Background EEOC Data EEOC data we obtained and analyzed showed that financial services  firms employed more than 3.2 million people in 2015. EEOC requires  employers to use the North American Industry Classification System  (NAICS) to classify their industry. Under this system, the financial  services industry includes the following five sectors: credit intermediation and related activities (banks and other  credit institutions), which include depository credit institutions— commercial banks, thrifts (savings and loan associations and savings  banks), and credit unions; and nondepository credit institutions, which  extend credit in the form of loans and include federally sponsored  credit agencies, personal credit institutions, and mortgage bankers  and brokers;  funds, trusts, and other financial vehicles (funds and trusts),  which include investment trusts, investment companies, and holding  companies; securities, commodity contracts, and other financial investments  and related activities (securities and other activities), which is  composed of a variety of firms and organizations that bring together  buyers and sellers of securities and commodities, manage  investments, and offer financial advice;  insurance carriers and related activities (insurance), which include  carriers and insurance agents that provide protection against financial  risks to policyholders in exchange for the payment of premiums; and monetary authorities, which include central banks. EEOC requires private employers subject to Title VII of the Civil Rights  Act of 1964 with 100 or more employees and all federal contractors who  have 50 or more employees and meet certain other requirements to  annually submit data on the racial/ethnic and gender characteristics of  employees by various occupations for a broad range of industries,  including financial services. Employers are required to submit these data  to EEOC by submitting an EEO-1 report. In addition to providing EEOC  with data on the demographic characteristics of employees as of a  specific point in time, employers must also report the number of  employees working at headquarters and any additional offices, the  primary industry type of the organization, and the numbers of employees  in two different categories of management positions. Beginning in 2007, EEOC changed its requirements on the reporting of  data on managers. More specifically, employers were required to report  data for senior-level management positions rather than combining data on  senior-level managers with data for first- and mid-level management  positions as had been the practice prior to 2007. Since 2007, employers  are to review EEOC guidance describing the two management positions  and determine how their firm’s job positions fit into these classifications.  Senior-level managers include, for example, chief executive officers, chief  financial officers, and managing partners. The first- and mid-level  management category includes (1) middle managers that report to senior  managers and typically lead major business units and (2) managers who  report to middle managers and oversee day-to-day operations, such as  team or branch managers. Additionally, EEOC changed its practices for collecting certain  racial/ethnicity information. The EEO-1 form was changed in 2007 to  divide “Asian or Pacific Islander” into two separate categories, “Asian”  and “Native Hawaiian or other Pacific Islander.” Also, EEOC adopted a  two-question format for collecting ethnicity data. Under this format,  employers should first ask employees their Hispanic or Latino status, and  then ask those employees who do not identify as Hispanic or Latino for  their race. EEOC proposed revisions to the EEO-1 form in 2016, which would have  required employers with 100 or more employees to report summary pay  data in their EEO-1 report. The Office of Management and Budget  (OMB) approved the revision in September 2016. In August 2017, OMB  issued a memorandum suspending the pay-related data collection  aspects of the EEO-1 form. According to the memorandum, since  approving the revised EEO-1 form, the relevant circumstances related to  the data collection had changed and the burden estimates provided by  EEOC in the original filing were materially in error. As a result, the  previously approved EEO-1 form without the pay-related data  requirements will remain in effect. Financial Services  Industry and Diversity  Practices We previously reported on the challenges faced by the financial services  industry in promoting and retaining a diverse workforce. In 2010, we  reported that diversity in management in the financial services industry  did not change substantially from 1993 through 2008 and that diversity in  senior positions was limited. We also found that without a sustained  commitment among financial services firms to overcoming challenges to  recruiting and retaining minority candidates, limited progress would be  possible in fostering a more diverse workplace. Subsequently, in 2013,  we found that following the 2007–2009 financial crisis, diversity in  management in the financial services industry did not change  substantially from 2007 through 2011 and that diversity in senior positions  remained limited. We also found that women generally represented 45  percent of management-level positions each year, from 2007 through  2011. Additionally, our 2013 report noted that practices that can support  diversity include sponsorships (where an executive acts as a guide to  help an employee navigate the organization) and efforts to address  unconscious bias in promotions. In a January 2005 report, we defined diversity management as a process  intended to create and maintain a positive work environment that values  individuals’ similarities and differences, so that all can reach their  potential and maximize their contributions to an organization’s strategic  goals and objectives. We also identified a set of nine leading diversity  management practices that should be considered when an organization is  developing and implementing diversity management. They are (1)  commitment to diversity as demonstrated and communicated by an  organization’s top leadership; (2) the inclusion of diversity management in  an organization’s strategic plan; (3) diversity linked to performance,  making the case that a more diverse and inclusive work environment  could help improve productivity and individual and organizational  performance; (4) measurement of the impact of various aspects of a  diversity program; (5) management accountability for the progress of  diversity initiatives; (6) succession planning; (7) recruitment; (8) employee  involvement in an organization’s diversity management; and (9) training  for management and staff about diversity management. In 2013, we  reported that industry representatives confirmed that these nine practices  are still relevant. Since our 2005 report, researchers and the federal government have  recognized that a focus on inclusion in the workplace is an important  component of creating and sustaining a diverse workforce. For example,  the Office of Personnel Management notes that optimal performance is  based on both diversity and inclusion, which it defines as a set of  behaviors (culture) that encourages employees to feel valued for their  unique qualities and experience a sense of belonging. Research on Potential  Benefits of Workforce  Diversity Research discusses a number of reasons why workforce diversity may be  beneficial to businesses. For example, two studies summarized other  research that found that diversity can bring new voices and perspectives  into conversations about business strategies, such as developing  opportunities in unserved markets. Also, a diverse workforce can help  managers understand and address the needs of a demographically  diverse customer base. That is, employees who are demographically  similar to customers are likely to have an easier time understanding  customer preferences and how they change over time. Additionally, a  diverse workforce can stimulate a wider range of creative decisions.  