United States Government Accountability Office

GAO Report to Congressional Requesters

FINANCIAL 

SERVICES INDUSTRY

Overall Trends in 

Management-Level 

Diversity and 

Diversity Initiatives, 

1993-2004 

June 2006 

 

GAO-06-617 
What GAO Found

United States Government Accountability Office

Why GAO Did This Study

Highlights

Accountability Integrity Reliability

June 2006

FINANCIAL SERVICES INDUSTRY

Overall Trends in Management-Level 

Diversity and Diversity Initiatives, 1993-

2004 

Highlights of GAO-06-617, a report to 

congressional requesters 

During a hearing in 2004 on the

financial services industry, 

congressional members and 

witnesses expressed concern about 

the industry’s lack of workforce

diversity, particularly in key

management-level positions. 

Witnesses stated that financial 

services firms (e.g., banks and 

securities firms) had not made

sufficient progress in recruiting and 

promoting minority and women

candidates for management-level 

positions. Concerns were also 

raised about the ability of minorityowned businesses to raise capital 

(i.e., debt or equity capital). 

GAO was asked to provide an 

overview on the status of diversity

in the financial services industry. 

This report discusses (1) what 

available data show

regarding diversity at the 

management level in the financial 

services industry from 1993

through 2004, (2) the types of 

initiatives that financial firms and 

related organizations have taken to

promote workforce diversity and 

the challenges involved, and (3) the 

ability of minority- and womenowned businesses to obtain access 

to capital in financial markets and 

initiatives financial institutions 

have taken to make capital 

available to these businesses. 

GAO makes no recommendations 

in this report. 

Between 1993 through 2004, overall diversity at the management level in the

financial services industry did not change substantially, but increases in 

representation varied by racial/ethnic minority group. During that period, Equal 

Employment Opportunity Commission (EEOC) data show that managementlevel representation by minority men and women increased from 11.1 percent to 

15.5 percent (see figure below). Specifically, African-Americans increased their 

representation from 5.6 percent to 6.6 percent, Asians from 2.5 percent to 4.5

percent, Hispanics from 2.8 percent to 4.0 percent, and American Indians from 

0.2 percent to 0.3 percent. The EEOC data also show that representation by

white women remained constant at slightly more than one-third whereas 

representation by white men declined from 52.2 percent to 47.2 percent. 

Financial services firms and trade groups GAO contacted stated that they have

initiated programs to increase workforce diversity, including in managementlevel positions, but these initiatives face challenges. The programs include

developing scholarships and internships, establishing programs to foster 

employee retention and development, and linking managers’ compensation with

their performance in promoting a diverse workforce. However, firm officials 

said that they still face challenges in recruiting and retaining minority

candidates. Some officials also said that gaining employees’ “buy-in” to diversity 

programs was a challenge, particularly among middle managers who were often

responsible for implementing key aspects of such programs. 

Research reports suggest that minority- and women-owned businesses have 

generally faced difficulties in obtaining access to capital for several reasons such

as these businesses may be concentrated in service industries and lack assets to 

pledge as collateral. Other studies suggest that lenders may discriminate in

providing credit, but assessing lending discrimination may be complicated by

limited data availability. However, some financial institutions, primarily

commercial banks, said that they have developed strategies to serve minorityand women-owned businesses. These strategies include marketing existing

financial products specifically to minority and women business owners. 

Workforce Representation in the Financial Services Industry at the Management Level (1993, 

1998, 2000, and 2004) 

www.gao.gov/cgi-bin/getrpt?GAO-06-617.

To view the full product, including the scope 

and methodology, click on the link above. 

For more information, contact Orice M. 

Williams at (202) 512-5837 or 

williamso@gao.gov.
Contents 

Letter 1

Results in Brief 3

Background 5

Diversity in the Financial Services Industry At the Management 

Level Did Not Change Substantially 7 

Initiatives to Promote Workforce Diversity in the Financial 

Services Industry Face Challenges 14 

Minority- and Women-Owned Businesses Often Face Difficulties in 

Obtaining Capital, but Some Financial Services Firms Have 

Developed Strategies to Assist Them 23 

Agency Comments and Our Evaluation 29 

Appendix I Objectives, Scope, and Methodology 30 

Appendix II Overall Statistics on Workforce Diversity in the 

Financial Services Industry 34 

Appendix III Diversity in Key Positions in the Accounting 

Industry 36 

Appendix IV GAO Contact and Staff Acknowledgments 42

Tables 

Table 1: AACSB Demographic Data of Students Reported Enrolled 

in MBA Degree Programs at AACSB Accredited Business 

Schools in the United States by Racial/Ethnic Group (2000-

2004) 19 

Table 2: Workforce Representation at the Professional, CPA and 

Partner/Owner Levels by Racial/Ethnic Group (2005) 39 

Table 3: Workforce Representation at the Professional Level by

Racial/Ethnic Group and Firm Size 40 

Page i GAO-06-617 Financial Services Industry
Figures 

Figure 1: EEO-1 Data on Trends in Workforce Diversity in the 

Financial Services Industry at the Management Level 

(1993, 1998, 2000, and 2004) 9 

Figure 2: EEO-1 Data on Trends in Workforce Diversity in the 

Financial Services Industry at the Management Level by

Racial/Ethnic Group and Gender (1993, 1998, 2000, and 

2004) 11

Figure 3: EEO-1 Data on Workforce Diversity in the Financial 

Services Industry at the Management Level by Sector 

(2004) 12

Figure 4: EEO-1 Data on Workforce Diversity in the Financial 

Services Industry at the Management Level by Firm Size 

(2004) 13

Figure 5: EEO-1 Data (Percentage) on Workforce Diversity in the 

Financial Services Industry by Position, Racial/Ethnic 

Group, and Gender (2004) 21 

Figure 6: EEO-1 Data (Number of Employees) on Workforce 

Diversity in the Financial Services Industry by Position, 

Racial/Ethnic Group, and Gender (2004) 34 

Figure 7: EEO-1 Data on Workforce Diversity in the Financial 

Services Industry by Position and Racial/Ethnic Group 

(2004) 35

Figure 8: EEO-1 Data on Workforce Diversity in the Accounting 

Industry at the Management Level by Firm Size, Gender, 

and Racial/Ethnic Group, and Gender (2004) 37 

Figure 9: EEO-1 Data on Workforce Diversity in the Accounting 

Industry at the Management Level by Firm Size and 

Racial/Ethnic Group (2004) 38 

Page ii GAO-06-617 Financial Services Industry
Abbreviations 

AACSB Association to Advance Collegiate Schools of Business 

ABA American Bankers Association 

ACS American Community Survey 

AICPA American Institute of Certified Public Accountants 

CPA certified public accountant 

ECOA Equal Credit Opportunity Act 

EEO-1 data Employer Information Report data 

EEOC Equal Employment Opportunity Commission 

GMAC® Graduate Management Admission Council®

HMDA Home Mortgage Disclosure Act 

IIABA Independent Insurance Agents and Brokers of America 

MBA Masters of Business Administration 

NAICS North American Industry Classification System 

PUMS Public Use Microdata Sample 

SBA Small Business Administration 

SBO Survey of Business Owners 

SIA Securities Industry Association 

SIC Standard Industrial Classification 

This is a work of the U.S. government and is not subject to copyright protection in the 

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reproduce this material separately. 

