[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
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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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