Researchers have noted that minority opinions stimulate creativity and  divergent thought, and that creativity and innovation are enhanced when  a diverse workforce is employed. Research on the effects of workforce diversity on financial performance  has been mixed. For example, a 2003 report summarized the results and  conclusions reached in four separate studies of the relationships between  race and gender diversity and financial performance. The report  concluded that race and gender diversity had no direct positive or  negative influence on financial performance. A 2011 report that  summarized this and other research found that researchers continue to  put forth conflicting results regarding the business benefits of workforce  diversity. In the authors’ opinion, the goals of workforce diversity  programs should be broad, and not just focused on the organization’s  financial performance. Management-Level  Diversity Trends  Showed Marginal or  No Increase from  2007 through 2015 Representation of minorities at the overall management level increased  by 3.7 percentage points from 2007 through 2015 and their  representation among senior-level managers increased by 1.7  percentage points during this time. Women’s representation at the overall  management level has remained at about 45 percent from 2007 through  2015. Among the various sectors of the financial services industry, the  insurance sector has consistently had the highest proportion of women in  management positions while the banks and other credit institutions sector  has consistently had the highest proportion of racial/ethnic minorities in  management. As the size of financial services firms increase (by number  of employees), the representation of minorities in overall management  increased and the representation of women in overall management was  generally the same. Additionally, management-level diversity in the  financial services sector has similarities and differences compared to  other sectors. Management-Level  Representation of  Minorities Increased  Marginally since 2007, but  Representation Varied by  Minority Group Trends in Overall Management At the overall management level, minority representation increased in the  financial services sector, though representation varied by individual  minority groups. More specifically, the representation of minorities in  management increased by 3.7 percentage points from 2007 through 2015  according to EEOC data, (see fig. 1). This increase shows a continued  upward trend from our 2006 report—the first of a series of reports we  have issued on trends in the financial services industry—in which data  showed that management-level representation by minorities increased  from 11.1 percent to 15.5 percent from 1993 through 2004. Since 2007,  Asians had the largest gains, increasing their representation among  managers from 5.4 percent to 7.7 percent. Hispanics made smaller gains.  In contrast, the proportion of African-Americans in management positions  decreased from 6.5 percent to 6.3 percent. From 2007 through 2015, minorities’ representation among first- and mid- level managers increased by 3.7 percentage points (see fig. 2).  Minorities’ representation among senior-level managers increased by 1.7  percentage points during this time. As previously noted, EEOC splits  management into two categories: (1) first- and mid-level officials and  managers and (2) executive and senior-level officials and managers.  First- and mid-level management positions may serve as an internal  pipeline in an organization through which minority candidates could move  into senior-level management positions. In 2015, representation of  minorities in first- and mid-level management positions was 22.4 percent  compared to 12.3 percent of minorities in senior-level management  positions. Among first- and mid-level managers, the representation of Asians  increased by 2.6 percentage points from 2007 through 2015, while  representation changed by less than 1 percentage point each for  Hispanics and African-Americans (see fig. 3). Among senior-level  managers, the representation of each racial/ethnic group changed by less  than 1 percentage point during this time. As previously mentioned, racial  and ethnic groups’ workforce participation is projected to grow at varying  rates. For example, from 2014 through 2024 labor force participation is  expected to increase by 10.1 percent for African-Americans, 23.2 percent  for Asians and 28 percent for Hispanics, according to the Bureau of Labor  Statistics. In contrast, labor force participation among white persons is  expected to increase by 2 percent. Management-Level  Representation of Women  and Men Has Been  Unchanged since 2007,  with Representation of  Minority Women and Men  Increasing Marginally Trends in Overall Management Representation of women and men at the overall management level in  the financial services industry has remained unchanged from 2007  through 2015, with women representing about 45 percent of managers  and men representing about 55 percent over time. In 2006, we similarly  reported that from 1993 through 2004, women represented from about 43  percent to 46 percent of managers. The proportion of minority women in  overall management increased by 1.5 percentage points from 2007  through 2015 while decreasing by 1.5 percentage points among white  women (see fig. 4). During the same time period, representation of  minority men in overall management increased by 2.2 percentage points  while decreasing by 2.3 percentage points for white men. However,  representation of white men remained significantly higher at 44.5 percent  in 2015 compared to white women at 34.4 percent, minority women at  10.7 percent, and minority men at 10.3 percent. Representation of specific racial/ethnic groups in the financial services  sector from 2007 through 2015 varied by gender (see fig. 5). For  example, among minority women, African-American women consistently  had the highest representation in management, representing from 4.1  percent to 4.0 percent of managers. Hispanic and Asian women had  similar representation in management positions over time. More  specifically, Hispanic women represented from 2.5 percent to 2.9 percent  of managers and Asian women represented from 2.3 percent to 3.1  percent of managers. In contrast, among minority men, Asian men  consistently had the highest representation in management, representing  from 3.1 percent to 4.6 percent of all managers from 2007 through 2015.  African-American and Hispanic men had similar representation in  management positions during this time period. More specifically, African- American men represented from 2.3 percent to 2.4 percent of managers  and Hispanic men represented from 2.3 percent to 2.6 percent of  managers. Representation of women among first- and mid-level managers and  senior-level managers was around 48 percent and about 29 percent,  respectively, from 2007 through 2015. Among first- and mid-level  management positions, the representation of white women decreased by  2 percentage points from 2007 through 2015 (see fig. 6). Also during this  time, the representation of white women in senior-level management  positions decreased by 0.9 percentage points. For minority women,  representation in first- and mid-level management positions increased by  1.6 percentage points and representation in senior-level management  positions increased by 0.3 percentage points from 2007 through 2015. For men, the largest changes over time were in the first- and mid-level  management positions. More specifically, from 2007 through 2015,  representation of white men in first- and mid-level management  decreased by 1.8 percentage points and representation of minority men in  first- and mid-level management increased by 2.2 percentage points.  