[House Hearing, 116 Congress]
[From the U.S. Government Publishing Office]


                  A REVIEW OF DIVERSITY AND INCLUSION
                        AT AMERICA'S LARGE BANKS

=======================================================================

                                HEARING

                               BEFORE THE

                       SUBCOMMITTEE ON DIVERSITY

                             AND INCLUSION

                                 OF THE

                    COMMITTEE ON FINANCIAL SERVICES

                     U.S. HOUSE OF REPRESENTATIVES

                     ONE HUNDRED SIXTEENTH CONGRESS

                             SECOND SESSION

                               __________

                           FEBRUARY 12, 2020

                               __________

       Printed for the use of the Committee on Financial Services

                           Serial No. 116-86
                           
                           
                                __________
                               

                    U.S. GOVERNMENT PUBLISHING OFFICE                    
42-820 PDF                  WASHINGTON : 2021                     
          
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                 HOUSE COMMITTEE ON FINANCIAL SERVICES

                 MAXINE WATERS, California, Chairwoman

CAROLYN B. MALONEY, New York         PATRICK McHENRY, North Carolina, 
NYDIA M. VELAZQUEZ, New York             Ranking Member
BRAD SHERMAN, California             ANN WAGNER, Missouri
GREGORY W. MEEKS, New York           FRANK D. LUCAS, Oklahoma
WM. LACY CLAY, Missouri              BILL POSEY, Florida
DAVID SCOTT, Georgia                 BLAINE LUETKEMEYER, Missouri
AL GREEN, Texas                      BILL HUIZENGA, Michigan
EMANUEL CLEAVER, Missouri            STEVE STIVERS, Ohio
ED PERLMUTTER, Colorado              ANDY BARR, Kentucky
JIM A. HIMES, Connecticut            SCOTT TIPTON, Colorado
BILL FOSTER, Illinois                ROGER WILLIAMS, Texas
JOYCE BEATTY, Ohio                   FRENCH HILL, Arkansas
DENNY HECK, Washington               TOM EMMER, Minnesota
JUAN VARGAS, California              LEE M. ZELDIN, New York
JOSH GOTTHEIMER, New Jersey          BARRY LOUDERMILK, Georgia
VICENTE GONZALEZ, Texas              ALEXANDER X. MOONEY, West Virginia
AL LAWSON, Florida                   WARREN DAVIDSON, Ohio
MICHAEL SAN NICOLAS, Guam            TED BUDD, North Carolina
RASHIDA TLAIB, Michigan              DAVID KUSTOFF, Tennessee
KATIE PORTER, California             TREY HOLLINGSWORTH, Indiana
CINDY AXNE, Iowa                     ANTHONY GONZALEZ, Ohio
SEAN CASTEN, Illinois                JOHN ROSE, Tennessee
AYANNA PRESSLEY, Massachusetts       BRYAN STEIL, Wisconsin
BEN McADAMS, Utah                    LANCE GOODEN, Texas
ALEXANDRIA OCASIO-CORTEZ, New York   DENVER RIGGLEMAN, Virginia
JENNIFER WEXTON, Virginia            WILLIAM TIMMONS, South Carolina
STEPHEN F. LYNCH, Massachusetts      VAN TAYLOR, Texas
TULSI GABBARD, Hawaii
ALMA ADAMS, North Carolina
MADELEINE DEAN, Pennsylvania
JESUS ``CHUY'' GARCIA, Illinois
SYLVIA GARCIA, Texas
DEAN PHILLIPS, Minnesota

                   Charla Ouertatani, Staff Director
                Subcommittee on Diversity and Inclusion

                     JOYCE BEATTY, Ohio, Chairwoman

WM. LACY CLAY, Missouri              ANN WAGNER, Missouri, Ranking 
AL GREEN, Texas                          Member
JOSH GOTTHEIMER, New Jersey          FRANK D. LUCAS, Oklahoma
VICENTE GONZALEZ, Texas              ALEXANDER X. MOONEY, West Virginia
AL LAWSON, Florida                   TED BUDD, North Carolina
AYANNA PRESSLEY, Massachusetts       DAVID KUSTOFF, Tennessee
TULSI GABBARD, Hawaii                TREY HOLLINGSWORTH, Indiana
ALMA ADAMS, North Carolina           ANTHONY GONZALEZ, Ohio, Vice 
MADELEINE DEAN, Pennsylvania             Ranking Member
SYLVIA GARCIA, Texas                 BRYAN STEIL, Wisconsin
DEAN PHILLIPS, Minnesota             LANCE GOODEN, Texas
                           
                           
                           C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on:
    February 12, 2020............................................     1
Appendix:
    February 12, 2020............................................    37

                               WITNESSES
                      Wednesday, February 12, 2020

Barry, Subha, President, Working Mother Media....................    12
Bentsen, Hon. Kenneth E., Jr., President and Chief Executive 
  Officer, Securities Industry and Financial Markets Association 
  (SIFMA)........................................................     5
Elhalaby, Rawan, Senior Economic Equity Program Manager, The 
  Greenlining Institute..........................................     8
Greenfield, Gail, Senior Principal, Workforce Strategy and 
  Analytics, Mercer..............................................    13
Mercer, Naomi, Senior Vice President, Diversity, Equity, and 
  Inclusion, American Bankers Association (ABA)..................     7
Vaughan, Joseph M., Executive Director, Corporate Diversity and 
  Inclusion Forum................................................    10

                                APPENDIX

Prepared statements:
    Barry, Subha.................................................    38
    Bentsen, Hon. Kenneth E., Jr.................................    49
    Elhalaby, Rawan..............................................    54
    Greenfield, Gail.............................................    93
    Mercer, Naomi................................................   102
    Vaughan, Joseph M............................................   113

 
                       A REVIEW OF DIVERSITY AND
                         INCLUSION AT AMERICA'S
                              LARGE BANKS

                              ----------                              


                      Wednesday, February 12, 2020

             U.S. House of Representatives,
                          Subcommittee on Diversity
                                     and Inclusion,
                           Committee on Financial Services,
                                                   Washington, D.C.
    The subcommittee met, pursuant to notice, at 10:10 a.m., in 
room 2128, Rayburn House Office Building, Hon. Joyce Beatty 
[chairwoman of the subcommittee] presiding.
    Members present: Representatives Beatty, Clay, Green, 
Gottheimer, Lawson, Adams, Dean, Garcia of Texas, Phillips; 
Wagner, Budd, Hollingsworth, Gonzalez of Ohio, Steil, and 
Gooden.
    Ex officio present: Representative Waters.
    Chairwoman Beatty. The Subcommittee on Diversity and 
Inclusion will come to order. Without objection, the Chair is 
authorized to declare a recess of the subcommittee at any time. 
Also, without objection, members of the full Financial Services 
Committee who are not members of this subcommittee are 
authorized to participate in today's hearing.
    Today's hearing is entitled, ``A Review of Diversity and 
Inclusion at America's Large Banks.''
    I now recognize myself for 4 minutes for an opening 
statement.
    In today's hearing, I am proud to discuss a review of 
diversity and inclusion within America's 44 largest banks. Last 
June, Chairwoman Maxine Waters and I sent a letter to 44 of the 
largest banks in America requesting them to share their 
diversity data with this committee.
    Months of analysis and review of banks' responses led to 
the creation of the committee's staff report entitled, 
``Diversity and Inclusion: Holding America's Largest Banks 
Accountable,'' which was circulated with today's hearing 
materials. This report confirms that America's largest banks 
must be more transparent so that regulators, Congress, and the 
American people can hold them accountable for real and 
intentional diversity and inclusion outcomes.
    Nearly all banks submitted substantive, qualitative data to 
share their diversity and inclusion (D&I) recruitment 
strategies and outreach to diverse organizations. But this 
report shows that despite some successes in recruitment 
strategies and establishing employee resource groups, our work 
is not done and there is progress to be made.
    For instance, the research shows that there are clear 
barriers in retaining and promoting underrepresented groups in 
the banking industry. Experts know the commitment to diversity 
and inclusion must be driven from the top down, and there is a 
lack of diverse groups within C-Suites and boardrooms, as the 
report shows by the banks' own data submission.
    Therefore, banks need more commitment, concrete plans, and 
cultural changes, in terms of C-Suite and board diversity. 
Also, we need more inclusion, in terms of business diversity, 
especially in the utilization of diverse asset managers, law 
firms, and women- and minority-owned business partnerships. 
This report is the first step in requiring banks to respond to 
our call in holding them accountable.
    This first-ever Subcommittee on Diversity and Inclusion has 
garnered national attention and has brought diversity and 
inclusion to the forefront of the nation's largest financial 
institutions. We have already seen some banks make public 
commitments to hold themselves accountable for improving 
diversity and inclusion within their firms.
    For example, CNBC reported in January that Goldman Sachs 
was setting a new standard of having at least one diverse board 
member before taking any companies public. Additionally, 
Citigroup announced their commitment to close the gender gap.
    Today, we welcome a distinguished panel of witnesses who 
will testify to the predominant challenges faced by banks in 
creating an inclusive workforce. I believe we must mirror the 
world we want to live in. As you know, this has been a long 
journey, and it is very important to me and this entire 
committee. When representation and equity is an overarching 
priority in the banking industry, we can develop banks that 
out-innovate and outperform others and continue to move the 
needle within the industry.
    I reserve the balance of my time for the Chair of the full 
Financial Services Committee, the Honorable Chairwoman Maxine 
Waters.
    The Chair now recognizes the ranking member of the 
subcommittee, Mrs. Wagner, for 4 minutes for an opening 
statement.
    Mrs. Wagner. Thank you, Madam Chairwoman.
    I want to thank our witnesses for testifying before the 
subcommittee today. Today's panel includes expert witnesses 
representing multiple parts of the financial services industry. 
I look forward to hearing your testimony and taking this 
opportunity to learn more about the strides being made within 
the industry and successful strategies for recruiting and 
retaining diverse employees.
    Republican and Democrat members of this committee agree 
that firms have more work to do to improve diversity, 
particularly in leadership positions. And, in fact, all of the 
banks surveyed in the Majority staff report acknowledge in some 
way that they need improvement with respect to diversity and 
inclusion.
    The Majority report found that the two most commonly cited 
challenges in improving diversity and inclusion at the 
financial institutions were: one, the competition for diverse 
talent with finance-related expertise; and two, the ability of 
firms to retain a diverse workforce. Studies continue to show 
that minorities and women tend to leave financial services 
firms at a higher rate than their white male counterparts.
    To improve the rate of retention, companies must adjust 
their culture and promote the development of diverse talent. 
This requires a pronounced commitment from corporate leadership 
and a specific action plan to increase inclusion. In order to 
be most effective, company policy changes should be implemented 
from the very top down and have buy-in at all levels of 
management.
    In reading the Majority report, I am encouraged that many 
corporations are proactively addressing diversity and 
inclusion, and a set of best practices are emerging. Some of 
the best practices we have learned about in hearings in this 
committee and in Congress regarding retention rates and 
improving inclusivity of the workplace include: providing 
financial literacy training; transparency regarding salaries 
and promotion opprtunities; mentoring and sponsoring programs; 
employee resource groups; unconscious bias training; and 
flexible work hours for working mothers.
    Various studies have identified several benefits for 
companies that increase their diversity, including different 
perspectives, increased creativity, more innovation, faster 
problem-solving, better decisions, higher profits, lower 
turnover, and improved hiring. So, we know just how beneficial 
it is to have a diverse and inclusive workplace.
    And industry has taken notice, too. According to our 
witness, Dr. Greenfield's, testimony, the projected 
representation among women and people of color in the industry 
over the next 10 years is expected to continue increasing. We 
look forward to hearing more about that. Dr. Greenfield's 
research shows that there are different areas of strength and 
weakness within the industry when it comes to representation.
    For women, she says that retention is an area of strength, 
while hiring and promotion are areas where improvement is 
needed. For people of color, hiring is an area of strength, 
while promotion and retention are areas where more focus is 
needed. These findings are reflective of what this subcommittee 
has heard from multiple witnesses that, while there are clear 
efforts being made by the industry to improve and declare 
acknowledgement of the benefits of a diverse workplace, good 
work is being accomplished and more can be done.
    I look forward to learning more today about the current 
state of diversity and inclusion within the financial services 
industry, the direction it is heading, and how Congress can 
help promote the best practices and strategies that we will 
hear about today. I am proud of this subcommittee for examining 
these important issues and I applaud the chairwoman for her 
efforts. Thank you, and I yield back.
    Chairwoman Beatty. Thank you.
    The Chair now recognizes the chairwoman of the full 
Financial Services Committee, the Honorable Maxine Waters, for 
1 minute.
    Chairwoman Waters. Thank you, Madam Chairwoman. Before I 
begin, I would like to thank you for holding this hearing and 
for your leadership on this important issue. I am so very proud 
that your efforts have culminated in the issuance of an 
historic and groundbreaking staff report on the diversity of 
our nation's large banks.
    This report has been a long time in coming. Back in June 
2019, you and I, Madam Chairwoman, sent letters to the 44 banks 
with more than $50 billion in assets, asking them to report on 
their workforce diversity, their investment with diverse firms, 
their diversity practices and policies, and any challenges they 
face in achieving diversity.
    I believe that America's banks took our charge seriously, 
and I thank them for their participation in this effort. The 
information they have provided is illuminating and is something 
that the American public deserves to see. The committee staff 
report found that banks have a lot of work to do, in terms of 
diversifying their senior staff and their boards. Banks also 
need to do more to contract with minority- and women-owned 
businesses.
    Moreover, banks need to disclose their data to their 
regulators and to the American public. I believe that today, 
with this hearing, we are bringing diversity at our large banks 
from out of the shadows and into the light.
    And, Madam Chairwoman, again, I want to thank you. You've 
worked very hard. I know that this is a subject that is dear to 
you and that you are doing everything possible to help our 
banks and other corporations understand what their 
responsibilities are to all of the people. With that, I yield 
back.
    Chairwoman Beatty. And thank you, Madam Chairwoman. Today, 
we welcome the testimony of a distinguished panel of six 
witnesses. And I thank you all for being here.
    First, we welcome the testimony of Kenneth Bentsen, Jr., 
president and chief executive officer of the Securities 
Industry and Financial Markets Association (SIFMA). Mr. Bentsen 
also served as a Member of the United States House of 
Representatives, representing Texas, and he actually sat on the 
House Financial Services Committee.
    Second, we welcome the testimony of Naomi Mercer, the 
senior vice president of diversity, equity, and inclusion for 
the American Bankers Association, a trade association which 
represents banks of all asset sizes.
    Third, we welcome the testimony of Rawan Elhalaby, the 
senior economic equity program manager at the Greenlining 
Institute, where she leads the organization's research efforts 
around bank accountability and financial inclusion.
    Fourth, we welcome the testimony of Joseph Vaughan, the 
executive director of the Corporate Diversity and Inclusion 
Forum, an organization that leads efforts to promote and 
enhance diversity and inclusion performance within the 
financial services industry.
    Fifth, we welcome the testimony of Subha Barry, the current 
president of Working Mothers Media, and a past senior vice 
president and chief diversity officer at Freddie Mac.
    And finally, we welcome the testimony of Gail Greenfield, a 
senior workforce strategy and analytics consultant at Mercer. 
Dr. Greenfield has more than 15 years of experience in 
diversity and inclusion, including workforce analytics, pay 
equity, and diversity and inclusion analytics.
    The witnesses are reminded that their oral testimony will 
be limited to 5 minutes. And without objection, your written 
statements will be made a part of the record. The witnesses are 
reminded to turn on their microphones and abide by the three 
lights in front of you: green means go; yellow means wrap it 
up; and red actually means stop.
    Mr. Bentsen, you are now recognized for 5 minutes to give 
an oral presentation of your testimony. And then, we will go in 
the same order as you were all introduced.