Page iii GAO-06-617 Financial Services Industry
United States Government Accountability Office

Washington, DC 20548 

 

June 1, 2006

The Honorable Michael G. Oxley 

Chairman 

The Honorable Barney Frank 

Ranking Minority Member 

Committee on Financial Services 

House of Representatives 

The Honorable Sue W. Kelly 

Chairwoman

The Honorable Luis V. Gutierrez 

Ranking Minority Member 

Subcommittee on Oversight and Investigations 

Committee on Financial Services 

House of Representatives 

The Honorable David Scott 

House of Representatives 

At a July 2004 hearing before the Subcommittee on Oversight and 

Investigations of the House Committee on Financial Services, some 

members and witnesses expressed concern about the financial services 

industry’s lack of workforce diversity, particularly in key managementlevel positions.1

 Witnesses stated that financial services firms (e.g., banks 

and securities firms) had not made sufficient progress in recruiting 

minority and women candidates for management-level positions. Concerns 

were also raised about the ability of minority-owned businesses to raise 

debt and equity capital.

This report follows up on the issues raised in the subcommittee hearing 

and responds to your February 2005 request that we provide an overview 

on the status of diversity in the financial services industry. Specifically, 

our objectives were to discuss (1) what the available data show 

regarding diversity at the management level in the financial services 

industry from 1993 through 2004, (2) the types of initiatives that the 

 1

Diversity In the Financial Services Industry and Access to Capital for Minority Owned 

Businesses: Challenges and Opportunities, Hearing Before the Subcommittee On 

Oversight and Investigations of the House Committee on Financial Services, 108th Cong. 

(2004). 

Page 1 GAO-06-617 Financial Services Industry
financial services industry and related organizations have taken to 

promote workforce diversity and the challenges involved, and (3) the 

ability of minority- and women-owned businesses to obtain access to 

capital in financial markets and initiatives financial institutions have taken 

to make capital available to these businesses. You also asked that we 

include information about the accounting industry, which we address 

separately in this report. In an earlier report, we defined workforce 

diversity as ways in which people in a workforce are similar and different

from one another including background, education, and language skills.2

For the purposes of this report, we focused the diversity discussion on 

changes in management-level representation over time by racial/ethnic 

minority groups (for both women and men), including African-Americans, 

Asian/Pacific Islanders (Asians), Hispanics or Latinos (Hispanics), and 

American Indians/Alaskan Natives (American Indians). We also discussed 

changes in management-level representation by whites (both women and 

men) over time. Finally, we defined raising capital as debt or equity capital 

obtained in conventional financial markets, such as from commercial 

banks or venture capital funds. 

To address objective one, we primarily analyzed the Equal Employment 

Opportunity Commission’s (EEOC) Employer Information Report (EEO-1) 

data for the financial services industry for employers with 100 or more 

employees for the years 1993, 1998, 2000, and 2004.

3

 The EEO-1 data 

provide information on racial/ethnic and gender representation for various 

occupations within a broad range of industries, including financial 

services. We used the EEO-1 “officials and managers” job category as the 

basis for our discussion of management-level diversity within the financial 

services industry, as well as for its various sectors, such as banking and 

securities firms. EEOC defines the job category of “officials and managers” 

as occupations requiring administrative and managerial personnel, who set 

broad policies, exercise overall responsibility for execution of these 

policies, and direct individual departments or special phases of a firm’s 

operation. First-line supervisors who engage in the same activities as the 

employees they supervise are reported in the same job category as the 

 2

GAO, Diversity Management: Expert-Identified Leading Practices and Agency 

Examples, GAO-05-90 (Washington, D.C.: Jan. 14, 2005). 

3

Generally, private employers with fewer than 100 employees and certain federal 

contractors who employ fewer than 50 employees are not required to submit EEO-1 reports 

to EEOC. Although the EEO-1 data do not include these smaller firms, the data do allow for 

the characterization of workforce diversity for firms with 100 or more employees due to 

EEOC’s annual reporting requirement. 

Page 2 GAO-06-617 Financial Services Industry
employees they supervise rather than in the “officials and managers” 

category. To address objectives two and three, we collected publicly 

available information and interviewed officials from a variety of financial 

services firms, including commercial banks, securities firms, and private 

equity/venture capital organizations. We also interviewed representatives 

from industry trade organizations, such as the American Bankers 

Association (ABA); the Securities Industry Association (SIA); Mortgage 

Bankers Association (Association); and the Independent Insurance Agents 

and Brokers of America (IIABA); federal agencies, including EEOC; the 

U.S. Department of Commerce’s Minority Business Development 

Administration (MBDA); the Small Business Administration (SBA); and 

federal bank regulators; academics; and organizations that represent 

minority- and women-owned businesses, such as the U.S. Hispanic 

Chamber of Commerce and the National Association of Women Business 

Owners. We also reviewed available government and industry studies that 

address workforce diversity in the financial services industry and the 

ability of minority- and women-owned businesses to obtain access to 

capital. 

We conducted our work from July 2005 to May 2006 in Washington, D.C., 

and New York City in accordance with generally accepted government 

auditing standards. Appendix I describes the objectives, scope, and 

methodology of our review in more detail. At your request, appendix II 

discusses overall statistics on workforce diversity in the financial services

industry, and appendix III discusses workforce diversity in the accounting 

industry. 

From 1993 through 2004, overall diversity at the management level in the

financial services industry did not change substantially, but some 

racial/ethnic minority groups experienced more change in representation

than others. During that period, EEO-1 data show that management-level 

representation by minority women and men overall increased from 11.1 

percent of all industry management-level positions to 15.5 percent. 

Specifically, African-Americans increased their management-level 

representation from 5.6 percent to 6.6 percent, Asians from 2.5 percent to

4.5 percent, Hispanics from 2.8 percent to 4.0 percent, and American 

Indians from 0.2 percent to 0.3 percent. Representation by white women 

remained constant at slightly more than one-third whereas representation 

by white men declined from 52.2 percent to 47.2 percent (overall white 

management-level representation declined from 88.9 percent in 1993 to 

84.5 percent in 2004). Additionally, the EEO-1 data indicate that, within the 

financial services industry, certain sectors have a somewhat more diverse 

Results in Brief 

Page 3 GAO-06-617 Financial Services Industry
management-level workforce than others. For example, the EEO-1 data 

show that depository institutions, such as commercial banks, and 

insurance companies generally have a higher degree of representation by

minorities or white women at the management level than securities firms. 

Although financial services firms and trade groups have initiated programs 

to increase workforce diversity, including in management-level positions, 

these initiatives face challenges that may help explain why overall 

diversity at the management level did not change substantially from 1993 

through 2004. According to officials from financial services firms we spoke 

with, diversity is an important goal, and their companies’ top leadership is 

committed to implementing programs to recruit and retain minority and 

women candidates. For example, to develop a pool of minority candidates,

financial services firms have established scholarship and internship 

programs or partnered with groups that represent minority professionals, 

such as the National Black Master of Business Administration Association. 

Additionally, officials from a few firms told us that in the last few years 

they have been linking managers’ compensation with their performance in 

promoting workforce diversity. Moreover, some firms have developed 

performance indicators (e.g., representation by minorities and women in 

key positions) to measure their progress in achieving workforce diversity. 