Among senior-level managers, representation of white men decreased by  0.9 percentage points and increased by 1.5 percentage points among  minority men from 2007 through 2015. For additional information on the  representation of minority women and men in each management position  by race/ethnicity, see appendix II. Certain Financial Sectors  Are More Diverse Than  Others and  Representation of  Minorities Increased with  Firm Size Trends by Financial Sectors The representation of minorities in overall management positions varied  by sector (see fig. 7). EEO-1 data for the financial services industry  include the following four sectors: banks and other credit institutions,  funds and trusts, securities and other activities, and insurance. For  example, the representation of minorities in overall management positions  was consistently the greatest in the banks and other credit institutions  sector and lowest in the insurance sector. Minorities’ representation in  overall management increased in four sectors of the financial services  industry from 2007 through 2015. For example, the representation of  minorities in the banks and other credit institutions sector increased by  3.1 percentage points and the representation of minorities in the  insurance sector increased by 4.2 percentage points. The representation of women in overall management also varied by  sector. As shown in figure 8, the insurance sector consistently had the  highest proportion of women in management positions, followed by banks  and other credit institutions, funds and trusts, and securities and other  activities. From 2007 through 2015, the proportion of women in  management positions decreased in each sector except for the insurance  sector where it increased by 1.9 percentage points. The proportions of Hispanics, Asians, and Other in overall management  increased from 2007 through 2015 in each of the four financial sectors we  reviewed, and decreased for African-Americans in all but the insurance  sector (see fig. 9). Among racial/ethnic groups, Asians generally  experienced the greatest increases in management-level representation.  For example, from 2007 through 2015, management-level representation  of Asians in the securities and other activities sector increased by 3.5  percentage points while it increased by 0.8 percentage points for  Hispanics, increased by 0.6 percentage points for Other, and decreased  by 0.8 percentage points for African-Americans. However, in the  insurance sector, African-Americans had the highest percentage  representation compared to other minority groups and increased from 6.7  percent in 2007 to 7.2 percent in 2015. The representation of minorities in overall management increased as firm  size (by number of employees) increased (see fig. 10). In 2007, the  representation of minorities in management was nearly 5 percentage  points greater in firms with 5,000 or more employees compared to firms  with 100–249 employees. In 2015, by comparison, the representation of  minorities in overall management was about 6 percentage points greater  in the largest category of firms (5,000 or more employees) compared to  the smallest (100–249 employees). Research suggests that larger  organizations may have greater capacity to address workforce diversity.  Researchers also note that large organizations tend to make greater  efforts to prevent workplace discrimination against women and  racial/ethnic minorities because they have direct legal obligations.  Additional information on representation of specific racial/ethnic groups in  management positions across firm size can be found in appendix II. As shown in figure 11, the representation of women in management  positions was generally the same across firm size in 2007 and 2015. For  example, in 2007 women represented from nearly 45 percent to nearly 46  percent of the managers in financial services firms of varying sizes.  Similarly, in 2015 women represented from nearly 44 percent to almost  47 percent of the managers in financial services firms of varying sizes. Financial Services Sector  Trends Have Similarities  and Differences  Compared to Other  Sectors Representation of minorities increased from 2007 through 2015 in the  financial services sector, the professional services sector, and the overall  private sector at both the senior-level and the first- and mid-level of  management, as shown in figure 12. The professional services sector  includes jobs in legal services, accounting, consulting, and advertising,  among other services. Among first- and mid-level managers, however,  the representation of minorities increased at a higher rate for the  professional services sector. More specifically, from 2007 through 2015,  minorities’ representation among first- and mid-level managers increased  by 7.5 percentage points in the professional services sector. In  comparison, minorities’ representation among first- and mid-level  managers in the financial services sector and the overall private sector  increased by 3.7 and 3.8 percentage points, respectively, during this time.  Among senior-level managers, representation of minorities fluctuated  from 2007 through 2015 in all three sectors. However, minorities’  representation increased the most—by 2.5 percentage points—in the  professional services sector, compared to the financial services and  overall private sector, which increased by 1.7 and 1.4 percentage points,  respectively. The financial services sector has generally had a greater proportion of  women in various management positions compared to the overall private  sector (excluding the financial services sector) and the professional  services sector. As shown in figure 13, from 2007 through 2015 women  represented about 48 percent of the first- and mid-level management  positions in the financial services sector. In comparison, women’s  representation among first- and mid-level managers in other sectors was  smaller. For example, women represented 36.7 percent of the first- and  mid-level managers in the professional services sector in 2015. Among  senior-level managers, the representation of women in financial services  was slightly higher than their representation in the overall private sector  from 2007–2010, after which time their representation in each sector was  generally within 1 percentage point. From 2007 through 2015, women’s  representation among senior-level managers in financial services was  generally greater than their representation among senior-level managers  in the professional services sector. Potential Talent Pools  for Financial Services  Positions, Including  Management, Are  Diverse Potential employees for the financial services industry who could be an  external pool for becoming managers can come from a wide range of  academic and professional backgrounds. Undergraduate or graduate  degrees are an important consideration for employment according to staff  we spoke with at financial services firms. Representatives from three  financial services firms told us that while graduates with Master of  Business Administration (MBA) degrees are still an important external  talent pool, firms have broadened their recruitment efforts and seek  students with a variety of degrees. About one-third of the external pool of potential talent for financial  services, that is, those obtaining undergraduate or graduate degrees,  were racial/ethnic minorities from 2011 through 2015 (see fig.14). Rates  of bachelor’s degree attainment by racial/ethnic minorities increased from  29.4 percent in 2011 to 33.9 percent in 2015. During the same time  period, rates of master’s degree attainment increased by similar amounts,  from 28.8 percent to 33 percent, and MBA attainment increased from 35.6  percent to 39.2 percent. As previously noted, the proportion of managers  in the financial services industry who were racial or ethnic minorities  increased from 17.3 percent in 2007 to 21 percent in 2015, which is lower  than the rates of bachelor’s, master’s, and MBA degree attainment for  these groups across all years. Among the potential external talent pool of minority women and minority  men, educational attainment has consistently increased over time, and  women have generally obtained a higher percentage of undergraduate or  graduate degrees compared to men. For example, from 2011 