce and in
the provision of financial services will be crucial to the
long-term economic vitality of the industry in this Nation. I
firmly believe that by working constructively and in
partnership, communities in the private sector can implement
the programs and procedures now that will lead to a greater
diversity and greater economic stability in all of our
communities, leading to long-term economic growth for the
Nation as a whole.
I thank the committee for its time and attention to this
matter, and I will be pleased to answer any questions.
[The prepared statement of Mr. Graves can be found on page
100 of the appendix.]
Chairman Watt. I thank you, and all of the witnesses for
their outstanding testimony, and we will now turn to questions
from the members of the subcommittee. I recognize Ms. Waters
for 5 minutes.
Ms. Waters. Thank you very much, Mr. Chairman. And I would
like to thank the witnesses who have appeared here today, and
listening to their testimony certainly causes me to focus and
to examine some of the subject matter that has been presented
to us, and it creates more questions, you know, for me about
the industry and how it all works.
I must say to the chairman that while we are looking at the
financial services industry, I really think we should take more
responsibility for seeing what we can do in the public sector
as well as the private sector, which leads me to those agencies
or GSAs in particular that we have oversight for.
I have spent a lot of time talking with the Federal Home
Loan Bank, Fannie Mae, and Freddie Mac about diversity, and we
have looked at the information that they have shared with us
over a period of time. And then I always learn afterwards that
I didn't ask the right questions.
So, I'm going to ask Mr. Abdul-Aleem, vice president of
Piedmont Investment Advisors, if I was talking to Fannie Mae or
Freddie Mac about increasing their involvement with minority-
owned firms that would help do money management or asset
management for investment in their firms for their firms, what
questions should I ask them? What would I say to them? How
would I get to finding out whether or not they are contracting
with minority firms to do asset management for them? Do they do
that in Fannie and Freddie? Do they use minority firms? Could
they use minority firms to help do money management for them?
Mr. Abdul-Aleem. Yes, they could. Can you hear me?
Ms. Waters. Yes.
Mr. Abdul-Aleem. Yes, they could. I think first the right
question is have a look at the managers that they use, and
assess that, and see if that does reflect, you know, good
minority representation. And then I would also ask what
policies are in place and if there is any documentation of the
high sponsorship level for pursing business with minority--
Ms. Waters. But we do know that they contract with firms to
do money management for them? We know that that's what they--
one of the things they do.
Mr. Abdul-Aleem. Yes, that's one of the things.
Ms. Waters. So if I ask them about how much of that they
do, that would not be a foreign--they never discuss that with
us. They come and they kind of discuss the organization chart,
and they don't really do that, and they talk about employment
of some individuals in various roles, but I did know enough to
talk with them about the contracting that they could or should
be doing. So we would just simply ask them--
Mr. Abdul-Aleem. Yes--
Ms. Waters. ``Who do contract with for money management?''
Mr. Abdul-Aleem. Exactly.
Ms. Waters. Okay.
Let me just ask Ms. Booker.
Ms. Booker. Yes.
Ms. Waters. Morgan Stanley. Are there minorities on the
board of Morgan Stanley?
Ms. Booker. Yes. Choctaw Phillips, who used to be a
managing director in Morgan Stanley's research department--he's
now at Oracle--he is a member of our board of directors.
Ms. Waters. How big is your board?
Ms. Booker. I believe it's approximately 13 to 14 people,
but I need to get back to you on the exact number for that.
Ms. Waters. Thirteen to fourteen. And of that, how many
women, and how many minorities?
Ms. Booker. We have Chuck, who is a minority, and we have a
woman on the board.
Ms. Waters. I beg your pardon?
Ms. Booker. We have one other woman on the board.
Ms. Waters. So one woman and one African-American, is that
it?
Ms. Booker. That is correct.
Ms. Waters. Okay.
Bank of America, how big is your board?
Ms. Thomas. I believe approximately 15 to 16 people. I can
get back to you on the exact number.
Ms. Waters. Okay. And how many minorities are on your
board?
Ms. Thomas. I believe we have three, and two women. But I
can get that and get back to you on those specifics.
Ms. Waters. But you think there may be two women and three
African-American and Latino--
Ms. Thomas. Two African American, I believe, one Latino,
and two women.
Ms. Waters. Okay.
Ms. Thomas. But I'll get that for you.
Ms. Waters. All right. Thank you very much.
Ms. Booker. Excuse me, Congresswoman Waters.
Ms. Waters. Yes.
Ms. Booker. I'd like to make a correction. There are
actually two women on Morgan Stanley's Board. Put that in the
record, please.
Ms. Waters. Okay. I asked that because really the attitude
of diversity starts with the board, as far as I'm concerned.
When you take a look at a board, and you see whether or not
there's diversity there, then you almost can determine whether
or not there is a real commitment to it.
The next thing is the organization chart, taking a look at
the organization chart. And, you know, when I was Chair of the
Congressional Black Caucus, one of the things I did for--
whenever the agencies or department came in to talk with us, I
said, ``Bring the organization chart.'' Then they would have to
bring it, and I would say, ``Now tell me who is at every
level.'' And once they did that, I really understood, you know,
what they were all about.