 STATEMENT OF THE HONORABLE KENNETH E. BENTSEN, JR., PRESIDENT 
AND CHIEF EXECUTIVE OFFICER, SECURITIES INDUSTRY AND FINANCIAL 
                  MARKETS ASSOCIATION (SIFMA)

    Mr. Bentsen. Thank you, Chairwoman Beatty, Ranking Member 
Wagner, Chairwoman Waters, and distinguished members of the 
subcommittee. Thank you for the opportunity to testify today on 
behalf of SIFMA and to share our members' commitment to 
diversity and inclusion in the securities industry.
    SIFMA commends the members of this committee for your 
collective focus on this important issue. SIFMA is the leading 
trade association for broker-dealers, investment banks, and 
asset managers operating in the United States and global 
capital markets. SIFMA's members recognize that achieving 
diversity in our workforce is a necessary goal that requires an 
ongoing commitment to fostering the culture of diversity and 
inclusion, and that a diverse and inclusive workforce that 
reflects the diversity of the clients and communities we serve 
is both the right thing to do and a business imperative.
    The commitment is a priority for SIFMA's board of 
directors. Through our Diversity and Inclusion Advisory 
Council, we provide a forum that allows our members the 
opportunity to discuss their unique initiatives and to 
benchmark with their peers on ways to achieve their D&I goals. 
SIFMA, through our D&I Advisory Council and industry-wide 
channels, convenes conferences, roundtables, and symposia to 
enhance D&I efforts for our members.
    Biennially, SIFMA, on behalf of our participating member 
firms, facilitates a thorough benchmarking survey. This study, 
conducted on a confidential basis, allows our members to assess 
their firm's D&I plans and how their progress compares to the 
results of their peers and to look respectively at the strong 
policies and practices needed to in order to achieve future 
goals.
    SIFMA completed its most recent survey in 2018, and while I 
can't share the specific survey results due to nondisclosure 
agreements, I did want to share a few topline observations. All 
participants reported having a strategic plan for diversity. In 
the United States, 95 percent of organizations' strategic plans 
explicitly address gender, gender identity, race, and 
ethnicity. Sexual orientation and veterans were also commonly 
covered in 80 percent. Responses indicated that leaders at all 
levels in the industry are actively engaged in diversity and 
inclusion efforts, particularly senior leaders.
    Representation of women in the industry was 44 percent. The 
overall industry hire rate for women is comparable to the rate 
of men, as is the overall turnover rate, indicating that while 
both populations are growing, the share of women in the 
industry relative to men has remained steady. Likewise, the 
share of women is projected to increase by 2 percentage points 
over the next 5 years, and 3 percentage points over the next 10 
years, making the ratio of men to women equal.
    People of color make up roughly one-third of the overall 
industry population in the United States. The overall industry 
rate for people of color exceeds that for whites by more than 5 
percentage points, while the turnover rate is about 2 
percentage points higher for people of color than for whites, 
indicating that the percentage of people of color relative to 
whites in the industry has been increasing.
    Ninety-four percent examined pay equity. Sixty-seven 
percent of the respondents conduct such analysis at least once 
a year. Eighty-two percent of respondents said adjustments are 
made as far as the annual review process, and a similar number 
said they have a formal remediation process to address pay 
equity risk.
    Our members report to us that they are employing a wide 
array of strategies to develop the diverse talent pipeline, so 
it's sustainable throughout the future. In fact, the committee 
staff report recognized several SIFMA member company 
initiatives to encourage upward mobility for diverse 
individuals, including development opportunities to highlight 
business' strategic and financial skills to create pathways for 
return to the workforce and identify new ways to promote more 
diverse individuals within their companies.
    Many SIFMA D&I Council members report to us that they tied 
their diversity and inclusion efforts to their performance 
results and compensation plans. Firms have worked to ensure 
hiring interviews or objective by developing best practices to 
reduce bias in the interview process and require that interview 
panels include minorities and women.
    Many have also developed special internship programs to 
further enhance their hiring diversity, some of which 
specifically target high-school students on track to be the 
first in their families to attend college. These recruitment 
efforts include leadership summits tailored to women, Latino, 
LGBTQ, and HBCU students.
    In their efforts to recruit mid-level candidates, many 
firms work with affinity organizations and community groups 
that bring together historically overlooked communities. Firms 
have developed ``return to work'' programs to attract 
predominantly female talent back into the workplace after a 
career break, with programming that includes group coaching, 
mentoring, and other upskilling.
    The strides members have made to build diverse talent 
pipelines, however, can only be sustained by simultaneously 
facilitating an inclusive culture of opportunities for diverse 
staff. Firms have established advancement initiatives to 
increase female and minority representation in senior 
leadership by providing ongoing development opportunities to 
strengthen their business, strategic, and financial skills.
    And many firms incorporate a discussion of diversity in 
their succession planning process. Sponsorship is another 
important aspect of retaining and promoting diversity. Veterans 
have always been of great importance to our members. Some of 
our members have undertaken ambitious initiatives to increase 
their hiring of our country's veterans.
    Again, I want to commend the work of this subcommittee, and 
I commit to work with you as the securities industry invests in 
the business of diversity. Thank you, and I look forward to 
answering your questions.
    [The prepared statement of Mr. Bentsen can be found on page 
49 of the appendix.]
    Chairwoman Beatty. Thank you very much.
    Ms. Mercer, you will have 5 minutes to present your oral 
testimony.

 STATEMENT OF NAOMI MERCER, SENIOR VICE PRESIDENT, DIVERSITY, 
   EQUITY, AND INCLUSION, AMERICAN BANKERS ASSOCIATION (ABA)

    Ms. Mercer. Chairwoman Beatty, Ranking Member Wagner, and 
members of the subcommittee, my name is Naomi Mercer and I am 
the senior vice president of diversity, equity, and inclusion 
at the American Bankers Association. I appreciate the 
opportunity to present ABA's views on the issues of diversity, 
equity, and inclusion, an issue that I have spent many years 
advancing.
    Let me start by commending the subcommittee on the work you 
have done to draw attention to these important issues and on 
the release of your recent diversity report. We are very 
appreciative of the time that the committee staff has taken to 
meet with ABA and many of our member institutions to discuss 
their diversity, equity, and inclusion initiatives.
    ABA is the voice of the nation's $18 trillion banking 
industry, which is comprised of small, midsized, regional, and 
large banks that together employ more than 2 million people. I 
joined ABA last year, after a 25-year career in the United 
States Army, where my responsibilities included overseeing the 
Army's Gender Integration and Religious Accommodation Program.
    I also served as an assistant professor at the United 
States Military Academy. I was teaching composition and 
literature at West Point, but my real mission was to develop 
cadets into leaders of character, with critical thinking skills 
and, more importantly, empathy. My students were predominantly 
white, male, and from privileged backgrounds, who needed the 
skills to understand and respect the perspectives of their 
soldiers with more diverse identities and backgrounds.
    It was my first experience teaching diversity, equity, and 
inclusion. After my retirement from the Army, ABA hired me to 
this position, working with our member banks to help them 
address many of the same diversity, equity, and inclusion 
(DE&I) issues we face in the military.
    The banking industry firmly believes in the value of 
diversity, equity, and inclusion. A diverse workforce and 
vendor channel is critical to the success of individual banks 
being able to meet the needs of a diverse set of communities 
and customers across the nation. In recent years, ABA has 
encouraged its member banks to review their diversity, equity, 
and inclusion programs, while providing a range of resources 
and services to help banks address DE&I issues.
    The industry has made progress in recent years to diversify 
its talent pool and leadership and to meet the needs of 
customers from all walks of life. Many banks have robust DE&I 
programs and have implemented leading practices, such as 
employee resource groups, and leadership and formal mentoring 
programs to advance women, people of color, and other 
underrepresented groups, and supply our diversity programs.
    As the subcommittee report clearly notes, the industry also 
still has much work to do. Today, banks of all sizes are 
engaged in a range of initiatives to embrace diversity, equity, 
and inclusion, not just because it's the right thing to do, but 
because it's good for business. ABA recognizes that DE&I 
efforts must be tailored to individual organizations and factor 
in the bank's existing culture, the bank's needs for the 
present and the future, and steps the bank must take to achieve 
an inclusive environment.
    The banking industry has made progress in diversity, 
equity, and inclusion, but challenges remain, as the banking 
industry, like many other business sectors, is most diverse 
among employees below the senior leadership and middle-
management areas.
    ABA is committed to providing leadership for our banks by 
creating the salient research on leading practices, such as 
using diverse and representative hiring and promotion slates, 
helping banks to expand their networks when searching for 
directors and C-Suite executives, teaching banks to prime 
interview and promotion review to reduce unconscious bias, and 
many more to help our banks build and implement strategies for 
DE&I.
    Cultural change within an organization is incremental and 
change across an entire industry can be frustratingly slow. ABA 
and our member banks stand ready to work with the subcommittee 
to advance diversity, equity, and inclusion.
    Thank you for the opportunity to share ABA's efforts to 
help the banking industry address these important issues. I am 
happy to answer any questions you may have. Thank you.
    [The prepared statement of Ms. Mercer can be found on page 
102 of the appendix.]
    Chairwoman Beatty. Thank you.
    Ms. Elhalaby, you are now recognized for 5 minutes.