through  2015, rates of bachelor’s degree attainment increased by at least 2  percentage points each for minority women and minority men, and  minority women consistently earned a greater proportion of bachelors’  degrees (see fig. 15). Similarly, the proportions of masters and MBA  degrees earned from 2011 through 2015 increased for minority women  and minority men. During this time frame, minority women consistently  earned a greater proportion of master’s and MBA degrees compared to  minority men. Additional information about educational attainment among  the potential external talent pool of women and men can be found in  appendix IV. A majority of the external pool of potential talent for the financial services  industry, that is, those obtaining undergraduate or graduate degrees,  have been women in recent years (see fig. 16). From 2011 through 2015,  women consistently earned about 58 percent of bachelors’ degrees, just  over 60 percent of masters’ degrees, and about 45 percent of the MBA  degrees. As we previously discussed, women have generally represented  about 45 percent of overall management in the financial services industry. Two of the nonmanagement job categories in the financial services  sector—professional and sales positions—are considered to be the  industry’s potential “internal pipeline,” which comprise staff that could  potentially move into management positions. Professional positions can  include credit and financial analysts, personal financial advisors, financial  examiners, and loan officers; sales positions can include those in  securities, commodities, financial services, and insurance sales agents.  EEOC data are derived from annual reports that show firms’ workforce  composition in a single point of time and therefore do not allow for  analysis of the extent to which firms promote staff internally. However, the  data do provide some insights into the potential internal pipeline. Representation of racial/ethnic minorities in professional and sales  positions has changed over time, but has generally been greater than  their representation in overall management positions (see fig. 17). More  specifically, EEOC data show that racial/ethnic minorities generally  comprised about 25 percent of the professional positions from 2007  through 2011, and then increased to nearly 28 percent in 2015. In  contrast, the representation of racial/ethnic minorities in sales positions  decreased during the 2007–2009 financial crisis, and then increased from  nearly 23 percent in 2011 to nearly 26 percent in 2015. As previously  noted, minorities have represented from 17 percent to 21 percent of  overall management in the financial services industry from 2007 through  2015. See appendix IV for additional information on the potential internal  pool for management positions in the financial services industry. Representation of women in professional positions in the financial  services industry has generally been greater than women’s  representation in overall management (see fig. 18). For example, from  2007 through 2015, the proportion of women in professional positions has  generally been just over 50 percent. As previously noted, during this time  frame women consistently represented about 45 percent of overall  management. The percentage of women in sales positions within the  financial services industry has generally been lower, at about 40 percent. Industry and Other  Sources Describe  Ongoing Workforce  Diversity Challenges  and Practices to  Address Them Representatives from financial services firms and other stakeholders  described many of the same challenges in recruiting and retaining women  and racial/ethnic minorities as we have previously reported, including  negative perceptions of the financial services industry that might  discourage potential candidates. Practices that financial services firms  use to address these challenges include broadening recruitment efforts,  establishing relationships with student groups and professional  organizations, and providing training on unconscious bias.  Representatives from all of the financial services firms we met with  agreed on the importance of analyzing data on the demographic  characteristics of their employees. Some firm representatives noted that  by assessing employee data they can identify trends that may need to be  addressed. However, representatives and other stakeholders differed on  the benefits of making firm-level information on employee diversity  publicly available. Firms and Other Sources  Cite a Variety of Recruiting  Challenges and Practices  That May Help Address  Them Representatives from financial services firms and organizations that  advocate for women or racial/ethnic minorities described a variety of  challenges to recruiting a diverse workforce for the financial services  sector, many of which we have described in previous reports on the  topic. For example, representatives from several financial services firms  stated that negative perceptions of the industry could limit potential  candidates’ interest in the field. Additionally, representatives of an  organization that advocates for workforce diversity stated that women and  minorities may not seek employment in the financial sector due to  concerns about the industry’s reputation or a lack of awareness of career  paths in the industry. Representatives from some financial services firms told us that it is  challenging to get firm leadership on board with recruiting at a broad  group of schools, rather than a small number of elite universities.  Representatives from three organizations that advocate for women or  minorities similarly observed that some financial services firms focus on  elite universities. Also, some financial services firm representatives told  us that there is a great deal of competition for diverse talent and that  financial services firms are increasingly competing with technology firms  for talent. Representatives from two firms also stated that it is challenging  to recruit diverse staff to work in some geographic locations. Reports on workforce diversity echo some of the recruiting challenges  that we heard from financial firm representatives. For example, a 2012  consulting firm report on women in senior management notes that at the  entry-level businesses viewed as male-dominated tend to attract fewer  women. This report also states that sometimes companies have a view that positions requiring long hours will not suit women. A 2012 study on  women’s job choices found that in financial services, women are  significantly less likely than men to apply for financial advisory and trading  jobs and more likely to apply for jobs in general management—most  notably internal finance and marketing. A 2014 consulting firm report on  diversity in the leadership of companies in the United Kingdom, Canada,  Latin America, and the United States found a number of barriers to the  recruitment of all diversity groups (including women as well as  racial/ethnic groups). These barriers include the lack of visible support  from leadership and inadequate collection and use of data on the  advantages of more diverse organizations. Additionally, a 2016 consulting  firm report on women in financial services in 32 countries noted that a  majority of asset managers who were interviewed held the view that  certain jobs in financial services, such as asset management, may deter  qualified women from applying, as may a lack of knowledge about the  industry among graduate students. Financial firm representatives and other stakeholders we spoke with, and  research we reviewed described a variety of practices that they believe or  have found to be effective for recruiting women and racial/ethnic  minorities. These practices include the following. Engaging in broad-based recruiting. Representatives from three  firms stated that they are increasingly hiring and interested in  recruiting students from a variety of academic disciplines, such as  liberal arts or science and technology. For example, representatives  from one firm explained that they are interested in candidates with  critical thinking skills, and that technical skills can be taught to new  employees. Additionally, representatives from several firms noted the  importance of recruiting at a broad group of schools, not just a small  number of elite universities. Establishing relationships with student and professional  organizations. Most financial firm representatives told us that an  effective strategy for recruiting diverse students is to establish  relationships with student organizations representing diverse groups.  