However, financial services firm officials said that they still face 

challenges in recruiting and retaining minority candidates. Some firm 

officials also said that gaining employees’ “buy-in” to diversity programs 

was a challenge, particularly among middle managers who were often 

responsible for implementing key aspects of such programs. 

Research reports and our discussions with financial services firms and 

relevant trade groups suggest that minority- and women-owned businesses 

generally have difficulty obtaining access to capital in conventional 

financial markets for several reasons. A 2004 report by the MBDA stated 

that minority-owned businesses may have difficulty in obtaining capital 

because they are often concentrated in service industries and lack 

sufficient assets to pledge as collateral to obtain financing or because 

many such businesses lack an established record of creditworthiness.4

Other studies suggest that lenders may discriminate in deciding whether to

make loans to minority-owned businesses. However, assessing lending 

discrimination against minority- and women-owned businesses may be 

 4

U.S. Department of Commerce, Minority Business Development Agency, “Expanding 

Financing Opportunities for Minority Businesses” (2004). 

Page 4 GAO-06-617 Financial Services Industry
complicated by limited data availability. In particular, the Federal 

Reserve’s Regulation B, which implements the Equal Credit Opportunity 

Act, prohibits financial institutions from requiring information on race and 

gender from applicants for nonmortage credit products.5

 Federal financial 

regulators and others have stated that Regulation B limits their capacity to

monitor potential business lending discrimination. While minority- and 

women-owned businesses may have faced difficulties in obtaining capital 

from conventional sources over the years, some financial institutions, 

primarily commercial banks, said that they have developed strategies to 

serve minority- and women-owned businesses. These strategies include 

marketing financial products specifically to minority- and women-owned 

businesses, although it does not appear that these financial institutions 

actually changed their general underwriting standards for such businesses. 

In addition, some financial institutions have established programs to 

provide technical assistance (e.g., assistance in developing business plans) 

to minority-owned and women-owned businesses so that these firms are 

better positioned to obtain capital from conventional sources.

This report does not contain recommendations. We requested comments 

on a draft of this report from the Chair, U.S. Equal Employment 

Opportunity Commission (EEOC). EEOC provided technical comments, 

which we incorporated as appropriate. We also obtained comments from

officials at selected industry trade associations, federal agencies, and 

organizations that examine access to capital issues on selected excerpts of

a draft of this report. We have incorporated their comments as

appropriate.

This section provides brief descriptions of the financial services industry 

and its component sectors, the changing demographic characteristics of 

the United States, and diversity management. 

Background 

Overview of the Financial 

Services Industry 

The financial services industry plays a key role in the U.S. economy by, 

among other things, providing vehicles, such as insured deposits, 

 5

The Equal Credit Opportunity Act (ECOA), 15 U.S.C. §§ 1691-1691f, makes it unlawful for a 

creditor to discriminate against an applicant in any aspect of a credit transaction on the 

basis of the applicant’s national origin, religion, sex, color, race, age (provided the 

applicant has the capacity to contract). Racial and gender information can be collected in 

two very limited circumstances, neither of which results in publicly available data 

regarding the race/ethnicity or gender of the bank’s nonmortgage credit applicants. 

Page 5 GAO-06-617 Financial Services Industry
providing credit to individuals and businesses, and providing protection 

against certain financial risks. We defined the financial services industry to 

include the following sectors: 

• depository credit institutions, which is the largest sector, include 

commercial banks, thrifts (savings and loan associations and savings 

banks), and credit unions; 

• holdings and trusts, which include investment trusts, investment 

companies, and holding companies; 

• nondepository credit institutions, which extend credit in the form of loans, 

but are not engaged in deposit banking, include federally sponsored credit 

agencies, personal credit institutions, and mortgage bankers and brokers; 

• the securities industry, which is made up of a variety of firms and 

organizations (e.g., broker-dealers) that bring together buyers and sellers 

of securities and commodities, manage investments, and offer financial 

advice; and 

• the insurance industry, including carriers and insurance agents, which 

provides protection against financial risks to policyholders in exchange for 

the payment of premiums. 

Additionally, the financial services industry is a major source of 

employment in the United States. The financial services firms we reviewed 

for this study, which have 100 or more staff, employed nearly 3 million 

people in 2004, according to the EEO-1 data. According to the U.S. Bureau 

of Labor Statistics, employment growth in management and professional 

positions in the financial services industry was expected to grow at a rate 

of 1.2 percent annually through 2012. 

According to the U.S. Census Bureau, the U.S. population is becoming 

more diverse by race and ethnicity. 6 In 2001, Census projected that the 

non-Hispanic, white share of the U.S. population would fall from 75.7 

percent in 1990 to 52.5 percent in 2050, with a similar increase from the 

minority population during the same period. Census further projected that 

the largest increases would be in the Hispanic and Asian populations. 

According to the Census Bureau’s 2004 American Community Survey

Changing U.S. 

Demographic 

Characteristics and 

Definition of Diversity 

Management 

 6

See U.S. Census Bureau, National Population Projections (January 2001).

Page 6 GAO-06-617 Financial Services Industry
results, Hispanics are now the second largest racial/ethic group after 

whites.7

 The rapid growth of minorities in the Unites States may also 

influence its economic activities. For example, according to Census, the 

number of firms owned by minorities and women continues to grow faster 

than the number of other firms. In particular, a recent Census report based 

on data from the 2002 Economic Census stated that, between 1997 and 

2002, Hispanics in the United States opened new businesses at a rate three

times faster than the national average.

8

As we stated in a 2005 report, the composition of the U.S. workforce has 

become increasingly diverse, and many organizations are implementing 

diversity management initiatives.9

 Diversity management is a process 

intended to create and maintain a positive work environment that values 

individuals’ similarities and differences, so that all can reach their 

potential and maximize their contributions to an organization’s strategic 

goals and objectives. On the basis of a literature review and discussions 

with experts, we identified nine leading diversity management principles: 

(1) top leadership commitment, (2) diversity as part of an organization’s 

strategic plan, (3) diversity linked to performance, (4) measurement, (5) 

accountability, (6) succession planning, (7) recruitment, (8) employee 

involvement, and (9) diversity training. 

EEO-1 data indicate that overall diversity among officials and managers 

within the financial services industry did not change substantially from 

1993 through 2004, but that changes by racial/ethnic group varied. The 

EEO-1 data also show that certain financial sectors, such as depositories, 

including commercial banks, are somewhat more diverse at the 

management level than others, including securities firms. Additionally, 

EEO-1 data do not show material differences in management-level 

diversity based on the size of individual firms within the financial services 

industry. 

Diversity in the 

Financial Services 

Industry At the 

Management Level 

Did Not Change 

Substantially 

 7

U.S. Census Bureau, American Community Survey (2004). 

8

U.S. Census Bureau, Survey of Business Owners: Hispanic-Owned Firms: 2002 (March 

2006). 

9

GAO-05-90. 