  STATEMENT OF RAWAN ELHALABY, SENIOR ECONOMIC EQUITY PROGRAM 
               MANAGER, THE GREENLINING INSTITUTE

    Ms. Elhalaby. Thank you, Chairwoman Beatty, Ranking Member 
Wagner, and members of the Subcommittee on Diversity and 
Inclusion for holding this hearing and for inviting the 
Greenlining Institute to testify.
    My name is Rawan Elhalaby, and I am a proud San Diegan and 
Palestinian-American. I am the economic equity senior program 
manager at the Greenlining Institute and I lead our research on 
the financial services sector. The Greenlining Institute is a 
State and national policy and research organization that 
envisions the nation where communities of color thrive, and a 
person's race is never a barrier to economic opportunity.
    The name of my institution comes from the antidote to the 
discriminatory practice of redlining. For anyone unfamiliar 
with the history of redlining, it was the public and private 
practice of drawing literal red lines around non-white 
neighbors on a map to signify that they were not suitable areas 
for banks or insurance companies to do business.
    Thanks to the Fair Housing Act and other civil rights laws, 
redlining is banned today. Yet, we can still see its lingering 
effects through society, with the lower earning potential of 
people of color, inferior treatment of minority small-business 
owners by banks, people of color routinely denied home loans at 
a higher rate than their white counterparts, and a widening 
racial wealth gap.
    In the last 40 years, the wealth of the median Black family 
has decreased by 50 percent, while the wealth of the median 
white family has increased by 33 percent. The Greenlining 
Institute has over 25 years of experience analyzing diversity 
at all levels of government, higher education, philanthropic 
foundations, and banks.
    At Greenlining, we understand that people solve the 
problems they see. One of the most successful examples of 
transparency legislation is the Home Mortgage Disclosure Act 
(HMDA). HMDA requires banks to disclose data on their lending 
by race and ethnicity and we use this data to identify 
potential discriminatory patterns. While HMDA does not enforce 
lending quotas or prohibit any particular activities, it does 
make banks take responsibility for lending or not lending to 
specific communities.
    Greenlining also tracks corporate contracting with diverse 
businesses or supplier diversity. California has an active, 
groundbreaking, supplier diversity, transparency effort, 
including the California Public Utilities Commission's General 
Order 156. This order encourages utility companies to contract 
with minority women and disabled veteran-owned businesses and 
requires annual reporting of their procurement and outreach 
policies.
    In 2019, I authored a study on the boards of directors of 
the 10 largest banks in California. I found out, on average, 
people of color made up 30 percent of bank board composition, 
even though over 67 percent of California's population are 
people of color. These figures have barely changed since we 
analyzed bank boards in 2012, and again in 2017, showing that 
banks have not made sufficient progress on recruiting people of 
color to their boards.
    To complete our bank research, Greenlining requests data 
from national institutions that operate in California and uses 
this data to track and rank these companies. We have seen in 
our work that financial institutions and other companies often 
make claims to prioritize diversity and inclusion, but data 
reveals the action or lack thereof behind these buzzwords.
    Data allows Greenlining to benchmark the banking industry's 
goal of increasing the D&I in critical areas. Unfortunately, we 
experienced substantial difficulty in receiving data broken 
down by race and ethnicity. Banks have inconsistent diversity 
data collection and reporting practices and generally, under-
resource internal teams tasked with responding to our data 
requests.
    Another driving factor is that banks are not required by 
law to provide the race data that is most meaningful to us. The 
CRA and other color-blind civil rights laws, while immensely 
impactful, are not sufficient on their own for eliminating 
discrimination in the financial services sector. Race-conscious 
regulations are needed to ensure financial inclusion.
    Greenlining urges Congress to expand existing legislation 
that requires government agencies and private institutions to 
disclose data on diversity and inclusion practices. One example 
is Section 342 of the Dodd-Frank Act, which created Offices of 
Minority and Women Inclusion (OMWIs) to ensure policymakers and 
regulators better reflect, understand, and promote job creation 
in minority communities.
    Data transparency on D&I helps agencies identify where 
policy and practice improvements should be made. The rise of 
the non-bank financial technology or fintech lenders is one 
largely unregulated area, where improvements in D&I can be 
made: 1.6 percent of the tech industry is Latino; and less than 
1 percent is Black, and without increased transparency, these 
figures may stay static for too long.
    To conclude, I applaud the Committee on Financial Services 
for prioritizing diversity and inclusion with the creation of 
this subcommittee. And I thank you again for the opportunity to 
testify today and highlight our work. The Greenlining Institute 
looks forward to working with you to shed light on the 
diversity and inclusion practices of the nation's banks. As I 
hope my testimony has demonstrated, transparency brings 
sunshine to essential parts of the financial sector and we need 
more of it.
    [The prepared statement of Ms. Elhalaby can be found on 
page 54 of the appendix.]
    Chairwoman Beatty. Thank you.
    Mr. Vaughan, you are now recognized for 5 minutes.

 STATEMENT OF JOSEPH M. VAUGHAN, EXECUTIVE DIRECTOR, CORPORATE 
                 DIVERSITY AND INCLUSION FORUM

    Mr. Vaughan. Thank you. Chairwoman Beatty, Ranking Member 
Wagner, and distinguished members of this subcommittee, thank 
you for the opportunity to share the perspectives of the 
Corporate Diversity and Inclusion Forum regarding the 
importance of diversity and inclusion performance in the 
financial services sector.
    Throughout the 116th Congress, the House Financial Services 
Committee has worked to illuminate the correlation between 
greater diversity and inclusion performance and the long-term 
economic stability, safety, and soundness of the financial 
services sector. In fact, witnesses before the committee have 
incontrovertibly established the economic benefit of diversity 
and inclusion performance to the United States' economy.
    The Corporate Diversity and Inclusion Forum works to 
educate market participants, policymakers, and the public 
regarding the intersectionality of greater diversity and 
inclusion performance in the sector and the goals of Federal, 
State, and local policymakers. We believe greater diversity and 
inclusion performance enhances profitability and is integral to 
addressing the persistent wealth gap in diverse urban and rural 
communities. In fact, McKinsey & Company recently estimated the 
U.S. economy will see between a $1 trillion and $1.5 trillion 
decline in consumption and investment between 2019 and 2028, 
due to the racial wealth gap yielding a 4 to 6 percent decline 
of the GDP in 2028.
    In recent years, the financial services sector has made 
significant strides to embrace the evolving demographic shifts 
in the U.S. workforce and consumer base. Countless financial 
services firms have integrated diversity and inclusion 
practices into their business enterprise. Diversity councils, 
employee resource groups, enhancements to more robust hiring, 
recruitment and retention policies, and the hiring of chief 
diversity officers are just a few examples of the critical 
practices being replicated across the sector.
    While these efforts are laudable, it is reasonable to 
question whether efforts to realign business practices to more 
inclusive goals are sustainable and permanent. The committee's 
Banking Diversity Data Report rightly highlights key 
performance improvements among covered institutions, such as a 
broad commitment to achieve pay equity and, in some cases, 
linking diversity and inclusion results to performance. Those 
improvements are tempered by persistent shortcomings enumerated 
in the analysis, such as a muted commitment to supplier 
diversity and poor representation of women and minorities in 
senior leadership ranks and on corporate boards of directors.
    The report's findings also identify structural challenges 
the industry faces in broadening the talent acquisition 
pipeline. The CDIF strongly encourages the financial services 
firms to make a concerted effort to engage diverse colleges and 
universities in the development of academic curricula, which 
produce talented graduates, well-suited to adapt to the rigors 
of the industry. Further, the industry must endeavor to visit 
college campuses and promote their goals and values, if we are 
to assuage perceptions that diverse talent is undervalued, 
unwelcome, and marginalized in the sector.
    These outreach efforts are further enhanced by embracing 
STEM education and financial literacy in K-12 education as 
well. While the report's findings represent a current snapshot 
of large bank performance, it's critically important to 
recognize the data collection, data aggregation, and reporting 
process were implemented through a collaborative and 
constructive engagement between the committee's Majority and 
covered institutions.
    Similarly, pursuant to Section 342 of the Dodd-Frank Act, 
the Directors of the Offices of the Minority and Women 
Inclusion have endeavored to develop an honest, collaborative, 
and transparent engagement with covered entities through a 
series of roundtables, conferences, and forums. The OMWI 
Directors have engaged market participants across the U.S., 
sought strategic advice in the development of the final joint 
standards, which were published in 2015, and are integral to 
developing a comprehensive assessment of D&I performance.
    Further, the OMWI Directors have taken a constructive 
approach in the development of the voluntary, self-assessment 
process, consistent with the key recommendations of the 
industry, such as a self-reporting process outside of 
prudential examinations, and the aggregation of D&I performance 
data from covered entities.
    The U.S. economy has experienced nearly a decade of 
expansionary growth that has served as a catalyst in the 
implementation of sound diversity and inclusion best practices. 
Although our workforce is enjoying near full employment, too 
many diverse urban and rural communities have not benefitted 
fully from the expertise and knowledge of the financial 
services sector.
    The Great Recession of 2008 yielded higher attrition rates 
in the sector for women and under-represented minorities. And 
my fear is the gains identified in the Banking Diversity Data 
Report will be lost during a future economic downturn. Greater 
transparency and disclosure will assuage that potential outcome 
and help to enshrine the ongoing commitment to D&I in this 
sector.
    Thanks again for the committee's consideration, and I look 
forward to answering your questions.
    [The prepared statement of Mr. Vaughan can be found on page 
113 of the appendix.]
    Chairwoman Beatty. Thank you.
    Ms. Barry, you now have 5 minutes to present oral testimony 
on your written presentation.

   STATEMENT OF SUBHA BARRY, PRESIDENT, WORKING MOTHER MEDIA

    Ms. Barry. Honored members of the subcommittee, I thank you 
for inviting me today.
    By way of added background, I spent 26 years of my career 
in financial services at some of our nation's largest 
institutions: 20 years in frontline trading, sales, and 
business development roles; and 6 years as a global chief 
diversity officer. I personally experienced the bias that women 
and people of color face in that industry, but I also 
experienced the great opportunities and credibility that came 
with being successful.
    As the president of Working Mother Media, we are a go-to 
resource for Fortune 1,000 companies, nonprofits, and 
governmental organizations. And we specialize in issues of 
DE&I, women and women of color, and parenting and caregiving. 
And we annually produce an inclusion index that assesses the 
diversity and inclusion best practices and outcomes. It is in 
this capacity that I share my comments with you.
    The report that the committee staff prepared identified 
three barriers to achieving diversity and inclusion results. 
And I will be happy to sort of illustrate some of the ways in 
which companies are overcoming those challenges. But there are 
two additional barriers that need to be acknowledged and 
addressed.
    One is a bias in talent development. Organizations must 
acknowledge and focus on the bias that exists in their talent 
decision-making systems and processes. And why do we say 44 
financial institution's populations demographically match that 
of the U.S. population? Very few of them are diverse at the 
top, whether it's the board, the CEO, or the C-Suite.
    And the lack of mechanisms that measure and titrate, for 
example, how feedback is given, or support is given and how 
that's received by underrepresented minority groups create gaps 
that become chasms. Recent gender gap research shows that women 
are one-third less likely to realize what relationship capital 
is and the importance of cultivating and monetizing it. Women 
and people of color aren't coached or made aware that building 
and leveraging relationships in your early career is critical, 
so they start out on their backs here.
    This also shows up in the lack of sponsorship for women and 
people of color. With 73 percent of white women and 83 percent 
of multicultural women citing the lack of sponsors as the main 
reason they haven't gotten into critical profit-and-loss roles. 
And remember, a 2015 Standard and Poor's 500 analysis found 
that 90 percent of new CEOs were promoted or hired from line 
roles with profit and loss responsibility. You can do the math.
    The second one is the lack of accountability for making 
progress. There are two aspects to this. One, holding companies 
accountable for transparently providing D&I data and metrics, 
both internally and externally. And two, holding the CEOs and 
their leadership teams accountable for the results they produce 
that tie to the above metrics.
    So, structured programs need to be created. Clear-cut 
accountability metrics need to be normalized across geography 
and industry. We say diversity is critical to businesses, but 
we don't measure or compensate enough on diversity and 
inclusion performance. For example, 75 percent of all the 
inclusion index companies say they hold managers accountable 
for D&I results, but only 35 percent of them link compensation 
to D&I results. And only 46 percent set new numeric goals for 
diversity representation, and 58 percent set percentage goals. 
Again, you do the math.
    Our inclusion index provides tools to hold organizations 
and leaders accountable. It measures demographics, best 
practices and talent processes, and culture and leadership 
accountability, and doing this annually allows companies to 
mark progress and tweak their strategy. So, intentions and 
words must translate into actions and consequences.
    So, what do we recommend? Be transparent about data. Build 
accountability from the top. Establish development programs for 
women and underrepresented minorities. Establish new work 
norms. Challenge existing norms. Reframe how work gets done. 
And leverage your employee resource groups for marketplace 
impact.
    In summary, while some organizations are proactively 
addressing D&I, there is much more work to be done, especially 
in the banking sector. The formula is straightforward, but the 
execution is key. And accountability creates the real change.
    I thank you, and I'm happy to answer any questions that the 
committee may have.
    [The prepared statement of Ms. Barry can be found on page 
38 of the appendix.]
    Chairwoman Beatty. Thank you.
    And I now recognize Dr. Greenfield for 5 minutes.