Representatives from one firm explained that working with student  groups helps expose diverse students to careers in financial services.  Additionally, to help recruit women and minorities who may already  have graduated from college or graduate school, representatives of  most financial firms and two trade groups described establishing  relationships with professional organizations that represent women  and minorities. Intentionally recruiting diverse candidates. Representatives from  two financial services firms and two organizations that advocate for  the financial services industry noted that firms should intentionally  seek out diverse candidates. For example, representatives from one  firm discussed the importance of including diversity in a firm’s  recruiting strategy and establishing relationships with schools and  organizations that can increase women’s and minorities’ exposure to  financial services. Offering programs to increase awareness of financial services. Several financial firm representatives told us that they establish  relationships with high school students to expose diverse students to  the financial services field. For example, representatives from one firm  described a program that pairs high school students with a mentor  from the firm. Two organizations that advocate for the financial  services industry also noted that it is helpful for financial services firms  to establish relationships with high schools to educate young students  about the field. A 2016 consulting firm report on women in financial  services organizations in 32 countries found that a majority of asset  managers who were interviewed thought it was important for financial  services firms to educate students about careers available in financial  services. The report noted that more on-campus education and  public relations work could help attract women to the field. Firms and Other Sources  Note Retention  Challenges and Practices  That May Help Retain and  Promote Diverse  Employees Reports on workforce diversity, representatives from financial services  firms, and other stakeholders discussed several challenges to retaining  women and racial/ethnic minorities, several of which we have previously  reported. Representatives of three financial services firms and two  organizations that advocate for the financial services industry told us that  it is challenging to retain women and minorities at organizations that lack  women and minorities in management positions. Additionally, two former  employees of large financial services firms, both racial/ethnic minorities,  told us that there are fewer mentors or role models for women and  racial/ethnic minorities in firms that have fewer women and minorities in  leadership positions. A 2012 consulting firm report on women in senior  management reported that women can lack a network or sponsor to help  them advance. Some financial firm representatives noted that employee  resistance, particularly from middle-managers, poses a challenge to  diversity and inclusion efforts. Additionally, some organizations that advocate for women and minorities  noted that unconscious bias is an issue that can negatively affect women  and minorities. As an example, managers may give hiring or promotion  preferences to persons who have hobbies or educational backgrounds  similar to theirs. Also, the authors of a 2014 report on women in senior  management at financial and nonfinancial organizations across 40  countries suggested that unconscious bias against women can result in a  reluctance to promote women in the expectation that they will eventually  put family first. The report stated that this bias can trigger a self-fulfilling  prophecy, as lack of promotion is one of the top reasons cited by women  for leaving their jobs. Reports on diversity, representatives from financial services firms, and  other stakeholders described a variety of practices that may be helpful in  retaining women and racial/ethnic minorities. These practices include the  following. Establishing affinity groups. Representatives from four financial  services firms stated that having affinity groups helps promote both  diversity and inclusion. Affinity groups—sometimes referred to as  employee resource groups or networking programs—provide forums  for employees to gather socially and share ideas outside of their  particular work unit. Representatives from two firms emphasized  that it is important for affinity groups to have meetings with firm  leadership. A 2007 study reported that networking programs have  stronger effects on some demographic groups than others. Training managers and employees on inclusion and  unconscious bias. Several financial firm representatives emphasized  the importance of offering training to foster an inclusive work  environment. As previously noted, an inclusive work environment is  one that encourages employees to feel valued for their unique  qualities and experience a sense of belonging. Training on  inclusiveness, emotional intelligence, and unconscious bias were  specifically noted by two financial firm representatives as being helpful  for both managers and staff. Establishing management-level accountability. Representatives  from three financial firms told us that firm management should be held  accountable for the firm’s workforce diversity goals. Managers’  performance in maintaining a diverse workforce can be evaluated a  variety of ways. For example, two firm representatives discussed the  use of “diversity scorecards.” A diversity scorecard is a set of  objectives and measures derived from an organization’s overall  business strategy and linked to its diversity strategy. Additionally, one  firm representative noted that tying senior managers’ compensation to  diversity goals has been an effective practice for retaining women and  minorities. Researchers have noted that efforts to establish  organizational responsibility for diversity lead to the broadest  increases in managerial diversity. Offering staff mentors and sponsors. Representatives from three  financial firms and two organizations that advocate for the financial  services industry told us that providing staff with mentors or sponsors  helps retain and promote women and racial/ethnic minorities. In  general, a mentor provides advice and guidance to more junior staff  (protégés) and a sponsor nominates or supports a protégé’s  promotion. Research and reports discuss the benefits of mentors  and sponsors. Implementing family-friendly policies. Some of the financial  services firm representatives and three of the four individuals with  whom we met (members of racial minority groups who had worked in  large financial services firms) noted the importance of work-life  balance to help retain women. A 2011 paper on the Canadian  financial sector described selected banks’ family-friendly policies,  such as flexible work schedules, that facilitate work-life balance. As previously noted, in 2005 we identified a set of nine leading diversity  management practices that should be considered when an organization is  developing and implementing diversity management. These practices  include measuring the impact of diversity programs and providing training  for management and staff on diversity. Financial firm representatives and  other stakeholders with whom we met agreed that these practices are still  relevant. However, researchers have found that practices related to diversity may  not benefit all genders and racial/ethnic groups evenly. For example, a  2015 consulting firm report