Page 7 GAO-06-617 Financial Services Industry
Figure 1 shows the representation of minorities and whites at the 

management level within the financial services industry in 1993, 1998, 

2000, and 2004 from EEO-1 data.10 Management-level representation by 

minorities increased from 11.1 percent to 15.5 percent during the period, 

while representation by whites declined correspondingly from 88.9 

percent to 84.5 percent. Management-level representation by white men 

declined from 52.2 percent to 47.2 percent during the period while the 

percentage of management positions held by white women was largely 

unchanged at slightly more than one-third. 

Overview of ManagementLevel Diversity 

 10Our review did not attempt to define appropriate benchmarks for assessing the extent of

management level diversity within the financial services industry and, instead, focused on 

changes in representation over time. While some analyses compare minority or gender 

representation in job categories or industries with general population statistics, such 

studies have limitations. For example, such analyses do not account for the educational 

attainment, age, or experience requirements, among many others, that may be necessary 

for particular positions, including management-level positions within the financial services

industry. Further, we did not identify a feasible means to comprehensively adjust available 

population or labor force data based on the qualification requirements (e.g., education and 

experience) for management-level positions in the financial services industry due to the

large number of such positions and their related qualification requirements. Such 

adjustments would have to be made to determine the relevant civilian labor force against 

which to assess the management-level diversity with the financial services industry.

However, the report does discuss some potential management requirements, such as

holding a Masters of Business Administration degree. 

Page 8 GAO-06-617 Financial Services Industry
Figure 1: EEO-1 Data on Trends in Workforce Diversity in the Financial Services 

Industry at the Management Level (1993, 1998, 2000, and 2004) 

Note: Percentages may not always add to 100 due to rounding. 

Existing EEO-1 data may actually overstate representation levels for 

minorities and white women in the most senior-level positions because the 

“officials and managers” category includes lower- and mid-level 

management positions that may have higher representations of minorities 

and white women. According to an EEOC official we spoke with, 

examples for “officials and managers” would range from the Chief 

Executive Officer from a major investment bank to an Assistant Branch 

Manager of a small regional bank. A revised EEO-1 form for employers 

that becomes effective with the 2007 reporting year divides the category of

“officials and managers” into two hierarchical sub-categories based on 

responsibility and influence within the organization: “executive/senior 

level officials and managers” and “first/mid-level officials.” According to a 

Percentage

Total minority

White men

White women

Total white

Minority women

Minority men

11.1

52.2

36.7

88.9% % % %

% %% %

6.2

4.9

15.5

47.2

37.4

84.5

8.4

7.0

13.1

49.0

37.9

86.9

7.3

5.8

Source: GAO analysis of EEOC data.

1993 1998 2000 2004

0

20

40

60

80

100

14.3

48.0

37.8

85.7

8.0

6.3

Page 9 GAO-06-617 Financial Services Industry
trade association that commented on the revised EEO-1 form, collecting 

information about officials and managers in this manner will enable EEO-1 

to more accurately report on the discriminatory artificial barriers (the 

“glass ceiling”) that hinder the advancement of minorities and white 

women to more senior-level positions. 

Figure 2 provides EEO-1 data for individual minority groups and illustrates 

their trends in representation at the management level, which varied by

group. African-American representation increased from 5.6 percent in 1993 

to 6.8 percent in 2000 but declined to 6.6 percent in 2004. Representation

by Hispanics and Asians also increased, with both groups representing 4 

percent or more of industry officers and managers by 2004. Representation 

by American Indians remained well under 1 percent of all managementlevel positions. 

Page 10 GAO-06-617 Financial Services Industry
Figure 2: EEO-1 Data on Trends in Workforce Diversity in the Financial Services Industry at the Management Level by 

Racial/Ethnic Group and Gender (1993, 1998, 2000, and 2004) 

Men

Women

0

2

4

6

8

10

12

14

16

1993 1998 2000 2004

Year

Percentage

Total minorities

0

2

4

6

8

10

12

14

16

1993 1998 2000 2004

Year

Percentage

African-Americans

0

2

4

6

8

10

12

14

16

1993 1998 2000 2004

Year

Percentage

Hispanics

0

2

4

6

8

10

12

14

16

1993 1998 2000 2004

Year

Percentage

American Indians

0

2

4

6

8

10

12

14

16

1993 1998 2000 2004

Year

Percentage

Asians

Source: GAO analysis of EEOC data.

8.0

7.3

6.2

8.4

6.3

5.8

4.9

14.3 7.0

13.1

11.1

15.5

4.3 4.0

3.5

4.2

2.5

2.3

2.1

2.5

6.8

6.4

5.6

6.6

1.9 1.7 1.5

2.2

1.7 1.6

1.3

1.9

3.7 3.3

2.8

4.0

1.6 1.4 1.1

2.0

1.9 1.8

1.4

2.5 3.6 3.2

2.5

4.5

.2 . .2 .3 3

Note: Percentages may not always add exactly due to rounding. 

Certain Financial Sectors 

Are Somewhat More 

Diverse Than Others, but 

Diversity Does Not Vary by 

Firm Size

EEO-1 data show that the depository and nondepository credit sectors, as 

well as the insurance sector, were somewhat more diverse in specific 

categories at the management level than the securities and holdings and 

trust sectors (see fig. 3). For example, in 2004, the percentage of 

management-level positions held by minorities ranged from a high of 19.9 

percent for nondepository credit institutions (e.g., mortgage bankers and 

brokers) to a low of 12.4 percent for holdings and trusts (e.g., investment 

companies). The share of positions held by white women varied from a 

high of 40.8 percent in the insurance sector to a low of 27.4 percent among 

securities firms. The percentage of white men in management-level 

positions ranged from a high of 57.5 percent in the securities sector to a 

low of 44.0 percent in both the depository (e.g., commercial banks) and 

nondepository credit sectors. Consistent with the EEOC data, a 2005 SIA 

Page 11 GAO-06-617 Financial Services Industry
study we reviewed found limited diversity among key positions in the 

securities sector.11

Figure 3: EEO-1 Data on Workforce Diversity in the Financial Services Industry at the Management Level by Sector (2004) 

Total officials

and managers

0

10

20

30

40

50

60

Depository

credit

institutions

Nondepository

credit

institutions

Security and

commodity

brokers

Holding Insurance

and trusts

Minority women

Minority men

White women

White men

7.0

37.4

47.2

8.4 9.4

36.1

44.0

10.5

8.7

27.4

57.5

6.4 5.4

40.8

46.3

7.5 6.2

35.3

52.3

6.2 7.7

38.2

44.0

10.1

Source: GAO analysis of EEOC dat.a

Percentage

Note: Percentages may not always add to 100 due to rounding. 

EEO-1 data also show that the representation of minorities and whites at 

the management level in financial services firms generally does not vary by 

firm size (see fig. 4). Specifically, we did not find a material difference in 

the diversity of those in management-level positions among firms with 100 

to 249 employees, 250 to 999 employees, and more than 1,000 employees. 

 11See Securities Industry Association, 2005 Report on Diversity Strategy, Development

and Demographics: Executive Summary (November 2005). The study also found that total

representation of minorities and women increased between 2001 and 2005. 

Page 12 GAO-06-617 Financial Services Industry
There were some variations across financial sectors by size.12 However, we 

note that SIA’s 2005 study of securities firms did find variation in diversity

by firm size for a variety of positions within the securities sector.13

Figure 4: EEO-1 Data on Workforce Diversity in the Financial Services Industry at 

the Management Level by Firm Size (2004) 

7

37

47

8

7

36

48

9

7

38

46

9

6

38

48

7

Percentage

15%

85%

14%

86%

16%

84%

16%

84%

Percentage minority employees

Source: GAO analysis of EEOC data.