   STATEMENT OF GAIL GREENFIELD, SENIOR PRINCIPAL, WORKFORCE 
                 STRATEGY AND ANALYTICS, MERCER

    Ms. Greenfield. Members of the subcommittee, thank you for 
the opportunity to share my views on this important topic.
    My name is Gail Greenfield, and I'm a senior principal at 
Mercer, a consulting firm and Marsh & McLennan business. I work 
with clients to help them create more diverse and inclusive 
workforces. My comments today will focus on evidence gathered 
through Mercer research and consulting assignments, as well as 
research conducted by others.
    Before I speak about this evidence, I want to discuss the 
business case for diversity and inclusion. The business case is 
clear. An extensive body of trust research has demonstrated the 
value of a diverse and inclusive workforce. Organizations 
interested in improving their financial performance, better 
leveraging their talent, and increasing innovation need to make 
diversity and inclusion a priority.
    In developing a diversity and inclusion strategy, Mercer 
recommends focus on four key measures. The first is 
representation. Based on recent research conducted by Mercer on 
behalf of financial institutions, we find that female 
representation in the industry is 44 percent. The highest 
representation is at the staff level, which is roughly two-
thirds female. Representation drops below 40 percent at the 
professional and manager levels, and fewer than 1 in 4 
executives are women.
    People of color collectively make up 32 percent of the 
overall industry workforce, with representation dropping to 
one-quarter at the manager level, and 14 percent at the 
executive level.
    The second measure is talent flows. Based on hiring, 
promotion, and turnover trends, how is a representation in the 
industry expected to change over the next decade? Based on 
Mercer's research, we expect a 3-percentage point increase in 
the representation of women at the manager level and above over 
the next decade. The projected increase is larger for people of 
color, where we expect an 11-percentage point increase in 
representation at the manager level and above.
    Our research further revealed that for women in the 
industry, retention is an area of strength, while hiring is an 
area of strength for people of color. For both women and people 
of color, the key lever to further increase the representation 
at senior levels is to ensure they're being promoted at 
comparable rates to their male and white counterparts.
    The third measure is employee experience. There's limited 
information on the perceptions of those employed in the 
financial services industry; however, we can glean insights 
from a study Mercer conducted on behalf of the Financial 
Services Pipeline Initiative. The study included a survey of 
10,000 individuals to learn about the experiences and 
perceptions of Hispanics and Latinos and Blacks and African 
Americans in the financial services industry in Chicago. One 
key finding is that people in these groups are less likely than 
whites to feel there is a racially and ethnically diverse mix 
of role models in their organizations and are less likely to 
perceive a leadership commitment to diversity and inclusion.
    The last measure is pay equity. PayScale recently released 
a report revealing that the raw gender pay gap in the finance 
and insurance industry is $0.26, with women in the industry 
earning $0.74 for each dollar earned by men. After accounting 
for legitimate compensable factors, the pay gap falls to $0.03. 
I refer to this figure as the unexplained pay gap.
    Mercer also compiles information on pay gaps. Among the 
financial services companies for whom Mercer conducts pay 
equity assessments, we find the unexplained gender pay gap is 
less than $0.01. Unexplained pay gaps are less than $0.01 for 
Blacks and African Americans and for Hispanics and Latinos. We 
find a positive pay gap for Asians of slightly more than $0.01. 
These studies reveal that pay gaps are driven mainly by 
compensable factors.
    Mercer's experience indicates that the single most 
important factor in determining an employee's pay is their 
career level. Thus, closing raw pay gaps will require 
organizations to ensure women and people of color gain access 
to more senior, higher-paying roles. I caution organizations, 
however, not to be deceived into thinking a small, unexplained 
pay gap does not deserve attention. A back-of-the-envelope 
calculation suggests a $0.01 unexplained pay gap translates 
into lost wages for women in the U.S. of $500 million each 
week.
    Thank you for this opportunity. I hope my remarks today 
have provided evidence-based strategies for what financial 
services companies can do to advance diversity and inclusion. I 
look forward to answering your questions.
    [The prepared statement of Dr. Greenfield can be found on 
page 93 of the appendix.]
    Chairwoman Beatty. Thank you very much. Before I recognize 
myself for 5 minutes, let me say thank you to all of the 
panelists, and let me also say, because of the large number of 
panelists, we are going to ask you to be brief and concise so 
everyone can get through asking each of you or most of you a 
question. And each of you will, as well as the Members, have an 
opportunity to follow up in writing.
    And now, I recognize myself for 5 minutes for questions. My 
first question is for Dr. Mercer, Dr. Greenfield, and Mr. 
Vaughan. In a review of the business case for diversity, the 
president of the National Minority Supplier Development Council 
testified that diverse supply chains are better equipped to 
address consumer preferences in a direct way. She also added 
that diverse firms tend to hire diverse workers at a much 
higher rate.
    With that, we found that some of the banks did not even 
track their spending with diverse firms. Would you recommend 
that banks have a public database on their website to increase 
transparency? That can be a yes or a no. How can organizations 
continue to work with other organizations, like the U.S. 
Chamber of Commerce or LGBTQ or the National Veterans Supplier 
Diversity? Dr. Mercer?
    Ms. Mercer. Chairwoman Beatty, we encourage our banks to 
have supplier diversity and we also encourage them to 
collaborate with a variety--
    Chairwoman Beatty. Okay. Transparency on their website, yes 
or no?
    Ms. Mercer. Yes, because we are--
    Chairwoman Beatty. Mr. Vaughan, transparency on their 
website, yes or no?
    Mr. Vaughan. Absolutely.
    Chairwoman Beatty. Ms. Barry, yes or no?
    Ms. Barry. Absolutely.
    Chairwoman Beatty. Dr. Greenfield?
    Ms. Greenfield. I'd like to see that at the discretion of 
the particular organization.
    Chairwoman Beatty. Mr. Bentsen?
    Mr. Bentsen. I think we would leave that up to the firms. I 
think a lot of firms do that.
    Chairwoman Beatty. Okay. Ms. Elhalaby?
    Ms. Elhalaby. Yes, definitely.
    Chairwoman Beatty. Thank you very much. The next question 
deals with Section 342 of the Dodd-Frank Act, which several of 
you have mentioned, and which we know established OMWIs. And 
they charged them with increasing inclusion and diversity with 
their workforce. They charged them with increasing 
participation of women in minority-owned businesses in their 
agency, and also, to assess diversity policies and practices of 
the industry that they regulate. Mr. Vaughan, how important is 
the data collection process in measuring D&I? I believe it's 
difficult to measure what we don't track.
    Mr. Vaughan. It is absolutely critical, whether you are 
looking at supplier diversity or talent acquisition, and the 
makeup of boards or leaderships teams. Disclosure certainly, as 
one of my fellow witnesses has said, brings transparency and 
increases performance. What gets examined and measured gets 
done.
    Chairwoman Beatty. We also know that, for example, the FDIC 
and the OCC did it on a voluntary basis and their assessments 
were as low as 16 percent and 9 percent. Mr. Bentsen and Dr. 
Mercer, why do you believe the response rates from your members 
to regulate are so low?
    Mr. Bentsen. We do have a number of members who tell us 
that they respond to it. Our members interpret the statute as 
actually being a discretion, not a mandate. And we do know we 
have members who raise concerns because while EEOC, which all 
members have to supply, has FOIA protection, 342 data may not 
have FOIA protection, and firms are concerned about 
confidentiality risks that would come from that.
    Chairwoman Beatty. Thank you. The president of the National 
Minority Supplier Development Council testified in one of our 
hearings that diverse supply chains are better-equipped to 
address consumer presences in a direct way. Despite this, 
review of the bank supplier diversity members from the 
subcommittee still show that not all of our nation's largest 
banks track this data or track their business partnerships with 
diverse asset management, something you're going to hear a lot 
about in looking at that. Mrs. Barry, can you tell us why you 
think some banks do not track their diverse supplier and how 
much they spend? And why banks who handle tens of hundreds of 
billions of dollars in assets do not have or do not track their 
partnerships with diverse managers? And, Ms. Greenfield, I will 
ask you that same thing.
    Ms. Barry. I believe that the banks are challenged by that 
data, because the data doesn't look good, and when it doesn't 
look good, they're not willing to share that data. It's as 
simple as that. But the second piece is where they gather that 
data. One of the things that the best practicing banks are 
doing is they are requiring their diverse suppliers or all of 
their suppliers to also monitor their own diverse sub-suppliers 
and subcontractors.
    Chairwoman Beatty. To anyone, why do you think they don't 
have diverse asset managers? We now know through our studies 
that there are many minority diverse asset managers who can do 
it, but we are finding out that was an ah-ha moment for many of 
the banks. Why? Anyone?
    Mr. Vaughan. It is why our diversity still remains not a 
top-line priority for the organizations.
    Chairwoman Beatty. Okay.
    Mr. Vaughan. Once they make the commitment, they will 
change the results.
    Chairwoman Beatty. Thank you. And my time is up.
    I now recognize the ranking member of the subcommittee, my 
colleague, Ranking Member Wagner, for 5 minutes of questioning.
    Mrs. Wagner. Thank you, Madam Chairwoman.
    Dr. Greenfield, according to your testimony, Mercer's point 
of view is that workforce diversity is an outcome that 
organizations ought to actively manage and that an 
organization's diversity and inclusion strategy is more likely 
to be effective if it is evidence-based. How do you advise 
companies to increase diversity and inclusion within their 
ranks?
    Ms. Greenfield. First and foremost, we tell them to look at 
their own data. Obviously, benchmarks can be very useful, but 
ultimately, they need to look at their own data. So that is 
what we work with our organizations to do. What we work with 
our clients to do is to help them look at their own data, and 
understand where they stand relative to themselve, essentially, 
an internal benchmark. So, for example, we have them look at 
things like promotion rates for women versus men, for whites 
versus people of color, hire rates, turnover rates, and look to 
see where there are gaps.
    And where there are gaps, we help them understand what is 
driving those gaps. So, for example, if we find in an 
organization that turnover is an issue for people of color, 
then we would work with them to understand, well, what are the 
drivers of turnover in the organization? Are there particular 
experiences that lead to retention or increase the likelihood 
of quitting and how do those particularly relate to people of 
color?
    So it is all about understanding your own data. And I will 
say, there is no one-size-fits-all approach. What works for one 
organization may not work for others.
    Mrs. Wagner. Dr. Greenfield, in your testimony, you state 
that companies should identify the cultural dynamics that may 
be posing a risk to their organization's culture of inclusion. 
Could you elaborate on these dynamics, because I do believe 
that the changes--obviously, supportive leadership from the 
very top and changing that corporate culture is what is key. 
Could you please elaborate?
    Ms. Greenfield. I would completely agree that you can try 
and build diversity using a variety of different policies and 
practices, but if you don't have an inclusive culture, then it 
is going to be very difficult to retain women and people of 
color in an organization where they don't feel welcome and they 
don't feel supported.
    So one of the things that we encourage our clients to do is 
to make sure they understand that employee experience, that 
they hear the voices of their employees. Most notably, we have 
organizations do their own surveys. Many organizations do 
engagement surveys and we are recommending that they add to 
their engagement surveys questions that are specifically around 
diversity and inclusion and the experience of different people.
    Asking, for example, is there a good mix of role models in 
the organization that I can look up to? Do I have a sponsor in 
the organization, who is making me more visible to the rest of 
the organization? Do I feel like I have an understanding of the 
career path available to me? Do I feel like I have fair access 
to opportunities?
    It's extremely important to hear directly from employees to 
understand how their experiences are differing based on whether 
it is gender or--
    Mrs. Wagner. Are those anonymous and at all levels of 
employee?
    Ms. Greenfield. Those are generally anonymous, yes. It is 
very rare to have something that is not. Of course, this would 
be anonymous. And the results are generally not reported to the 
manager, unless they have a certain number of responses or more 
and it is aggregated.
    Mrs. Wagner. Moving on, obviously, it is very clear that 
diversity and inclusion are two distinct, but equally 
important, factors with respect to hiring and retaining a 
diverse workforce. And how employees, as you have elaborated, 
perceive their experience in the workplace. According to 
Mercer's research, what are some of the factors that affect 
whether a company is able to retain a diverse workforce and 