found that the approach of many companies  to cover all groups (racial/ethnic, gender, and sexual orientation) using a  single diversity program is insufficient. The report found that diversity- related practices should be tailored to specific groups. Earlier empirical  research similarly found that the effects of various diversity-related  initiatives varied across gender and race/ethnicity groups. Firms and Stakeholders  Generally Agree on the  Value of Assessing  Workforce Diversity and  Inclusion, but Differ on  Benefits of Making Data  Public Representatives of financial services firms told us that it is useful for  financial services firms to analyze demographic data to assess diversity  of their workforce and identify trends that may need to be addressed. All  of the financial services firms with whom we met agreed on the  importance of analyzing employee data. Some firm representatives noted  that by assessing employee data they can analyze the gender and  racial/ethnic diversity of new hires, employees leaving the organization,  and newly promoted staff and managers. Representatives from several  firms stated that it is important for organizations to be self-aware of how  they are doing with workforce diversity. Also, representatives from an  investment bank told us that they analyze employee data over time to  determine whether certain demographic groups tend to leave the firm  after a certain number of years. With this information, the representatives  told us, the organization can proactively take steps to help retain these  staff, such as providing staff with mentors. Additionally, representatives  from a large bank explained that by analyzing demographic data of  employees, the organization can identify “leaks” in their internal pipeline.  That is, they can determine when and potentially why women and  racial/ethnic minorities leave before progressing into management  positions. Several financial firm representatives told us that when they  identify data trends that indicate problems, such as retention issues, they  then take steps to address them. Several financial firm representatives stated it is important to know the  demographic make-up of employees, because firms should look like their  customers. As an example, a representative of an investment banking  institution told us that over half of the firm’s customers were women;  therefore it was a priority for the organization to know how to serve them  as well as other diverse groups. Also, a firm representative told us that  some potential clients call inquiring about racial and gender diversity  before doing business. The representative added that clients are  interested in receiving advice and information from advisors to whom they  can relate. Additionally, representatives from a large financial services  firm stated workforce diversity helps the firm better understand its diverse  customers. Representatives of three financial services firms with whom we met also  described the importance of obtaining employees’ views about the  organization, including employees’ feelings about diversity and inclusion.  For example, a financial services firm representative told us that in order  to be successful at fostering workforce diversity firms must obtain  employees’ views on work/life balance, opportunities for advancement,  and inclusiveness. He noted that while quantitative data on employees’  demographic characteristics may indicate that the workforce has become  more diverse, employees may not feel like the workplace has become  more diverse. Three of the organizations with whom we met (two that  advocate for the financial services industry and one that advocates for  diversity) agreed on the importance of surveying employees about  diversity and inclusion. For example, representatives from a financial  services industry trade group told us that employee surveys can be used  to detect issues that minority employees face. Research points out that  having diversity management practices alone is insufficient for improving  workplace performance. This research finds that productive workplaces  exist when inclusion is promoted and employees are encouraged to  express their opinions and their input is sought before making important  organizational decisions. Representatives of financial services firms and organizations that  advocate for diversity varied in their views on whether data on the  demographic characteristics of employees at specific financial services  firms should be shared publicly, for example through diversity indexes or  on the company’s website. Representatives from two financial firms told  us that publicly disclosing firm-level employee characteristics would not  benefit the company. More specifically, representatives from two financial  services firms indicated that diversity indexes are of limited value  because they do not indicate whether a firm has made progress on  diversity. One representative noted the reputation of firms that are not  diverse could be damaged, which could make improvement of workforce  diversity more difficult. As discussed earlier, potential candidates’  negative perceptions of the financial services industry’s reputation can  make it difficult for firms to recruit diverse employees. In contrast, representatives from one of the financial services firms and  two organizations that advocate for diversity told us that making data on  the diversity of firms’ workforce publicly available was beneficial because  it highlighted firms’ diversity efforts. As an example, representatives from  a large financial services firm told us that the firm regularly participates in  a number of surveys on diversity, which third-parties use to create various  diversity indexes. The indexes highlight this firm’s progress on employee  diversity. Additionally, several of the firms with whom we met post data on  their websites indicating demographic information about their employees,  such as the proportion of women in management and employees’ country  of origin. Representatives of organizations that advocate for diversity in the  workplace cited the benefits of diversity indexes and the publication of  workforce diversity information on specific financial services companies. For example, one representative stated that requiring businesses to be  transparent about their workforce diversity data creates incentives to  improve the diversity of their workforce. A representative from an  organization that advocates for women noted that diversity indexes or  other public information can be helpful for investors, who want to know  about the workforce composition of the businesses that they may invest  in. This representative stated that institutional investors have been  leading the charge for more transparency and diversity among  companies. We have previously reported on large investors’ interest in  having more public disclosure about the diversity of corporate board  directors. Agency Comments We provided a draft of this report to EEOC. We received technical  comments, which we addressed as appropriate. As agreed with your offices, unless you publicly announce the contents of  this report earlier, we plan no further distribution of this report until 30  days from the report date. At that time, we will send copies of this report  to the appropriate congressional committees and the Acting Chair of the  Equal Employment Opportunity Commission. We will make copies  available to others upon request. The report will also be available at no  charge on our website at http://www.gao.gov. If you or your staffs have any questions about this report, please contact  me at (202) 512-8678 or garciadiazd@gao.gov. Contact points for our  Offices of Congressional Relations and Public Affairs are listed on the last  page of this report. GAO staff who made major contributions to this report  are listed in appendix V. Appendix I: Objectives, Scope, and  Methodology The objectives of this report were to examine (1) trends in management- level diversity in the financial services industry, (2) trends in diversity  among potential