Minority

White

Minority women

Minority men

White women

White men

More than

1,000 employees

250-999

employees

100-249

employees

All firms with

100+ employees

0

10

20

30

40

50

Note: Percentages may not always add exactly due to rounding. 

 12For example, for the holdings and trust sector, the share of positions held by white 

women are higher in firms with more than 1,000 employees than smaller firms. 

13SIA (2005). Unlike our analysis, the study of 48 securities firms included positions such as 

assistants, analysts and associates, mid-level positions, senior-level positions, retail 

brokers, and institutional sales staff. 

Page 13 GAO-06-617 Financial Services Industry
Officials from financial services firms and industry trade associations we 

contacted stated that the rapid growth of minorities as a percentage of the 

overall U.S. population and increased global competition have convinced 

their organizations that workforce diversity is a critical business strategy. 

Financial firm officials we spoke with said that their top leadership was 

committed to implementing a variety of workforce diversity programs to 

help enable their organizations to take advantage of the full range of 

available talent to fill critical positions and to maintain their firms’ 

competitive position. However, officials from financial services firms and 

trade associations also described the challenges they faced in 

implementing these initiatives, such as ongoing difficulties in recruiting 

and retaining minority candidates and in gaining commitment from 

employees to support diversity initiatives, especially at the middle 

management level. 

Initiatives to Promote 

Workforce Diversity 

in the Financial 

Services Industry 

Face Challenges 

Financial Services Firms 

Have Implemented a 

Variety of Diversity 

Initiatives 

Over the past decade, the financial services firms we contacted have

implemented a variety of initiatives to increase workforce diversity, 

including programs designed to recruit and retain minority and women 

candidates to fill key positions. Some bank officials said that they had 

developed scholarship and internship programs to encourage minority 

high school and college students to consider careers in banking with the 

goal of increasing the diversity of future applicant pools. Some firms have 

established formal relationships with colleges and Masters of Business 

Administration (MBA) programs to recruit minority students from these 

institutions. Some firms and trade organizations have also developed 

partnerships with groups that represent minority professionals, such as 

the National Black MBA Association and the National Society of Hispanic 

MBAs, as well as with local communities to recruit candidates, using 

events such as conferences and career fairs. Officials from other firms said 

that the goal of partnerships was to build long-term relationships with 

professional associations and communities and to increase the visibility of 

financial services firms among potential employees. 

Officials from financial services firms also said that they had developed 

programs to foster the retention and professional growth of minority and 

women employees. Specifically, these firms have 

• encouraged the establishment of employee networks. For example, a 

commercial bank official told us that, since 2003, the company had 

established 22 different employee networks that enabled employees from

various backgrounds to meet each other, share ideas, and create informal 

mentoring opportunities. 

Page 14 GAO-06-617 Financial Services Industry
• established mentoring programs. For example, an official from another 

commercial bank told us that the company had a Web-based program that 

allowed employees of all backgrounds to connect with one another and to

find potential mentors. 

• instituted diversity training programs. Officials from financial services 

firms said that these training programs increase employees’ sensitivity to 

and awareness of workforce diversity issues and helped staff deal 

effectively with colleagues from different backgrounds. One commercial 

bank we contacted requires its managers to take a 3- to 5-day training 

course on dealing with a diverse workforce. The training stressed the 

concept of workforce diversity and provided a forum in which employees 

spoke about their differences through role-playing modules. The bank has 

also developed a diversity tool kit and certification program as part of the 

training. 

• established leadership and career development programs. For example, an

official from an investment bank told us that the head of the firm would 

meet with every minority and woman senior executive to discuss his or 

her career development. For lower-level individuals, the investment bank 

official said that the organization had created a career development 

committee to serve as a forum for discussions on career advancement. 

Officials from some financial services firms we contacted as well as 

industry studies noted that that financial services firms’ senior managers 

were involved in diversity initiatives. For example, SIA’s 2005 study on 

workforce diversity in the securities industry found that almost half of the 

48 securities firms surveyed had full-time senior managers dedicated to

diversity initiatives. According to a report from an executive membership 

organization, an investment bank had developed a program that involved

lower-level employees from diverse backgrounds, along with their senior 

managers, to develop diversity initiatives. Moreover, officials from a few 

commercial banks that we interviewed said that the banks had established 

diversity “councils” of senior leaders to set the vision, strategy, and 

direction of diversity initiatives. The 2005 SIA study and a few of the firm 

officials we spoke with also suggested that some companies have 

instituted programs that link managers’ compensation with progress made

toward promoting workforce diversity. Officials from one investment bank 

said that managers of each business unit reported directly to the 

company’s Chief Executive Officer who determined their bonuses in part 

based on the unit’s progress in hiring, promoting, and retaining minority 

and women employees. 

Page 15 GAO-06-617 Financial Services Industry
According to some officials from financial services firms, their firms have

also developed performance indicators to measure progress in achieving 

diversity goals. These indicators include workforce representation, 

turnover, promotion of minority and women employees, and internal 

employee satisfaction survey responses. An official from a commercial 

bank said that the company monitored the number of job openings, the 

number of minority and women candidates who applied for each position, 

the number of such candidates who interviewed for open positions, and 

the number hired. In addition, a few officials from financial services firms 

told us that they had developed additional indicators such as promotion 

rates for minorities and whites and compensation equity across ranks for 

minorities and whites. Officials from several financial services firms stated 

that measuring the results of diversity efforts over time was critical to the

credibility of the initiatives and to justifying the investments in the 

resources such initiatives demanded.

Financial services trade organizations from the securities, commercial 

banking, and insurance sectors that we contacted have been involved in 

promoting workforce diversity. The following are some examples: 

• In 1996 SIA formed a “diversity committee” of senior-level executives from 

the securities industry to assist SIA’s member firms in developing their 

diversity initiatives and in their efforts to market to diverse customers. 

This committee has begun a number of initiatives, such as developing 

diversity management tool kits, conducting industry demographic and 

diversity management research, and holding conferences. SIA’s diversity 

tool kit provides step-by-step guidelines on establishing diversity 

initiatives, including identifying ways to recruit and retain diverse 

candidates, overcoming challenges, measuring the results of diversity 

initiatives, and creating strategies for transforming a firm’s culture. In 

addition, since 1999 SIA has been conducting an industry-wide diversity 

survey every 2 years to help its members measure their progress toward 

increasing workforce diversity. The survey includes aggregated data that

measure the number of minority and women employees in the securities

industry at various job levels and a profile of securities industry activities 

designed to increase workforce diversity. In 2005, SIA held its first 

diversity and human resources conference, which was designed so that 

human resources and senior-level managers could share best practices and 

current strategies and trends in human resource management and 

diversity. 

Several Financial Services 

Trade Organizations Have 

Promoted Workforce 

Diversity 

Page 16 GAO-06-617 Financial Services Industry
• The American Bankers Association collaborated with the Department of 

Labor’s Office of Federal Contract Compliance Programs in 1997 to 

identify key issues that banks should consider in recruiting and hiring 

employees in order to create fair and equal employment opportunities. The 

issues include managing the application process and selecting candidates

in a way that ensures the equal and consistent treatment of all job 

applications. 