what strategies have you seen as effective for creating a more 
inclusive workplace, outside of surveys and such regarding--
    Ms. Greenfield. Yes, and I will say that there is no one 
response to that, because when we do turnover analyses for 
organizations, we find different results for different 
organizations. But some of the things that we see that are a 
common theme are things like supervision, the relationship 
between an individual and their supervisor. Things like, for 
example, am I supervised by someone of the same race or 
ethnicity? Someone of the same gender or a different gender? I 
would like to be able to say that there is one set of best 
practices and one set of drivers, but that is just not the 
case.
    Mrs. Wagner. I am running out of time. Mr. Bentsen, I think 
that all of the members of this subcommittee can agree that an 
internal professional development program benefits the 
employee, the employer, and the general corporate culture that 
we have been talking about here. Lawful hiring practices are of 
critical importance in getting qualified employees who 
represent an increasingly diverse America.
    But mentorship and promotion of qualified, diverse 
candidates is perhaps even more important. Can you speak to 
some of the mentoring practices of your member firms?
    Mr. Bentsen. Absolutely, Congresswoman. That is a very good 
point because on the one hand, recruitment is great, but you 
invest in that employee and you want that employee to be there 
for the long term. So if you are not having retention rates at 
the same rate, then you are not getting, effectively, a return 
on your investment, right?
    Mrs. Wagner. Yes.
    Mr. Bentsen. And so, firms report to us that they are and, 
in fact, we work with our firms through our various conferences 
developing different tools, such as mentoring programs, such as 
affinity groups and the like to work on retention.
    Mrs. Wagner. My time has expired. I would love it, Mr. 
Bentsen, if you would elaborate some more about your member 
firms in writing.
    Mr. Bentsen. Absolutely.
    Mrs. Wagner. And I yield back to the Chair.
    Chairwoman Beatty. Thank you.
    The gentleman from Florida, Mr. Lawson, is now recognized 
for 5 minutes.
    Mr. Lawson. Thank you, Madam Chairwoman.
    And I welcome all of you to the committee. This question, I 
think, will go to Dr. Mercer, and anyone else who would care to 
comment on it. The American Bankers Association (ABA) notes in 
its testimony that 140 banks are led by racially and ethnically 
diverse leadership. What challenges do banks face in achieving 
greater diversity at the leadership level?
    Ms. Mercer. Congressman, the challenges that the banks are 
facing at the leadership level is to have qualified people that 
they can bring in, but it is a matter of expanding their 
networks to find the people who are qualified to bring into 
those leadership positions.
    Ms. Barry. If I could add to that?
    Mr. Lawson. Yes.
    Ms. Barry. The important thing to note is that you need to 
look at the pipelines. What is the pipeline to the CEO's job? 
If 90 percent of the people who get promoted to CEOs have 
profit-and-loss management experience, and when there is a very 
small percentage of women who actually get that experience 
along the way in their careers, they essentially don't even 
enter that pipeline. So the important thing is right at the 
get-go in their early careers, women and underrepresented 
minorities need to be shown and taught what those profit-and-
loss roles are. How they can opt into those roles in early 
career and get that experience early so that they are actually 
in line to be in that pipeline?
    Mr. Lawson. Mr. Vaughan, go ahead?
    Mr. Vaughan. I would add that many financial services firms 
have only deployed their diversity inclusion programs in the 
last 5 years. In fact, I think two-thirds of the S&P 500 
companies who have chief diversity officers (CDOs) have only 
hired those CDOs in the last 5 years. And we have to recognize 
it is going to take time to really build the mechanisms and 
develop the talents and the candidates who will eventually be 
the leadership of the future generation of the industry.
    Mr. Lawson. Mr. Bentsen, did you want to respond?
    Mr. Bentsen. Again, I think that these are issues that the 
firms are focusing on and need to focus on. And I would note 
that members report to us in the surveys. And we have been 
doing these surveys for over 2 decades now, across a broad 
range of the industry. Our members are not just the big banks, 
they are broker-dealers and asset managers of all different 
sizes all over the country.
    But what they report to us is where they are today is not--
the majority view themselves at an intermediate stage and some, 
to Mr. Vaughan's comments, are at the beginning stage. Very 
few, if any, are saying they have mastered this issue. And so, 
this is very much a work in progress.
    Mr. Lawson. Okay. And I am going to try to get this next 
question in. Banks had identified challenges in hiring a 
diverse staff, including reports that there is too much 
competition in and around the small field of qualified 
minorities, STEM, and financial graduates.
    According to the 2017 GAO report, financial services firms 
focus on recruiting and hiring from elite universities as a 
source of their diversity recruiting practice. What are some of 
the reasons why the institutions do not recruit from public 
universities and Historically Black Colleges and Universities 
(HBCUs), which provide rigorous academic support to minority 
students pursuing STEM and financial degrees, which would 
vastly expand the pool of qualified candidates? And everyone 
can comment. I have about 49 seconds, but I would like for you 
all to comment on that.
    Mr. Bentsen. The vast majority of our member firms who 
participate in our surveys report that they are actually are 
recruiting from HCBUs and other so-called non-elite 
universities. And, again, the breadth of our membership 
recruits from across the college/university sector in the 
United States.
    Mr. Vaughan. I would just state that there is a persistent 
perception that those educational curriculums are not rigorous 
and that there needs to be improvements in terms of the 
educational curriculum, and that the industry should be out 
promoting those helping to replicate those programs at HBCUs 
and rural community colleges as well.
    Ms. Barry. There are two very specific examples I will call 
out. A company like Microsoft is creating internships and 
mentoring as early as elementary and middle school to foster 
that career interest and focus on building those analytical 
skills early. And Bloomberg has been one of the leaders in 
looking at top 10 percent of the students, across a wide 
variety of institutions, not just the elite ones.
    So, there are companies that are actually doing this well, 
and that model needs to be adopted across-the-board.
    Mr. Lawson. My time has expired, and I yield back. But I 
have a lot of questions in that area.
    Chairwoman Beatty. Thank you. The gentleman's time is up.
    The gentleman from North Carolina, Mr. Budd, is recognized 
for 5 minutes.
    Mr. Budd. Thank you, Madam Chairwoman.
    Ms. Elhalaby, thank you for being here, and for your time 
this morning. I think we can all agree that diversity and 
inclusion efforts in the financial services sector are very 
desirable goals. And as we have heard this morning, the 
financial services industry is proactively seeking to improve 
the diversity of their workforce, not only because it is the 
right thing to do, but because a lot of studies have shown that 
it is a highly effective way to increase innovation and 
profitability, things we can all agree on.
    Now, there's more work to be done, but it is encouraging to 
see that large banks and financial institutions are really 
taking this mission more seriously. However, I am concerned 
that we can't see the forest through the trees here, and that 
we are starting to mandate the private sector of one particular 
industry to self-report. And it may not meaningfully lead to a 
more diverse and inclusive workforce.
    So my question for you is, what other industries, such as 
tech or energy, healthcare, telecom, or others have a mandate 
or requirement to conduct a self-assessment and provide the 
results of their D&I report to their regulator?
    Ms. Elhalaby. Thank you. We have seen in California, 
specifically, that the public utilities industry, so energy, 
water, telecommunications--
    Mr. Budd. Can you give an exception outside of California?
    Ms. Elhalaby. My expertise lies specifically there, so I 
would not be able to. Thank you.
    Mr. Budd. So, it is some number approaching zero that is 
outside of California, other industries, is what I am seeing.
    Dr. Mercer, a question for you, in all of the discussions 
surrounding diversity and inclusion, sometimes there are 
categories of identities that are overlooked. For example, 
being of a minority religion in the United States or being of a 
different socioeconomic background than most of your colleagues 
is another form of diversity. So what do you think about 
aspects of diversity that are not discussed as much, such as 
religious diversity or socioeconomic diversity or political. 
Let's say that you are a Republican in San Francisco. We 
mentioned California earlier. Are these things as important as 
gender and ethnic and racial diversity?
    Ms. Mercer. Absolutely. DE&I programs need to be tailored 
to the environment and the organization in which they are going 
to function. And we have a lot of small community banks that 
are in racially and ethnically homogenous communities. So we 
encourage them because the other limitations in their community 
to consider other avenues of getting diversity of thought into 
their leadership, into their bank, and on their boards of 
directors.
    Mr. Budd. Studies are showing that this is the right thing 
to do. Do we really need to do regulation for this? Because it 
is good for business to be more diverse. It is the right thing.
    Ms. Mercer. It is absolutely the right thing to do 
diversity, equity, and inclusion. It is good for business and 
there is a strong moral case for it. We encourage our member 
banks to self-report for the OMWI self-assessment and we had a 
webinar to that effect to encourage our banks to do so.
    But we also realize that in diversity, equity, and 
inclusion, accountability is very important, but it should be 
internally motivated. We think that our banks do gather that 
information; they may just not release it publicly.
    Mr. Budd. Understood. Thank you very much.
    Mr. Bentsen, I am sure you know that the Human Rights 
Campaign (HRC) produces an annual list of the most diverse 
companies to work for. Their 2019 iteration included 33 of the 
44 banks that the chairwoman's report lists. Why do you think 
the HRC included so many banks on this year's list?
    Mr. Bentsen. Congressman, I am not familiar with that 
specific report, but this is something again that our members 
report to us and this is a priority. As I said, this is a 
priority for my board of directors and that represents a broad, 
cross-section of the securities industry. So I think to your 
earlier questions, and I think Dr. Mercer got into this, many 
firms take a very broad view of diversity, and that is driven 
to a large extent by the pool of talent from which they are 
recruiting, and it's also driven by the pool or community of 
the clients which they are serving. And so, I think that is how 
many firms determine how they look at diversity.
    Ms. Barry. There is one additional aspect to that and the 
fact that with LGBTQ persons, and persons with disabilities, 
there is an intersectionality there that cuts across gender and 
race, and very often, that is something companies are willing 
to step up and do.
    Mr. Budd. Thank you. I just want to summarize. It seems 
like the financial services industry is making progress without 
government intervention. Thank you. I yield back.
    Chairwoman Beatty. Thank you. The gentlewoman from 
California, the Honorable Maxine Waters, the Chair of the full 
Financial Services Committee, is now recognized for 5 minutes.
    Chairwoman Waters. Thank you very much, Chairwoman Beatty. 
Again, I would like to compliment you on the work that you've 
done to get this report that you are releasing today to the 
public. And I am so pleased about the witnesses that you have 
gotten here to testify today.
    We just released this groundbreaking report, showing the 
real numbers about diversity at America's largest banks, as you 
know. That is what we have been talking about. I understand 
that SIFMA also has a biennial report on its member firms, 
including banks, but it is not publicly released. I want to ask 
my friend, Ken Bentsen--it's good to see you--do you think that 
banks and other financial services firms should be required to 
publicly release their diversity and inclusion data? Should 
banks be more accountable to shareholders, regulators, and the 
public for their diversity and inclusion efforts?
    Mr. Bentsen. First, if I might, with respect to our report, 
it is a tool, like our other benchmarking surveys that we do 
with our members, and there is a lot of confidential 
information the firms share that they wouldn't necessarily 
share with their competitors but they can learn from, and 
that's why our report has nondisclosure agreements and why we 
are not able to share it publicly.
    In terms of what firms should or whether firms should be 
mandated or not, again, many of our firms do share such 
information publicly. Others choose not to because of concerns 
around privacy, litigation risk, and the like. And I think as 
we commented back when 342, your statute as part of Dodd-Frank, 
as I recall, was being implemented in 2013, and then 
ultimately, I believe, in 2015, we did raise some questions.
    And something that I think policymakers should consider in 
terms of what data should be public, what data should be 
subject to Freedom of Information requests, what data shouldn't 
be, similar to what firms require to the EEOC. So these are the 
issues that we are talking with our members about, as this 
committee is talking about, whether there should be mandates 
around disclosure or reporting and disclosure.
    Chairwoman Waters. So, do you consider that information on 