We don't have an opportunity to do that, but I think that's
something that we may incorporate in our investigation and
oversight as we continue with this kind of work. And I know
that Mr. Chairman, you have been very generous with the time,
and I thank you very much, and yield back.
Mr. Abdul-Aleem. Congresswoman Waters, I would like to add
something to your question regarding Freddie and Fannie. Their
main business line is mortgage securitization, so another
question you could ask them is what minority firms they do
business with as it relates to their mortgage securitization as
well.
Ms. Waters. Very good.
Chairman Watt. Thank you so much for your steadfast support
and continued commitment in this area, Representative Waters,
and I will now yield 5 minutes to the ranking member.
Mr. Miller. I enjoyed the testimony. Mr. Abdul-Aleem--I got
that right the first time, I beat Maxine to that one--it is
impressive that the CEO of Morgan Stanley selected you, a new
guy, and obviously there was a reason you went on to become
vice president of Piedmont Investment, so he saw something in
you that sparked his interest. Why do you think he selected
you?
Mr. Abdul-Aleem. I think, well, number one, we share--
Mr. Miller. Besides the women behind you grinning when I
ask.
[Laughter]
Mr. Miller. Okay.
Mr. Abdul-Aleem. I mean you would have to ask him that,
but--
Ms. Waters. No, tell him you're smart.
Mr. Miller. Because I have another question for Ms. Sims
based on this, and that's why I want to hear this.
Mr. Abdul-Aleem. Well, I think you alluded to it. I think
he identified something in me that he thought was talented, and
I think he realized I needed a break in order to realize those
talents, and some opportunities to bring them to fruition as
well.
Mr. Miller. Well, based on your success, he was right. But
Ms. Sims, you stated in your testimony that as a person of
color, you are less likely to be picked by a senior leader to
be mentored. And I'm looking at this. Can you explain that to
me a little bit?
Ms. Sims. Sure. I would offer that is a tremendous
opportunity--
Mr. Miller. You just turned it off.
Ms. Sims. I got it. There are definitely isolated
situations where individuals with talent and potential are
identified, but not sufficiently enough to be able to impact
the type of critical mass that we're talking about. With the
Toigo population, certainly we are also looking for other
markers, and one of the things that we measure as a leadership
opportunity is actually running public pension funds. Our group
right now works with a variety of public pension funds who also
have commitment to diversity and most recently one of our alums
from a graduating class of 1994 was just named the CIO for New
York City Common Retirement Fund. So again managing $150
billion investment fund for beneficiaries is an important
marker.
So again looking at all the various ways in which we can
see leadership continue to grow, the opportunities for
identifying them within the larger institutions is equally
important. It is just not as frequent as we would like it to
be.
Mr. Miller. If you look at the whole financial services
industry, based on the stock market, everybody is in deep
trouble. I mean, you don't know what a good buy is out there
any more. It doesn't matter what the bottom line is. But any
business looks at the bottom line, and most business people who
have half a brain in their head realize diversity is beneficial
to their bottom line, because they want to do business with as
many people as possible.
And I think, Mr. Corey, you testified that your training
programs are being tested, and can you describe precisely what
your training programs are intended to accomplish as they're
being tested?
Mr. Corey. Well, we see growth. There's growth from high
school curriculum, to college, to university graduate school.
We're talking with a law school in northern New England, and we
have been asked to go up to Tuck in April, Tuck School of
Business at Dartmouth, to teach the course.
In addition to that, a bank in the State of Maine has
initiated conversation--
Mr. Miller. But how are they being tested? This is how
they're being tested?
Mr. Corey. Tested? No. Well, there are two ways. The answer
I just gave you. But the second and the more important way is
that we have designed an evaluation, an assessment
questionnaire, which measures 17 different aspects of ethical
leadership. We test our students at discreet points along the
process of learning values-based leadership training. We test
them. So we can see progress or lack of progress. We can see
leadership profiles that give us the opportunity as
facilitators to step into the process and help them pick up
their socks where they droop and recognize them where they're
strong.
Mr. Miller. And that is the private sector doing this?
Mr. Corey. Excuse me?
Mr. Miller. That is the private sector doing this? Which I
think the answer to this--
Mr. Corey. Yes, that is us doing that. That's right.
Mr. Miller. Yes. That's why I think the answer to this
situation is the private sector. And I'm listening to the
testimony, and, you know, I'm watching the private sector,
whether they're becoming insightful or just looking around and
realizing the benefit to their business and it being
inclusionary, and it seems to be working.
Mr. Graves, you had discussed your organization and the
efforts you put forward to help minorities in the workforce.
Can you describe that?
Mr. Graves. Sure. You're talking about Progress Through
Business. One of the things that we do is work with major
corporations to help them identify pools of talent. To give you
an example of a company that we work with that I believe has
got it, Johnson Controls. It's not in the financial services
sector, but it's a Fortune 100 engineering firm that looked at
the demographic changes in the United States recognized that
its workforce was changing, that its predominantly white male
50-plus engineers were going to be retiring, that its mid-level
and senior-level managers were going to be leaving the
workforce.