talent pools, and (3) challenges financial services firms  identified in trying to increase workforce diversity and practices firms used  to increase workforce diversity. Trends in Management- Level Diversity To describe management-level diversity in the financial services industry,  we obtained 2007–2015 workforce data from the Equal Employment  Opportunity Commission’s (EEOC) Employer Information Report (EEO- 1). EEO-1 data are annually submitted to EEOC by most private-sector  firms with more than 100 employees. Most federal contractors with 50 or  more employees are also required to submit to EEOC annual reports  showing the composition of their workforce; however, consistent with our  2006 and 2013 reports, we did not include these contractors in our  analysis. Accordingly, the EEO-1 data presented in this report do not  exactly match the EEO-1 data on EEOC’s website. We found that these  differences were small and did not materially change the trends in the  representation of various demographic groups. We obtained EEO-1 data in February 2017 for the finance and insurance  industry categorized under the North American Industry Classification  System (NAICS) code 52 from 2007 through 2015, the most recent year  of data available. EEO-1 data were specifically obtained for each job  category by gender, race/ethnicity, firm size, and industry sectors. We  used the race/ethnicity categories used by EEOC: African-American,  Asian, Hispanic, and Other. The “Other” category, which represents less  than 3 percent of the financial services workforce, includes Native  Hawaiian or Pacific Islander, Native American or Alaska Native, and “two  or more races.” Job categories include: senior-level managers, first- and  mid-level managers, professionals, technicians, sales workers,  administrative support workers, craft workers, operatives, laborers and helpers, and service workers. We defined “overall management” as  senior-level managers and first- and mid-level managers. We compared  2007 through 2015 EEO-1 data on the financial services industry to  comparable information we previously published using EEO-1 data on  diversity trends in the financial services industry from 1993–2006.  Because the EEOC data do not come from a sample, but are collected  from all businesses, we did not calculate standard errors or confidence  intervals on our estimates. To compare diversity trends in the financial services industry with the  overall private sector and the “professional and technical services sector,”  we downloaded 2007 through 2015 EEO-1 data on the overall private  sector and the professional and technical services sector from the EEOC  website. We excluded data for the financial services industry from the  data representing the “overall private sector.” The professional and  technical services sector is categorized under the NAICS code 54, and  includes establishments that specialize in performing professional,  scientific, and technical activities for others, such as accounting,  bookkeeping, payroll services, and consulting services. For the financial  services industry, we used the data provided to us by EEOC, which, as  discussed earlier, does not include federal contractors with fewer than  100 employees and therefore does not precisely match data on EEOC’s  website. We chose not to rely on data from the EEOC website for this  comparison so that data on the financial services sector would be from a  consistent source throughout the report. We compared the representation  of racial/ethnic minorities and women in management positions across all  three sectors from 2007 through 2015. To determine the reliability of the EEO-1 data from EEOC that we used  throughout this report, we interviewed knowledgeable EEOC officials and  reviewed relevant documents provided by agency officials and obtained  on its website. We also conducted electronic testing of the data. We  determined that the EEO-1 data were sufficiently reliable for describing  workforce diversity trends. Trends in Potential Talent  Pools To describe recent trends in diversity among potential external talent  pools (potential source of future managers outside the firms) for positions  in the financial services sector, we interviewed representatives from three  financial services firms about the preferred educational requirements  needed to enter the field. We then used educational attainment data  available from the Department of Education’s Integrated Postsecondary  Education Data System (IPEDS) to analyze the race/ethnicity and gender  characteristics of individuals receiving undergraduate degrees, master’s  degrees (of all subjects), and Master of Business Administration (MBA)  degrees for the school years ending 2011 through 2015. At the time of  our review, data for the school year ending in 2015 were the most recent  data available. Through a review of documentation and electronic testing,  we found the IPEDS data to be sufficiently reliable for describing trends in  educational attainment. To describe recent trends in diversity among potential internal talent pools  for management positions, we first identified the nonmanagement  positions that were most likely to feed into management by reviewing an  EEOC report on diversity in financial services and analyzing job  descriptions and education requirements for nonmanagement positions in  the financial services sector. Based on this information, we determined  that the professional and sales job categories best represent the primary  internal talent pool for management positions in the financial services  industry. We then analyzed EEO-1 data for NAICS code 52 to identify  trends in the representation of women and racial/ethnic minorities in  professional and sales positions from 2007 through 2015. We compared  these trends to trends in the representation of women and racial/ethnic  minorities in overall management positions in the financial services  industry. Challenges and Practices  Related to Increasing  Workforce Diversity To identify challenges financial services firms face in trying to increase  workforce diversity as well as practices financial services firms use to  improve workforce diversity, we conducted a literature review. We used  research databases such as ProQuest and SCOPUS to search for  scholarly or peer-reviewed material, government reports, conference  papers, trade and industry articles, and association or nonprofit  publications published from 2006 through 2016. Also, we used Internet  search techniques and keyword search terms to identify publicly available  information about workforce diversity in the financial services sector as of  August 2017. In cases where the studies or articles referenced older  materials that focused on workforce diversity practices, we reviewed  those as well. In addition, we interviewed: representatives from 13 financial services  firms that were actively involved in workforce diversity efforts,  representatives of 11 organizations that advocate for the financial  services industry, women or racial/ethnic minorities, or both. We also  interviewed a selection of two male and two female members of racial  minorities who formerly worked for large financial services firms. We  interviewed representatives from 9 of the 13 financial services firms in a  group setting. Based on the group-discussion format, we did not collect  precise counts of the participants who agreed or disagreed with specific  practices or challenges. Financial services firms were selected based on  their participation at a conference on improving diversity in the financial  services industry, their participation in our previous work, and suggestions  from organizations that represent the financial services industry. Former  employees were selected based on their participation in a conference on  diversity in financial services or their experience in the financial services  industry. We also attended a conference on diversity in the financial  services sector. To determine how financial services firms assess their  diversity policies and practices, we interviewed representatives of  financial services firms as well financial services industry trade groups.  