inclusion and diversity as information that should be kept 
private because in some way it reveals something that would 
interfere with the bottom line?
    Mr. Bentsen. Again, this is something that our firms are 
talking about. Some firms do disclose this. Some firms choose 
not to because they are concerned either about employee privacy 
or proprietary information, and it is something that our firms 
are talking about as to whether, where they can--
    Chairwoman Waters. But if the information is proprietary 
and they do not care to release it, how are we going to get 
into a discussion with them about diversity and inclusion? How 
can we even approach that subject without information?
    Mr. Bentsen. First of all, I think you have gotten into a 
discussion with them about it, and I think that is something, 
as I mentioned, that we have been working on for 2 decades with 
our members and many firms are beginning to report under 342. 
Many firms are publicly reporting, and as shown in the data, 
and in our case, the survey we do, which represents half of our 
industry, half of the securities industry in the U.S., are 
taking this very seriously.
    Chairwoman Waters. I appreciate that. Ken, did you say we 
have been working on this for 2 decades? Is that what you just 
said?
    Mr. Bentsen. That SIFMA has.
    Chairwoman Waters. That is a long time.
    Mr. Bentsen. And we have seen growth. But as I said in my 
comments, what members report to us is that most members feel 
they are in an intermediate stage. No member or very few 
members believe they've mastered this issue.
    Chairwoman Waters. Well, we are very serious about this 
issue and the creation of the subcommittee, which is chaired by 
Ms. Beatty, is going to spend significant time on this. What we 
know and what we have learned is that discrimination and other 
kinds of reasons have caused a lack of opportunity for talented 
people who would like to be in the financial services space, 
who would like to have opportunity, and it has eluded them 
because we have not been able to get to it and no one has paid 
attention to it in the ways that we are.
    So, I want the word to go forward, and perhaps you can help 
with this, to say that we are very serious. Ms. Beatty is 
spending significant time on this issue, and we intend to do 
everything that we can for transparency in all of the 
industries to open up the opportunities that have eluded so 
many people of color for so long. So, I thank you for being 
here today. And help us communicate.
    Thank you. I yield back the balance of my time, Ms. Beatty.
    Chairwoman Beatty. Thank you so much, Chairwoman Waters.
    The gentleman from Ohio, Mr. Gonzalez, is recognized for 5 
minutes.
    Mr. Gonzalez of Ohio. Thank you to my friend, Chairwoman 
Beatty, for holding this hearing today.
    And thank you to the witnesses for your participation. I 
would like to submit, for the record, a Wall Street Journal 
article from October 26, 2019, entitled, ``Financial Industry 
Leads the Way on Diversity and Inclusion.''
    Chairwoman Beatty. Without objection, it is so ordered.
    Mr. Gonzalez of Ohio. Thank you.
    One of the reasons I wanted to highlight that article 
specifically is it reflects what I have seen in my own home 
State of Ohio. I am proud to say that in Ohio, institutions 
like Key Bank, Synchrony Bank, Huntington Bank, and Fifth Third 
Bank have all made efforts to prioritize diversity and 
inclusion initiatives. I met with each of their staffs on this 
issue specifically, and it is clear that the priority that has 
been set in Ohio is starting to take hold.
    There is plenty of work to be done, right? You never quite 
get there. But I am proud of my State and I am proud of the 
institutions and the efforts that they have made in this arena. 
For my first question, I want to start with Mr. Bentsen. I 
noticed that there were 7 of your members in total in the top 
50 for most diverse companies. What resources, programs, or 
practices does SIFMA provide that your firm has utilized to 
facilitate a more diverse and inclusive work environment?
    Mr. Bentsen. There are many things we do at SIFMA for our 
members. I have talked about the biennial benchmarking survey 
that we have been doing for over 2 decades, and our Diversity 
and Inclusion Council conducts both an annual conference, as 
well as periodic roundtables in sharing of best practices.
    But more importantly, over the last several years, we have 
integrated into all of our various conferences, whether it is 
our Legal and Compliance, our Executive Education program that 
we do with the Wharton School, our Operations Conference, our 
Private Client Wealth Management Conferences, different D&I 
components, whether it is in roundtables, break-out sessions, 
work sessions, where we are really working with what I would 
call the core rank and file of the industry or the people who 
are doing the job day-in and day-out.
    Mr. Gonzalez of Ohio. Anecdotally, it feels like there has 
been more of an emphasis in the last couple of years. Does your 
experience reflect that or how is the uptake of those programs? 
What has the trendline been on that?
    Mr. Bentsen. I think this is something that has been on the 
uptake since the early 2000s in the industry.
    Mr. Gonzalez of Ohio. Okay.
    Mr. Bentsen. And I can say it is from a point of personal 
experience, having been in the industry before I came to 
Congress. The emphasis inside the industry is profoundly 
different today than it was in the 1980s and early 1990s, when 
I was in the business. And I think that is a good thing.
    Mr. Gonzalez of Ohio. Right.
    Mr. Bentsen. But it is something that is a huge commitment, 
from the top down.
    Mr. Gonzalez of Ohio. Good. And then this one is going to 
be for anybody who wants to jump in. This past year, the FDIC 
issued a proposed rule to formalize the Agency's policy 
covering individuals seeking to work in the banking industry 
who have been convicted of certain crimes. And, again, I'll 
open this up to the panel. Does anyone want to comment on the 
FDIC's rule, and should more be done to provide individuals a 
second chance, while still protecting the financial interests 
of customers? Does anybody want to take that one on? You don't 
have to. That's fine.
    It's an initiative that is important for me, that I think 
would be helpful, frankly. I believe in second chances. I think 
mistakes that some of us might make when we are young that are 
unrelated to working in the financial sector, I think we should 
have some leniency in that regard.
    Final question, which I will open again to the panel, how 
does the industry leverage benchmarking and information sharing 
to enhance diversity and inclusion performance?
    Ms. Barry. I can give you some insight into that.
    Mr. Gonzalez of Ohio. Please.
    Ms. Barry. We have five surveys we do. They are all 
quantitative surveys, so there is no subjectivity to the 
judgment made on it. Best companies for working mothers, which 
is around working parents and caregivers; best companies for 
women; best companies for multicultural women; and then we do 
one for the law firms also; and an inclusion index. Companies 
like IBM and J&J have been submitting data for over 30 years, 
so they see the value and benefit in extensive submissions, 
400-plus questions answered year-in and year-out. So, I can't 
emphasize enough the importance of collecting data that is 
objective, that takes out any kind of subjective view to it, 
and measuring them and reporting it back to them as an 
aggregate and then individually.
    Mr. Gonzalez of Ohio. Thank you. With that, I will yield 
back.
    Chairwoman Beatty. Thank you. The gentleman yields back.
    The gentlewoman from North Carolina, Ms. Adams, is 
recognized for 5 minutes.
    Ms. Adams. Thank you, Madam Chairwoman, for convening the 
hearing today, and thank you for your leadership and your 
tenacity in requesting critical data from our financial 
institutions.
    To the panelists, thank you all for being here. We can't 
make serious strides in diversity, inclusion, and equity 
without first knowing the data and the demographics. Once we 
have that, we can begin to develop thoughtful, intentional 
strategies to improve the workplace and the workforce. So 
having said that, I want to raise a couple of questions.
    Dr. Mercer, the Dodd-Frank Act created the Offices of 
Minority and Women Inclusion (OMWIs) and all of the Federal 
financial regulators, largely through the work of this 
committee's chairwoman, Chairwoman Waters. And since the 
inception of OMWIs, they have done work to diversify the 
agencies themselves and to hold the government itself 
accountable for diversity and inclusion. What should be the 
role of OMWI offices with respect to their regulated entities, 
and do they need additional authority to be effective? Dr. 
Mercer?
    Ms. Mercer. Congresswoman, we appreciate the opportunity to 
work with the OMWIs and we encourage our member banks to do the 
self-assessment that is governed by the OMWI offices. We think 
that the collaboration with the OMWIs should also lend itself 
toward our banks leading practices that can help them shape 
their DE&I initiatives and programs.
    Ms. Adams. Okay. In the report, committee staff recommended 
legislation, such as the draft bill, the Promoting Diversity 
and Inclusion in Banking Act that would require bank 
examinations of diversity and inclusion efforts and would 
require banks to disclose diversity data to the Offices of 
Minority and Women Inclusion. This question is for you, Dr. 
Mercer and Dr. Bentsen. To what extent do you believe that this 
legislation would increase transparency of diversity 
information in the banking industry and do you support it?
    Ms. Mercer. Congresswoman, ABA's legislative team will need 
the opportunity to speak with our member banks before giving 
you an answer to that question, and they will have to follow up 
with you.
    Ms. Adams. Dr. Bentsen?
    Mr. Bentsen. Yes, the same. We are reviewing the 
legislation with our members to get their view. But I also do 
want to echo what Dr. Mercer said with respect to engagement 
with the offices, which we do with our members and through our 
D&I Council.
    Ms. Adams. Okay. So, Ms. Elhalaby, Ms. Barry, and Dr. 
Greenfield, do you support the legislation?
    Ms. Elhalaby. We are also doing further analysis, but we 
think that this could really represent important steps for the 
Federal Government to take on promoting transparency and 
disclosure.
    Ms. Adams. Okay. Dr. Mercer and Dr. Bentsen, to what extent 
have your member firms vocalized challenges in implementing 
their diversity and inclusion initiatives, and what kind of 
assistance do your organizations provide to your members who 
vocalize such challenges?
    Ms. Mercer. Congresswoman, we have an advisory role to our 
banks. Some of their challenges are, especially for our smaller 
community banks, with getting started with DE&I. And so we 
advise them on some leading practices to help them get going. 
We also have resources and tools on our website that are 
available to any of our members to use to help them with DE&I.
    We are starting up an advisory working group in order to 
further determine what those needs are, so that we can continue 
to develop the resources that they need and can use.
    Mr. Bentsen. Congresswoman, this is exactly why we have 
things like our D&I Council, why we do our benchmarking 
surveys, so that members can learn from each other what both 
the challenges that they have in terms of creating a culture of 
inclusivity and improve their retention programs, as well as in 
their recruitment programs. And so, this is what leads to 
things like employee resource groups, sponsorships, 
mentorships, and the like. And that is what firms continue to 
build every day as part of their diversity and inclusion.
    Ms. Adams. Okay. Thank you.
    Quickly, Dr. Greenfield, to what extent has Mercer's 
research identified similar challenges by banks or others in 
the financial services industry and what recommendations have 
been made to help organizations overcome such challenges?
    Ms. Greenfield. Well, in terms of the most recent research 
that we have looked at, one thing that is notable is that there 
does appear to be a bit of a revolving door for people of 
color, so we do see notable hiring throughout the hierarchy for 
people of color, but we also see turnover.
    Ms. Adams. Okay.
    Ms. Greenfield. Now, while we do expect, based on our data, 
to see an increase in representation of people of color, we do 
see some issues regarding retention. So, we've been working 
with our organizations to help them improve retention.
    Ms. Adams. Thank you very much. I'm out of time. I yield 
back, Madam Chairwoman.
    Chairwoman Beatty. Thank you.
    The gentleman from Texas, Mr. Gooden, is recognized for 5 
minutes.
    Mr. Gooden. Thank you, Madam Chairwoman.
    Congressman Bentsen and Dr. Mercer, I have a question for 
both of you. The majority of banks, I understand, report with 
detailed transparency in their ESG reports regarding D&I, and 
they highlight additional practices and results in those 
reports. Do you expect your members to continue to expand their 
ESG disclosures to reflect their ongoing commitment to D&I, 
moving forward?
    Ms. Mercer. Congressman, that is an answer I will have to 
get back to you on.
    Mr. Gooden. Okay.
    Mr. Bentsen. I guess, the way I would answer that is that 
this continues to be a priority for the industry, so I would 
only see all of these efforts increasing within the industry.
    Mr. Gooden. And, Dr. Greenfield, through Mercer's work, are 
you observing that companies are recognizing the value of 
diversity when it comes to developing business strategies and 
making decisions?
    Ms. Greenfield. Yes. I don't think there is any question at 
this point. Back maybe a decade ago, the business case for 
diversity and inclusion was not as clear. I don't hear that 
anymore from our clients about whether or not they think there 
is a business case. So, I think it is pretty clear that there 
is, and they are trying to determine how they can craft 
strategies to best support their talent strategy and their 
business strategy.
    Mr. Gooden. Is it fair to say that we should expect diverse 
companies to thrive in the market, compared to their less 
diverse competitors?
    Ms. Greenfield. Yes, absolutely. I think the evidence is 