• The Independent Insurance Agents and Brokers of America (IIABA) 

established the IIABA Diversity Task Force in 2002 to promote diversity 

within the insurance agent community. The task force is charged with 

fostering a profitable independent agency force that reflects, represents, 

and capitalizes on the opportunities of the diverse U.S. population. Among 

its activities, the diversity task force is developing a database of minority 

insurance agents and minority-owned insurance agencies as a way to help

insurance carriers seeking to expand their business with a diverse agent 

base and potentially reach out to urban areas and underserved markets. 

According to IIABA, the task force has just completed a tool kit for IIABA

state associations, volunteer leadership, and staff. This step-by-step guide 

advises state associations on how to recruit and retain a diverse 

membership through their governance, products, service offerings, and 

association activities. In addition, IIABA participates in a program to 

educate high school and community college students on careers in 

insurance, financial services, and risk management and encourages 

students to pursue careers in the insurance industry. 

• The Mortgage Bankers Association (Association) has established plans 

and programs to increase the diversity of its own leadership, as well as to 

promote diversity within the Association’s member firms in 2005. The 

Association plans to increase diversity within its leadership ranks by 30 

percent by September 2007 and has asked member firms to recommend 

potential candidates. To help member firms expand the pool of qualified 

diverse employees in the real estate finance industry, the Association has 

instituted a scholarship program called “Path to Diversity,” which awards 

between 20 and 30 scholarships per year to minority employees and 

interns from member firms. Recipients can take courses at CampusMBA, 

the Association’s training center for real estate finance, in order to further 

their professional growth and development in the mortgage industry. 

Page 17 GAO-06-617 Financial Services Industry
Although financial services firms and trade organizations we contacted 

have launched diversity initiatives, they cited a variety of challenges that 

may have limited their success. First, the officials said that the industry 

faces ongoing challenges in recruiting minority and women candidates 

even though firms may have established scholarship and internship 

programs and partnered with professional organizations. According to 

officials responsible for promoting workforce diversity from several firms, 

the industry lacks a critical mass of minority and women employees, 

especially at the senior levels, to serve as role models to attract other 

minorities to the industry. Officials from an investment bank and a 

commercial bank also told us that the supply (or “pipeline”) of minority 

and women candidates in line for senior or management-level positions 

was limited in some geographic areas and that recruiting a diverse talent 

pool takes time and effort. Officials from an investment bank said that 

their firm typically required a high degree of specialization in finance for 

key positions. An official from another investment bank noted that 

minority candidates with these skills were very much in demand and 

usually receive multiple job offers. 

Available data on minorities enrolled in and graduated from MBA 

programs provide some support for the contention that there is a limited 

external pool that could feed the “pipeline” for some management-level 

positions within the financial services industry, as well as other industries. 

According to the Department of Labor, many top executives from all 

industries, including the financial services industry, have a bachelor’s 

degree or higher in business administration. MBA degrees are also 

typically required for many management development programs, 

according to an official from a commercial bank and an official from a 

foundation that provides scholarships to minority MBA students. We 

obtained data from the Association to Advance Collegiate Schools of 

Business (AACSB) on the percentage of students enrolled in MBA degree 

programs in accredited AACSB schools in the United States from year 

2000 to 2004.

14 As shown in table 1, minorities accounted for 19 percent of 

all students enrolled in accredited MBA programs in 2000 and 23 percent

in 2004. African-American and Hispanic enrollment in MBA programs was 

generally stable during that period, and both groups accounted for 6 and 5 

percent of enrollment, respectively, in 2004. Asian representation 

Several Challenges May 

Have Affected the Success 

of Initiatives Designed to 

Increase Workforce 

Diversity in the Financial 

Services Industry 

 14AACSB, the world’s largest accreditation association for business schools, conducts an

annual survey called “Business School Questionnaire” of all its accredited schools. 

Participation in this survey is voluntary. For the year 2004, the most recent year, 92.7 

percent of the accredited schools responded to the survey. 

Page 18 GAO-06-617 Financial Services Industry
increased from 9 percent in 2000 to 11 percent in 2004. Other data indicate

that MBA degrees awarded may be lower than the MBA enrollment data 

reported by AACSB. For example, Graduate Management Admission 

Council®

 (GMAC®) data indicate that minorities in its survey sample 

accounted for 16 percent of MBA graduates in 2004 versus 23 percent 

minority enrollment during the same year as reported by AACSB.15

Because financial services firms compete with one another, as well as with 

companies from other industries to recruit minority MBA graduates, their

capacity to increase diversity at the management level may be limited. 

Table 1: AACSB Demographic Data of Students Reported Enrolled in MBA Degree Programs at AACSB Accredited Business

Schools in the United States by Racial/Ethnic Group (2000-2004) 

Minority

Year White African-American Hispanic Asian American Indian Total minority

2000 81% 5% 5% 9% a19%

2001 80 6 5 10 a20

2002 80 5 5 10 a20

2003 78 6 5 11 a22

2004 77% 6% 5% 11% 1% 23%

Source: GAO analysis of AACSB data. 

Note: Percentages may not always add exactly due to rounding. 

a

Less than 1 percent. 

Other evidence suggests that the financial services industry may not be

fully leveraging its “internal” pipeline of minority and women employees 

for management-level positions. As shown in figure 5, there are job 

categories within the financial services industry that generally have more 

overall workforce diversity than the “officials and managers” category, 

particularly among minorities. For example, minorities held 22 percent of

professional positions as compared with 15 percent of “officials and 

managers” positions in 2004. See appendix II for more information on the 

specific number of employees within other job categories, as well as more 

specific breakouts of various minority groups by sector. 

 15GMAC®

 has been conducting its “Global MBA Graduate Survey” since 2000. To obtain the

demographic data for 2004, GMAC®

 mailed out 18,504 surveys to graduating MBA students 

with a response rate of 34 percent. 

Page 19 GAO-06-617 Financial Services Industry
According to a recent EEOC report, which used 2003 EEO-1 data, the

professional category represented a likely pipeline of internal candidates 

for management-level positions within the industry.16 Compared with white 

males, the EEOC study found that the chances of minorities and women 

(white and minority combined) advancing from the professional category

into management-level positions were low. The study also found that the 

chances of Asians (women and men) advancing into management-level

positions from the professional category were particularly low. Although 

EEOC said there are limitations to its analysis, the agency suggests that 

the findings could be used as a preliminary screening device designed to 

detect potential disparities in management-level opportunities for 

minorities and women.17

 16See EEOC, Diversity in the Finance Industry (April 2006). In the study, EEOC analyzed 

the 2003 EEO-1 data by an analytical technique referred to as odds-ratio analysis to assess 

the potential chances of minorities and women becoming managers as compared with 

white men. The analysis assumes the pipeline for “officials and managers” job category 

generally consists of professionals. However, the study also included “sales workers” as a 

potential pool of managers in some analyses because in the securities sector, stock brokers

might become managers, according to EEOC. 