The views expressed by firms, trade organizations, and former  employees may not be representative of all entities involved in workforce  diversity efforts. We used certain qualifiers when collectively describing  responses from financial services firms and trade groups, such as  “some,” “several,” and “most.” We define some as four, several as at least  five but less than most, and most as more than half relative to the total  number possible. We also reviewed academic and other research studies  on the effect of specific workforce diversity policies. We conducted this performance audit from August 2016 through  November 2017 in accordance with generally accepted government  auditing standards. Those standards require that we plan and perform the  audit to obtain sufficient, appropriate evidence to provide a reasonable  basis for our findings and conclusions based on our audit objectives. We  believe that the evidence obtained provides a reasonable basis for our  findings and conclusions based on our audit objectives. Appendix II: Additional Analysis of Diversity  Trends in the Financial Services Industry This appendix provides additional detailed analysis of EEOC data on the  financial services industry from 2007 through 2015. Analysis by Gender,  Race/Ethnicity, and  Management Level The representation of minority women in first- and mid-level management  increased by 1.6 percentage points from 2007 through 2015 while their  representation in senior-level management increased by 0.3 percentage  points during this time (see fig. 19). Women’s representation among  specific racial/ethnic groups did not change by more than 1 percentage  point for any specific group at either management level from 2007  through 2015. The representation of minority men in first- and mid-level management  increased by 2.2 percentage points from 2007 through 2015 and their  representation in senior-level management increased by 1.5 percentage  points (see fig. 20). Men’s representation among specific racial/ethnic  groups did not change by more than 1 percentage point at the senior  management level. In contrast, at the first- and mid-level management  position, Asian men experienced an increase in their management  representation of 1.7 percentage points. Men of other races/ethnicities did  not experience changes in their representation at the first- and mid-level  management position of more than 1 percentage point. Analysis by Firm Size Representation of minorities in overall management increased from 2007  through 2015 in firms of all sizes, with the greatest increases occurring in  firms with over 1,000 employees (see fig. 21). Representation of Asians,  Hispanics, and Other in management positions increased over time in  firms of all sizes while representation of African-Americans in  management decreased by less than 1 percentage point or stayed the  same from 2007 through 2015 in firms of all sizes. In 2015, Asians and  African-Americans had the largest percentage of minority representation,  8.7 percent and 7.1 percent respectively, in firms with over 5,000  employees. Appendix III: Diversity in the Financial  Services Industry by State, 2015 This appendix provides information on management representation in the  financial services industry by state in 2015. Appendix IV: Diversity Trends in Degrees  Earned and Nonmanagement Job  Categories This appendix provides additional information about the potential external  and internal talent pools for the financial services sector. Table 2 includes  information on the demographic characteristics of persons obtaining  undergraduate-level and graduate-level degrees for the school years  ending from 2011 through 2015. Tables 3 through 7 show the  representation of various demographic groups working in the Professional  and Sales job categories of the financial services sector from 2007  through 2015. Appendix V: GAO Contact and Staff  Acknowledgments GAO Contact Staff  Acknowledgments In addition to the individual named above, Kay Kuhlman, Assistant  Director; Lisa Moore, Analyst in Charge; Rachel Batkins; Ben Bolitzer;  Mitch Karpman; Jill Lacey; May Lee; John Mingus; Tovah Rom; Kelsey  Sagawa; Jena Sinkfield; and Tyler Spunaugle made major contributions  to this report.
The U.S. workforce force has become increasingly diverse and is projected to become even more diverse in the coming decades. As a result, many private sector organizations have recognized the importance of recruiting and retaining minorities and women for key positions to improve their business or organizational performance and help them better meet the needs of a diverse customer base. The financial services industry is a major source of employment in the United States and affects the economic well-being of its customers. However, questions remain about diversity in the financial services industry, which provides services that help families build wealth and are essential to economic growth. GAO was asked to analyze diversity trends in the financial services industry, particularly in management positions. This report examines (1) trends in management-level diversity in the financial services industry from 2007 through 2015, (2) trends in diversity among potential talent pools, and (3) challenges financial services firms identified in trying to increase workforce diversity and practices firms used to address them. GAO analyzed data from the Equal Employment Opportunity Commission (EEOC) and the Department of Education. The most recent available data were from 2015. GAO also reviewed studies on workforce diversity and interviewed representatives from financial services firms and organizations that advocate for the financial services industry, women, or minorities. EEOC provided technical comments on a draft of this report that GAO incorporated as appropriate. Overall representation of minorities in first-, mid-, and senior-level management positions in the financial services industry increased from about 17 percent to 21 percent from 2007 through 2015. However, as shown in the figure below representation varied by race/ethnicity group and management level. Specifically, representation of African-Americans at various management levels decreased while representation of other minorities increased during this period. Overall representation of women was generally unchanged during this period. Representation of women among first- and mid-level managers remained around 48 percent and senior-level managers remained about 29 percent from 2007 through 2015. Potential employees for the financial services industry, including those that could become managers, come from external and internal pools. For example, the external pool includes those with undergraduate or graduate degrees, such as a Master of Business Administration. In 2015, about 33 percent of the external pool included minorities and around 60 percent were women. The internal talent pool for potential managers in financial services includes those already in professional positions. In 2015, nearly 28 percent of professional positions in financial services were held by minorities and just over 51 percent were held by women. Research, financial services firm representatives, and financial industry stakeholders described challenges to recruiting and retaining members of racial/ethnic minority groups and women and practices that could help address these challenges, including recruiting from a wider variety of schools. Firm representatives said that it is important for firms to assess firm-level data on diversity and inclusiveness. However, firm representatives and other stakeholders differed in their views on whether firm-level diversity data should be made public. For example, one stakeholder stated that sharing diversity data publicly would create incentives for improvement. However, a firm representative said that for firms that are not diverse, making employee diversity data public could make improvement of workforce diversity more difficult for them.