very clear that diversity and inclusion is associated with 
important business outcomes like higher return on equity, 
better financial performance, and better employee satisfaction. 
Organizations that are interested in delivering on their 
business results would be wise to be prioritizing diversity and 
inclusion.
    Mr. Gooden. Ms. Barry, did you want to add anything?
    Ms. Barry. Well, I just believe that this is a rising tide, 
not only in the banking industry, but really across most major 
corporations. You're starting to see a big focus on this. One 
of the ideas that I would suggest--I know this is the Financial 
Services Committee--is to require the SEC, when companies 
register, to disclose their diversity and inclusion stats and 
let them disclose it. Make it part of it for everybody, as 
opposed to just one sector.
    Mr. Gooden. Thank you.
    Mr. Vaughan. Congressman, I do agree with that perception. 
I think if you look to things like the CEO Action for Diversity 
and Inclusion, which is a joint effort, where more than 800 
CEOs have signed onto an affirmation of their commitment to 
diversity and inclusion performance or to the purpose of a 
corporation, where 181 CEOs have signed onto that effort, 
companies benefit from espousing where their values are, and we 
are going to see that continue in the future.
    Mr. Gooden. Thank you.
    Madam Chairwoman, I yield back.
    Chairwoman Beatty. Thank you.
    Mr. Gooden. Mrs. Wagner, would you like my time?
    Mrs. Wagner. I would like it.
    Mr. Gooden. I will yield it to Mrs. Wagner.
    Chairwoman Beatty. The gentleman yields to the ranking 
member.
    Mrs. Wagner. I thank the gentleman for yielding me some 
time.
    We have talked a lot about the financial services sector 
being an extension of the STEM utility out there and the STEM 
field. And we have watched struggles in the STEM field for 
women and people of color and other diversities to join in.
    I am wondering, and Mr. Bentsen, perhaps you can speak to 
this, or even Dr. Mercer, how does the financial services 
industry, knowing that it is a STEM field and profession, 
measure up toin term of reporting, in terms of their diversity 
and inclusion, measure up with other STEM groups in engineering 
and math and technology and sciences and research, things of 
this nature? Mr. Mercer?
    Mr. Bentsen. You're the academic, but Congresswoman, first 
of all, there is no question that that is an important 
community that the industry has to recruit from. The industry 
is increasingly becoming a technology-driven industry, as is 
maybe everything. And the competition for that is fierce as 
well. What firms are trying to do, and one of our other 
panelists talked about this before is, how do we get ahead of 
the curve, in terms of not just waiting until you are going to 
the universities and the engineering or mechanical engineering 
schools in the university and trying to recruit at that point 
in the junior or senior year. But how can you get there in the 
high schools, through sponsorship, and things like that. So, 
firms are certainly, in some cases, starting internships like 
that and beginning to get into that process.
    Mrs. Wagner. And, in fact, it was cited by the Majority 
that improving the diversity and inclusion at financial 
institutions, part of the challenge there was the competition 
for diverse talents with STEM and finance-related expertise. 
Anything to add, Dr. Mercer?
    Ms. Mercer. We look at different hiring models in order to 
gather a base of knowledge to advise our banks on hiring 
practices that could expand their talent pool.
    Mrs. Wagner. Thank you. I have run out of time. I yield 
back.
    Chairwoman Beatty. Thank you so much.
    The gentlewoman from Pennsylvania, Ms. Dean, is recognized 
for 5 minutes.
    Ms. Dean. Thank you, Madam Chairwoman. I appreciate the 
chance to ask a few questions, and I really appreciate the 
chance to be on this important subcommittee.
    I wanted to just follow up on a question that Ms. Adams was 
asking and just try to get a little more detail from both Dr. 
Mercer and Mr. Bentsen on the participation rate in the 
surveys. The data that we see is that the FDIC is participating 
in about 16 percent, the OCC at 9 percent, and the Fed at about 
5 percent. You are encouraging members to participate. Those 
rates are terrible. They are very, very low. What are you doing 
to encourage and what can you do to put more teeth into that 
encouragement and get full participation?
    Ms. Mercer. Congresswoman, we hosted a webinar with the 
regulators from the FDIC, the OCC, and the Federal Reserve in 
November. And that webinar, which is still available on our 
website to our member banks, went over how to do the self-
assessment, and then also touched on leading practices for DE&I 
in recruiting and retaining minority members or applicants and 
women into their banks.
    Ms. Dean. Was the webinar intended to try to get greater 
participation? Are you alarmed by this?
    Ms. Mercer. It was intended to encourage our banks to 
continue the self-assessment, and if they had not done so 
before, to do so. We are also looking at venue space during a 
conference that is upcoming, so that the FDIC can give a 
presentation to some of the CDOs and HR professionals that we 
expect to be in that audience from our banks on how to do the 
self-assessment, since they just moved their report into 
FDICconnect, which most of our community banks are already 
familiar with.
    Ms. Dean. Thank you.
    Mr. Bentsen, with SIFMA?
    Mr. Bentsen. We also encourage, and we try to provide 
information on the reporting requirements to our member firms. 
It's interesting to learn things from our colleagues from ABA 
as well, that we will talk about with our own team. We don't 
have any data as to why firms don't report. We know concerns 
they have raised, as I mentioned, around FOIA, but we don't 
keep any data as to why they are not doing it.
    I will say that our survey captures about half of the 
industry.
    Ms. Dean. I ask these questions, based on just my own 
experience digging in as a result of being a part of this 
subcommittee. I took this committee assignment really 
seriously. And when we went back into our district last summer, 
we held roundtables on diversity and inclusion, and it was very 
enlightening. We held roundtables on disability, on race, 
gender, the LGBTQ community. And we learned and we listened 
what is working and what is not.
    And the very thing that we are talking about in terms of 
failure of participation is what works is when institutions or 
organizations or government, whomever, is actually intentional, 
is actually looking at themselves under a microscope, 
collecting the data. One of the people at one of our 
roundtables, a leader of a government community in our area 
said, ``We believed we were diverse, and then we looked around 
and recognized that we weren't.''
    So unless you are intentional, unless you are doing these 
self-assessments and being honest about it, we are going to be 
much slower in getting toward that diversity and inclusion.
    Let's start with just some of the things that we learned. 
So, Dr. Mercer, Mr. Bentsen, what are your recruitment 
practices in your own hiring? How are you attracting talent? 
And I am thinking, in particular, talent from underserved areas 
to participate, to be hired and find careers in the work that 
you do.
    Ms. Mercer. For ABA, currently, we have a veterans' 
recruiting program, which is how I was hired by the 
organization. Our organization is actually very diverse already 
and we continue to pay attention to that. One of the biggest 
programs that has worked for us in attracting talent is student 
loan reimbursement or helping our hires to pay off their 
student loans over time. And we have also used that as a 
recommendation to some of our community banks, especially ones 
in more rural areas that have a more difficult time attracting 
talent, that they offer student loan reimbursement as an 
incentive.
    In our organization, we do a lot of learning and 
development based around diversity, equity, and inclusion and 
it has been integrated into our organization.
    Ms. Dean. I am just going to say a quick word; I know my 
time is running out. But it was very interesting in a separate 
veterans' panel, we were not focusing on diversity and 
inclusion. It came up very, very clearly that veterans have a 
hard time becoming assimilated, particularly commanders, people 
who had successful careers in the military. You would think 
industry and organizations would prize their talent, and they 
are finding real barriers. Thank you. I yield back.
    Chairwoman Beatty. Thank you.
    The gentleman from Wisconsin, Mr. Steil, is recognized for 
5 minutes.
    Mr. Steil. That was a almost a little lecture on diversity 
there. I appreciate you calling today's hearing, Chairwoman 
Beatty.
    And I appreciate the witnesses being with us here today. 
What we have heard today is a lot of the work I think that some 
of these large corporations, banks in particular, are doing to 
get towards this end goal, including investing appropriately in 
programs that are moving us forward towards more diversity.
    I want to just dig in a little bit here, Ms. Greenfield, as 
it relates to the resources that some of these corporations and 
banks are putting into these diversity programs. Could you 
scale the type of investment that we are seeing by some of 
these banks into improving their diversity?
    Ms. Greenfield. I don't have any specific numbers for you, 
but what--
    Mr. Steil. Can you scope it? Scale it? Anything?
    Ms. Greenfield. I cannot; I am afraid I would not be 
willing to say that. I could look into it and get back to you.
    Mr. Steil. That would be helpful.
    Would anybody else like to discuss the time, scale, and 
resources that are being invested?
    Mr. Bentsen. Likewise, I don't have the data, but 
anecdotally, it's quite substantial, and again, members report 
to us that this runs from senior leadership down. And so once 
you are including senior leadership, that means it is getting a 
great deal of emphasis.
    Mr. Vaughan. I would add that it is important to recognize 
that the institutions covered in this study tend to have the 
most well-established, long-standing diversity and inclusion 
programs in the industry. And what we see in their performance 
is really the thought leadership that middle-market and small 
firms in this sector need to leverage to continue to grow their 
programs.
    Mr. Steil. Thank you.
    I am going to go with the broad scale that you offered 
there, Mr. Bentsen, that it is substantial, that these 
companies are now putting in substantial resources. I just find 
it interesting because often, when we are in our Full 
Committee, there is a favorite slide that comes up from some of 
my colleagues on the other side of the aisle showing the banks 
profits up, up, up, up.
    And what I think is important to note is that companies 
that are performing well have the resources to invest in their 
employees. And so, across the broad business spectrum that we 
seen in the United States, companies that are performing well, 
that have the resources, often reinvest that into their 
employees. And I think it is of note as we see some of these 
large banks have thoughtful programs, investing substantial 
resources into improving the diversity in their institutions, 
that there is an aspect that they are doing this in a time when 
they are able to.
    So as we see companies generating profits, I think one of 
the things that needs to be highlighted is that many of these 
companies then go back and are reinvesting in their employees. 
And one of the areas that has the greatest need for investment 
is in improving the diversity of women and underrepresented 
minority groups to be successful. Sometimes, when we see that 
side, I think it is worthwhile thinking that as businesses do 
well, there is a benefit to these businesses in investing back 
into their institutions.
    And one of the greatest areas of that, that I think we are 
highlighting today in many ways, is the investment in making 
sure that women and underrepresented minority groups succeed.
    I want to shift gears slightly and go back to Dr. 
Greenfield. In your testimony, you discussed the concept of an 
internal labor market. I would like you to dive in if you would 
and just share a little bit more as to what you mean by that 
and how some of these resources that we have at these banks are 
playing a role in that internal labor market?
    Ms. Greenfield. Sure. Essentially, at its core, an internal 
labor market is just understanding how people move in, through, 
and out of an organization. It is really understanding the 
talent dynamics within an organizatio, understanding how are 
women and people of color entering the organization from the 
external labor market compared to their white and male 
counterparts, how are they moving up throughout the 
organization, and how are they being retained, compared to 
these counterparts?
    And this is really key to increasing diversity and 
inclusion for organizations. If they want to increase the 
representation of women and people of color, they must have an 
understanding of where they have gaps. Is it in hiring? Is it 
in promotion? Is it in turnover? And at what particular levels? 
Are there certain chokepoints beyond which women and people of 
color are struggling to progress? And if there are, they need 
to understand, and do more digging to understand, what are the 
actual driving forces behind that?
    Mr. Steil. Thank you.
    With my limited time left, I would like to go back to Mr. 
Bentsen. The financial services industry has made significant 
progress, there is room to go, but significant progress in 
improving its diversity and inclusion practices. We will all 
recognize that some are further ahead than others. And I am 
sure that is reflected amongst your membership. Can you discuss 
the role that SIFMA is playing in facilitating some of the 
business-to-business sharing of best practices?
    Mr. Bentsen. Yes, Congressman. As I mentioned, besides our 
benchmarking, where we have about half of the industry, in 
terms of employee base, participate in that, we have tried to 
permeate beyond our D&I Council, which is about 70 member 
firms, to across all of our industry programming from executive 