17For example, EEOC said that the EEO-1 data do not show how many employees are 

promoted from one job group to another over time, and so promotion data are not 

available. Rather, the EEO-1 survey collects information on the number of employees in 

various job categories at a given point in time. In the absence of promotion data, EEOC 

views the analysis as a screening tool to identify potential disparities. 

Page 20 GAO-06-617 Financial Services Industry
Figure 5: EEO-1 Data (Percentage) on Workforce Diversity in the Financial Services Industry by Position, Racial/Ethnic Group,

and Gender (2004) 

Minority women

White women

Minority men

White men

Percentage

Source: GAO analysis of EEOC data.

0

10

20

30

40

50

60

Office and Other

clerical workers

Sales

workers

Officials and Professionals Technicians

managers

Total

30

43

9

18

47

37

7 8

37

42

9

13

41

35

13 11

47

29

12 12 13

51

8

28

41

25

21

13

Note: Percentages may not always add to 100 due to rounding. 

Following are descriptions of the job categories in EEO-1 data from 

EEOC: (1) “officials and managers”: occupations requiring administrative 

and management personnel who set broad policies, exercise overall 

responsibility for execution of these policies, and direct individual 

departments or special phases of a firm’s operations; (2) “professionals”: 

occupations requiring either college graduation or experience of such kind

and amount as to provide a comparable background; (3) “technicians”: 

occupations requiring a combination of basic scientific knowledge and 

manual skill that can be obtained through 2 years of post high school 

education; (4) “sales workers”: occupations engaging wholly or primarily 

in direct selling; (5) “office and clerical”: includes all clerical-type work 

regardless of level of difficulty, where the activities are predominantly 

nonmanual; and (6) the category “other” includes craft workers, 

operatives, laborers, and service workers. 

Page 21 GAO-06-617 Financial Services Industry
Many officials from financial services firms, industry trade groups, and 

associations that represent minority professionals agreed that retaining 

minority and women employees represented one of the biggest challenges 

to promoting workforce diversity. The officials said that one reason 

minority and women employees may leave their positions after a short 

period is that the industry, as described previously, lacks a critical mass of 

minority women and men, particularly in senior-level positions, to serve as 

role models. Without a critical mass, the officials said that minority or 

women employees may lack the personal connections and access to 

informal networks that are often necessary to navigate an organization’s 

culture and advance their careers. For example, an official from a 

commercial bank we contacted said he learned from staff interviews that 

African-Americans believed that they were not considered for promotion 

as often as others partly because they were excluded from informal 

employee networks. 

While firms may have instituted programs to involve managers in diversity 

initiatives, some industry officials said that achieving commitment, or 

“buy-in,” can still pose challenges. Other officials said that achieving the 

commitment of middle managers is particularly important because these 

managers are often responsible for implementing key aspects of the 

diversity initiatives, as well as explaining them to their staffs. However, the 

officials said that middle managers may be focused on other aspects of 

their responsibilities, such as meeting financial performance targets, 

rather than the importance of implementing the organization’s diversity 

initiatives. Additionally, the officials said that implementing diversity 

initiatives represents a considerable cultural and organizational change for 

many middle managers and employees at all levels. An official from an 

investment bank told us that the bank has been reaching out to middle 

managers who oversee minority and woman employees by, for example, 

instituting an “inclusive manager program.” According to the official, the

program helps managers examine subtle inequities and different 

managerial and working styles that may affect their relationships with 

minority and women employees. 

Page 22 GAO-06-617 Financial Services Industry
Studies and reports, as well as interviews we conducted, suggest that 

minority- and women-owned businesses have faced challenges obtaining 

capital (primarily bank credit) in conventional financial markets for 

several business reasons, such as the concentration of these businesses in 

the service sector and relative lack of a credit history.18 Other studies 

suggest that lenders may discriminate, particularly against minority-owned 

businesses. However, assessing lending discrimination against minorityowned businesses may be complicated by limited data availability. 

Available research also suggests that factors, including business 

characteristics, introduce challenges for both minority- and women-owned 

businesses in obtaining access to equity capital.19 However, some financial

institutions, primarily commercial banks, have recently developed 

strategies to market their loan products to minority- and women-owned 

businesses or are offering technical assistance to them. 

Minority- and WomenOwned Businesses 

Often Face 

Difficulties in 

Obtaining Capital, but 

Some Financial 

Services Firms Have 

Developed Strategies 

to Assist Them 

Research Suggests That 

Business Characteristics 

May Affect Minority- and 

Women-Owned 

Businesses’ Access to 

Commercial Loans

Reports issued by the MBDA, SBA, and academic researchers, as well as 

interviews we conducted with commercial banks, minority-owned banks, 

and trade groups representing minority- and women-owned businesses 

suggest that minority- and women-owned businesses may face challenges

in obtaining commercial bank credit.20 The reports and interviews typically 

cite several business characteristics shared by both minority-owned firms 

and, in most cases, women-owned firms that may compromise their ability 

to obtain bank credit as follows: 

• First, recent MBDA reports found that many minority-owned businesses in 

the United States are concentrated in retail and service industries, which 

 18A minority-owned business is defined by Census as a business in which a minority owns

51 percent or more of the stock or equity in the business. A woman-owned business is

defined by Census as a business in which a woman owns 51 percent or more of the stock or

equity in the business. 

19Equity capital can be raised from several sources including venture capital funds, private 

stock sales, or issuing stock in public financial markets. 

20It should be noted that all small businesses may face challenges in obtaining credit due to 

the risks and costs involved in such lending. See Board of Governors of the Federal 

Reserve System, Report to the Congress on the Availability of Credit to Small Businesses

(September 2002). 

Page 23 GAO-06-617 Financial Services Industry
have relatively low average annual capital expenditures for equipment.21

Low capital expenditures are an attractive feature for start-up businesses, 

but with limited assets to pledge as collateral against loans, these 

businesses often have difficulty obtaining financing. According to the U.S. 

Census Bureau’s 2002 Survey of Business Owners, approximately 61 

percent of minority-owned businesses and approximately 55 percent of 

women-owned firms operate in the service sectors as compared to about

52 percent of all U.S. firms.22

• Second, the Census Bureau’s 2002 Survey of Business Owners indicated 

that many minority- and women-owned businesses were start-ups or 

relatively new and, therefore, might not have a history of sound financial 

performance to present when applying for credit. Some officials from a 

private research organization and a trade group official we contacted said 

that banks are reluctant to lend to start-up businesses because of the costs 

involved in assessing the prospects for such businesses and in monitoring 

their performance over time. 

• Third, the relatively small size and lack of technical experience of some 

minority-owned businesses may affect their ability to obtain bank credit.23

For example, an MDBA report stated that minority businesses often need

extensive mentoring and technical assistance such as help developing 

business plans in addition to financing.24

 21U.S. Department of Commerce, Minority Business Development Agency, Expanding

Financing Opportunities for Minority Businesses (2004). U.S. Department of Commerce, 

Minority Business Development Agency, Keys to Minority Entrepreneurial Success,

Capital, Education, and Technology (September 2002). U.S. Department of Commerce, 

Minority Business Development Agency, State of Minority Business Enterprises: A 

Preliminary Overview of the 2002 Survey of Business Owners (September 2005). 