So in partnership with Johnson Controls and a number of
other organizations, we are helping them to identify pools of
talent within minority communities, because they also recognize
that the urban core is their place of business for the future.
Mr. Miller. You worked at Business Link when you worked to
help minorities and women-owned business. Was it very similar
to that?
Mr. Corey. There were a number of similar programs around
the country and companies that were adopting those. I refer
back to what I talked about in my testimony. You have a number
of corporations in Cleveland that was the Cleveland Business
Link Program, that ended up being the Commission on Economic
Inclusion. They're very focused on diversity of the workforce,
diversity at the board level, supplier diversity as well. And
they've had some pretty meaningful results.
Mr. Miller. Well, my time has expired. I had something for
all of you, but I'm out of time. So thank you very much.
Chairman Watt. And we're almost out of time. You probably
heard the bells and whistles going off in the background, which
indicates that we have six votes, which according to my
calculation would take, even in the best of all possible
worlds, 40 minutes before we could get back--more likely an
hour and 15 minutes.
So I'm going to let you all off the hook, and promise to
ask my questions--
[Discussion held off the record]
Chairman Watt. I'm going to come to you, but I have to ask
a couple of general questions that I'm not really asking for a
response to right now. But, Mr. Visconti--and this actually
helps the corporate people, because you can go back and kind of
work some of these things up the corporate ladder.
There obviously is a big disparity between what's going on
in banks and in some other parts of the financial services
industry. That is apparent from the statistics. Some feeling is
that is because of CRA and the requirement that banks are
responsive to their communities. So one of the questions I want
you all to vet--and we have two wonderful participants here who
can vet it, because you do both banking and brokerage--what's
the attitude toward what Mr. Visconti suggested about a broader
CRA requirement that transcends just banks? Especially since
everybody's getting into everybody else's business now in the
financial services sector.
Mr. Visconti, I'm going to want you to address why on page
4 of your testimony, DiversityInc has found that the top 50 is
20 percent higher in their bottom line, and I'd like to know
what more specifically you attribute this success. But I'm
asking these questions. Probably there will be others that will
come in writing, and I would ask that in lieu of keeping you
here for another hour, you be as responsive to the questions
that we ask in writing as you have been to the questions we've
asked verbally.
I'm going to recognize Mr. Scott for as long as--we'll keep
an eye on the clock on the floor, but we won't miss the votes.
Mr. Scott. Thank you, sir. I'll be quick.
Mr. Visconti, I'd like to just ask you a series of
questions because--
Chairman Watt. You have to ask him in 2 minutes, though.
Mr. Scott. How do you check the veracity or the
truthfulness of your survey questions?
Mr. Visconti. We have two means. We look at things very
statistically. We have a metrics-based measurement system, and
we look at--most of the questions are looked at parametrically.
So we look for statistical outliers, and we certainly ask
questions about that, then we have a team of full-time
journalists and we spot-check answers all the way.
We have found over the last 8 years that corporations tend
to answer more conservatively than not. We uncover things that
they could have answered in a way that would have benefitted
them--
Mr. Scott. Okay. A good way of measurement to me, as I
mentioned earlier, is money, budgets, bonuses, how do you
measure that? Have you looked at the Diversity advertising
budgets, for example?
Mr. Visconti. Yes--
Ms. Scott. The recruitment advertising budgets? Give me a
little bit on that.
Mr. Visconti. We look at several different fiscal measures.
We look at bonuses, percent of bonuses, to whom they are paid.
We look at plans, accountability, who signs off on them. We
look at percentages of supplier diversity spent. And I'll tell
you that Johnson Controls is a top company, because they supply
the automotive industry, who in turn supplies the Federal
Government. And the supplier diversity programs that the
Federal Government put into effect with their suppliers caused
in turn Ford and GM to turn around to Johnson Controls and act
more responsively.
We also look at advertising budget and percentage spent on
recruitment. We look at number of new recruits by race, gender,
orientation, and age, and we look at promotions, and we look at
retention. So all of those things by every parameter, we look
at very closely.
Mr. Scott. How do they apply the bonuses? How much money
are we talking about?
Chairman Watt. Mr. Scott, can I encourage you to submit
your questions in writing?
Mr. Scott. I will do that.
Chairman Watt. Otherwise, we're going to miss these, at
least the first in the series of votes, which we don't want to
do, because it's an important amendment, it looks like.
And I will just note that some members, including the Chair
and Mr. Scott and others may have additional questions for the
panel, which they may wish to submit in writing. Without
objection, the hearing record will remain open for 30 days for
members to submit written questions to these witnesses and to
place their responses in the record.
I am delightfully grateful to all of you for your
testimony. I knew we were going to get to this point where we
would have a series of votes, so I have been kind of pushing
everybody a little bit more aggressively than I normally like
to. But I knew at least one person had a 7:00 flight, so we
don't anybody to miss their flight as a result of having to
stay here waiting on me to come back and ask questions, because
I doubt any other member will come and ask questions. So I will
submit mine in writing.
I thank you all so much, and the hearing is officially
adjourned.
[Whereupon, at 5:06 p.m., the hearing was adjourned.]
A P P E N D I X
February 7, 2008
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