education to legal to all of these issues, to have D&I 
programming in there and bringing in senior industry leaders as 
part of that process.
    Mr. Steil. Thank you very much.
    I yield back.
    Chairwoman Beatty. Thank you.
    The gentleman from Missouri, Mr. Clay, who is also the 
Chair of our Subcommittee on Housing, Community Development, 
and Insurance, is recognized for 5 minutes.
    Mr. Clay. Thank you, Madam Chairwoman. And thanks for 
holding this hearing.
    And I thank all of you all for being here. It's good to see 
you again, Mr. Bentsen. Let me ask you, with your background 
toggling between a Member of Congress and financial services, 
you probably have a unique insight on why and how banks and 
other financial institutions operate.
    I would like for you and Dr. Mercer to address for me, how 
do we eliminate that blind spot throughout a financial 
institution? When a customer walks in your institution, and 
with all things being equal, they may have pretty good credit 
score, but they apply for a loan or a credit card, whatever, 
and because of biases, they are treated differently as a 
customer. They are given a higher interest rate. They may be 
denied or approved for a home improvement loan or a loan or a 
mortgage. How do we address that as a society or as an 
industry? How would you address it? Let's start with you, Mr. 
Bentsen.
    Mr. Bentsen. Thank you, Congressman. I don't represent the 
loan side of the industry, but let me say this. First, it 
starts with the tone at the top, and the tone at the top has 
been quite clear across the industry and increasingly so. And 
with executives that I speak with in our sector of why this is 
important.
    And it is important really for two reasons that I have 
talked about before. One, it is important--and Congressman 
Steil was sort of talking about this as well. If you are going 
to manage and run a successful company, you have to invest in 
your employees. And the employees you are going to hire are 
going to look like the community that you are hiring from and 
you are serving. So, you would have to make sure that you have 
that. And we are seeing that more and more every day and 
recognize it at the senior levels of leadership.
    But the second thing, which is maybe even more important 
that you touch on is, and particularly in the securities 
industry, this is a highly competitive industry, an extremely 
competitive industry. Clients can walk out the door any time 
they want to and there is somewhere else for them to go. And 
so, managers who do well tend to be pretty smart and to figure 
out, if I am not keeping up with my client, my business isn't 
going to be around too much longer. And this is something else 
that executives figure out.
    So, have there been blind spots? For sure. But I think this 
is something that people realize, what does our community look 
like today, who are the clients we are serving, and how do we 
make sure we are competitive in that marketplace?
    Mr. Clay. Dr. Mercer, how does the banking industry do a 
better job of serving their customers?
    Ms. Mercer. Unfortunately, discrimination is a problem in 
every segment of society, and the banking industry is no 
exception. However, unconscious bias training can help people 
understand what their biases are and become aware of them, and 
then perhaps alter their behavior once they have that 
awareness.
    One of the things that I am looking into is research by Dr. 
Barbara Adams that talks about having diversity of biases, 
which tends to mitigate some of the situations that you were 
giving in your example. Where as long as not everyone has the 
same bias, it can equalize the playing field for everyone. Our 
mortgage lenders, in particular, have a degree of anxiety 
because most of them are aging out. And they know that they 
need to recruit diverse talent to replace them and diverse 
talent to serve the customer base that is also emerging.
    Mr. Clay. And how is that process going? Are they really 
getting a more diverse workforce?
    Ms. Mercer. Sir, they are working on it, and they are 
asking for speakers and training and resources to help them do 
that. And ABA tries to provide those resources and tools for 
them.
    Mr. Clay. Thank you.
    And I see Mr. Vaughan. Go ahead.
    Mr. Vaughan. Congressman, I would just add that it is 
really critical that the diversity and inclusion practices be 
fully resourced, integrated fully throughout the business 
enterprise, and that the institutions must make sure that their 
policies and practices are such that when the consumer walks in 
the door, there is very clear delineation of what types of 
products and how they will engage that consumer as they seek to 
access credit-based products or other services from the 
institution.
    Mr. Clay. I thank you all for your responses, and I yield 
back.
    Chairwoman Beatty. Thank you.
    The gentleman from Texas, Mr. Green, who is also the Chair 
of our Subcommittee on Oversight and Investigations, is 
recognized for 5 minutes.
    Mr. Green. Thank you, Madam Chairwoman. I want to 
compliment you on the diversity of the panel and for the 
tenacity that you have shown in this area. I think history will 
be very kind to you.
    Diversity has become a great talking point. The challenge 
for us is, how do we make it an action item? Talking points are 
great. Action items are better. Dr. King reminded us that those 
who tell us that we can wait, that there is more time, that 
wait almost always means never. He went on to say that justice 
too long delayed is justice denied.
    So, let's take a look at this from a voir dire or voir 
dire, depending on where you are from, point of view. It is a 
term that trial lawyers use, one that I am quite fond of as a 
former litigator. Question for you, and would you kindly extend 
a hand into the air, so that I may, for the record, record your 
position. If you believe that CEOs should be incentivized to 
ensure diversity in their company's ranks, particularly in 
upper-management positions, kindly extend a hand into the air.
    [Hands raised.]
    Okay. Please hold your hands up, so that I may make a 
proper recording. I take photos of these for my office. Let the 
record reflect that Ms. Mercer, Ms. Elhalaby, and is that Ms. 
Greenfield, I can't quite see it from here, oh, who did not 
raise their hands.
    If you believe that race-conscious regulations are needed 
to ensure financial inclusion, raise your hand, please.
    [Hands raised.]
    I believe that one of our panel has indicated that that 
would be very helpful. But only one person? Raise your hand, 
please, if you think race-conscious regulations are needed. 
Okay. We'll note that one panelist has extended a hand, and 
that is Ms. Elhalaby. Thank you very much.
    Friends, one more question. If you believe that in a 
country where women outnumber men, 71 percent of the average, 
executive, senior level, diversity positions across banks, that 
71 percent of them should be held by men, extend a hand into 
the air. If you think that 71 percent should be held by men--
not one hand is in the air. Well, yes. Seventy-one percent are 
currently held by men, 29 percent by women. All I'm asking is 
if you think that is right, raise your hand.
    Okay. Let's do it the other way. If you think that is 
wrong, raise your hand.
    [Hands raised.]
    You have to participate. I know it is tough. Thank you.
    Dear friends, I greatly appreciate what is happening here, 
but having lived as long as I have and experienced the 
invidious discrimination that I have suffered, I really don't 
have as much patience, because I don't have as much time left 
to make the change that I want to see. I just don't have the 
patience that a good many of my colleagues do--and I respect 
them--but I don't have it. We need to change it and we need to 
change it right away.
    An excuse of, we can't find any, that is what I am hearing 
from some of you. That is not acceptable. I see one sitting out 
there in the audience right now, a person who is capable, 
competent, and qualified, was hired by your business, Mr. 
Bentsen. People are available. We have to get on with it. I 
refuse to leave the planet, assuming that I have a reasonable 
amount of time left, without at least making sure that my 
record reflects that I did all that I could.
    When you have power, you have to use it. We have the power. 
Regulations may be the thing to do. I think the carrot was a 
good idea. But after having heard things today, I think we have 
to move now to the stick. That is regulations. I yield back the 
balance of my time.
    Chairwoman Beatty. Thank you.
    The gentlewoman from Texas, Ms. Garcia, is recognized for 5 
minutes.
    Ms. Garcia of Texas. Thank you, Madam Chairwoman. And I 
thank you and Chairwoman Waters for putting all this attention 
on an issue that has been very concerning for me for many 
years. I do want to apologize first, Madam Chairwoman, not only 
to you, but to all of the panelists. I have been in a Judiciary 
Committee markup that is rather lengthy, and we are still 
taking votes, and then we will probably be doing it most of the 
day. So, I am running back and forth across the hall. But 
please do not consider my lack of attendance as a lack of 
interest, because it is really quite the contrary.
    This is a critical issue for me. It brings back a lot of 
memories of when I was city controller in Houston and, in fact, 
going to some of the pricings on Wall Street. And I remember 
the very first one, walking in and not seeing the diversity and 
inclusion that we would all hope for. In fact, it is safe to 
say that I saw hardly any women and hardly any minorities on 
the floor.
    That has changed a little with time. And I am hopeful, 
someday, to drop in on a bond buyer conference and see if it 
has changed there, too. Because I recall going to quite a few 
of those and, again, there too, there was maybe a handful or 
two of minorities or women in the room or at the conference. So 
we have to make change, but make it real of not only changing 
the people at the table, but making sure that they are heard, 
making sure that they are part of the conversation and the 
decision-making process.
    Dr. Mercer, I have to say that I am very disappointed that 
the ABA and the banks have been unwilling, in this hearing, to 
support legislation mandating D&I disclosure. The industry 
seems to be telling us that diversity is important, but is 
unwilling to go beyond, ``Trust us.'' We are going to keep 
doing it better.
    But we see that the participation rates in the OMWI surveys 
are incredibly low and, frankly, somewhat unacceptable. Knowing 
that D&I data is going to be made public will be a powerful 
focusing tool inside these organizations. I know that some 
banks are already doing this, and I would hope ABA reconsiders 
its position. Otherwise, I am afraid that we will be having 
this conversation again in 5 years, applauding whatever tiny 
improvements have been made.
    I want to talk about retention issues, and I wanted to 
start with you, Mr. Bentsen. I know that we have identified 
some retention challenges. Could you share with me those that 
you see, and can you discuss the factors that are driving the 
turnover?
    Mr. Bentsen. Not a lot is reported to us, in terms of why 
people leave. In some cases, firms will talk to employees as 
they are leaving and find out if there is an issue or if they 
are just going to a different firm for whatever reason.
    What the firms are trying to do is get ahead of that, and 
to come up with different mentoring sponsorship programs, 
things like employee resource groups, things like mentoring 
with senior executives or managers. Trying to, as one of the 
panelists put it, create either a pipeline or a pathway from 
where someone is today to where they can aspire to, as they 
progress within the firms, with the goal of keeping that 
retention.
    Because, as I pointed out, particularly with people of 
color, what our survey shows is recruitment of people of color 
is above the mean, which is good. But retention is below the 
mean. So that means, for all the investment that is being made 
to recruit people of color, the firms are keeping many people, 
but not keeping as many as they would like. So they have to 
come up with these different tools. And they are always trying 
to figure out what other firms are doing to do so.
    Ms. Garcia of Texas. But is there any one thing or two 
things that you can pinpoint, things that would be a best 
practice of what really needs to be done to increase retention?
    Mr. Bentsen. I think our firms would report to us two 
things: one, mentorship with a more senior employee; and two, 
employee resource groups, where employees would feel that there 
is an inclusivity effort on the part of the firm.
    Ms. Garcia of Texas. Okay. Dr. Mercer, did you have 
anything to add?
    Ms. Mercer. Congresswoman, I believe that the mentorship 
and sponsorship, as Mr. Bentsen has discussed, is essential. I 
would also add stay interviews and promotion and professional 
development transparency. Those seem to be key drivers for our 
bankers in retaining their personnel, so the stay interview 
conducted at key points in someone's career would be very 
effective.
    Ms. Garcia of Texas. Thank you.
    Thank you, Madam Chairwoman, and I yield back.
    Chairwoman Beatty. Thank you. I would like to ask unanimous 
consent to have a letter from the University of Michigan School 
of Social Work Regarding Diversity and Inclusion in the 
Financial Services Industry to be entered into the record. 
Without objection, it is so ordered.
    I would like to thank all of our witnesses today for their 
testimony and for their time.
    The Chair notes that some Members may have additional 
questions for this panel, which they may wish to submit in 
writing. Without objection, the hearing record will remain open 
for 5 legislative days for Members to submit written questions 
to these witnesses and to place their responses in the record. 
Also, without objection, Members will have 5 legislative days 
to submit extraneous materials to the Chair for inclusion in 
the record.
    This hearing is now adjourned.
    [Whereupon, at 12:03 p.m., the hearing was adjourned.]

                            A P P E N D I X



                           February 12, 2020
                           
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