22U.S. Department of Commerce, Minority Business Development Agency, State of 

Minority Business Enterprises: A Preliminary Overview of the 2002 Survey of Business

Owners (September 2005). U. S. Census Bureau, “2002 Survey of Business Owners, 

Women-Owned Firms” (Jan. 26, 2006). 

23U.S. Department of Commerce, Minority Business Development Agency, Keys to 

Minority Entrepreneurial Success, Capital, Education, and Technology (September

2002). U.S. Small Business Administration, Office of Advocacy, Financing Patterns of 

Small Firms: Findings from the 1998 Survey of Small Business Finance (September 

2003). 

24U.S. Department of Commerce, Minority Business Development Agency, Expanding

Financing Opportunities for Minority Businesses (2004). 

Page 24 GAO-06-617 Financial Services Industry
Several other studies suggest that discrimination may also be a reason that

minority-owned businesses face challenges obtaining commercial loans. 

For example, a 2005 SBA report on the small business economy 

summarized previous studies by researchers reporting on lending 

discrimination.25 These previous studies found that minority-owned 

businesses had a higher probability of having their loans denied and would 

likely pay higher interest rates than white-owned businesses, even after 

controlling for differences in creditworthiness and other factors.26 For 

example, a study found that given comparable loan applications—by 

African-American and Hispanic-owned firms and white-owned firms—the 

applications by the African-American and Hispanic-owned firms were 

more likely to be denied.27 Another study found that minorities had higher 

denial rates even after controlling for personal net worth and 

homeownership.28 The SBA report concludes that lending discrimination is 

likely to discourage would-be minority entrepreneurs and reduce the 

longevity of minority-owned businesses. 

Another 2005 report issued by SBA also found that minority-owned 

businesses face some restrictions in access to credit.29 This study 

investigated possible restricted access to credit for minority- and womenowned businesses by focusing on two types of credit—“relationship loans” 

(lines of credit) and “transaction loans” (commercial mortgages, 

equipment loans, and other loans) from commercial banks and nonbanks, 

Other Studies Suggest That 

Discrimination May Limit 

Minority-Owned 

Businesses’ Ability to 

Obtain Commercial Loans 

 25U.S. Small Business Administration, The Small Business Economy (Washington, D.C.: 

2005). 

26Blanchard, Lloyd, John Yinger, and Bo Zhao (2005), “Do Credit Market Barriers Exist for 

Minority and Women Entrepreneurs?” Syracuse University, Center for Policy Research 

Working Paper No. 74. Blanchflower, David G, P. Levine, and D. Zimmerman (1998).

“Discrimination in the Small Business Credit Market”, National Bureau of Economic 

Research. Cavalluzzo, Ken and John Wolken (2002). “Small Business Loan Turndowns,

Personal Wealth and Discrimination. Georgetown University.” Coleman, Susan (2002). 

“Characteristics and Borrowing Behavior of Small, Women-Owned Firms: Evidence from 

the 1998 National Survey of Small Business Finances.” University of Hartford. 

27Blanchard, Lloyd, John Yinger, and Bo Zhao (2005), “Do Credit Market Barriers Exist for 

Minority and Women Entrepreneurs?” Syracuse University, Center for Policy Research 

Working Paper No. 74. 

28Cavalluzzo, Ken and John Wolken (2002). “Small Business Loan Turndowns, Personal

Wealth and Discrimination.” Georgetown University. 

29U.S. Small Business Administration (2005). Availability of Financing to Small Firms 

Using the Survey of Small Business Finances. A report for the U.S. Small Business

Administration, Washington, D.C. 

Page 25 GAO-06-617 Financial Services Industry
such as finance companies.30 The researchers found that minority business 

owners were more likely to have transaction loans from nonbanks and less 

likely to have bank loans of any kind. The researchers also found that 

African-American and Hispanic business owners have a greater probability 

of having either type of loan denied than white male owners.31 The 

researchers did not find evidence suggesting that women or Asian 

business owners faced loan denial probabilities different from those of 

firms led by white, male-owned firms. 

Although studies have found potential lender discrimination against 

minority-owned businesses, assessing such discrimination may be 

complicated by limited data availability. The Federal Reserve’s Regulation 

B, which implements the Equal Credit Opportunity Act, prohibits financial 

institutions from requiring information on race and gender from applicants

for nonmortgage credit products.32 Although the regulation was 

implemented to prevent the information from being used to discriminate 

against underserved groups, some federal financial regulators have stated 

that removing the prohibition would allow them to better monitor and 

enforce laws prohibiting discrimination in lending. We note that under the 

Home Mortgage Disclosure Act (HMDA), lenders are required to collect

and report data on racial and gender characteristics of applicants for 

mortgage loans. Researchers have used HMDA data to assess potential 

mortgage lending discrimination by financial institutions. In contrast, the

studies we reviewed on lending discrimination against minority and small 

business tend to rely on surveys of small businesses by the Federal 

Reserve or the Census rather than on lending data obtained directly from

financial institutions. 

According to available research, many minority- and women-owned 

businesses face challenges in raising equity capital—such as, from venture 

capital firms. For example, one study estimated that only $2 billion of the 

$95 billion available in the private equity market in 1999 was managed by 

companies that focused on supplying capital to entrepreneurs from

Many Minority- and 

Women-Owned Businesses 

May Also Face Difficulties 

Raising Equity Capital 

 30Relationship loans are defined as a commitment by the lender to a pre-set maximum 

amount of credit over a certain time period. Transaction loans are injections of cash made 

after loan approval and used to acquire tangible assets that can serve as loan collateral. 

31See Small Business Administration (2005). 

32The Equal Credit Opportunity Act (ECOA), 15 U.S.C. §§ 1691-1691f. 

Page 26 GAO-06-617 Financial Services Industry
traditionally underserved markets, such as minority-owned businesses.33

Moreover, according to a study by a private research organization, in 2003

only 4 percent of women-owned businesses with $1 million or more in 

revenue had been funded through private equity capital as compared with 

11 percent of male-owned businesses with revenues of $1 million or 

more.34

According to studies and reports by private research organizations, some 

of the same types of business characteristics that may affect the ability of 

many minority- and women-owned businesses to obtain bank credit also 

limit their capacity to raise equity capital.35 For example, industry reports 

and industry representatives that we contacted state that venture 

capitalists place a high priority on the management and technical skills 

companies; whereas some minority-owned businesses may lack a proven

track record of such expertise. 

Although venture capital firms may not have traditionally invested in 

minority-owned businesses, a recent study suggests that firms that do 

focus on such entities can earn rates of return comparable to those earned 

on mainstream private equity investments.36 This study, funded by a private 

foundation, found that venture capital funds that specialize in investing in

minority-owned businesses were relatively profitable compared with a 

private equity performance index. According to the study, the venture 

capital funds that specialized in minority-owned businesses invested in a

more diverse portfolio of businesses than the typical venture capital fund,

which typically focuses on high-tech companies. The study found that 

investing in broad portfolios helped mitigate the losses associated with the 

downturn in the high-tech sector for firms that focused on minority-owned 

businesses. 

 33Milken Institute, The Minority Business Challenge: Democratizing Capital for

Emerging Domestic Markets (September 2000). 

34Center for Women’s Business Research, Access to Capital: Where We’ve Been, Where 

We’re Going (March 2005). 

35Center for Women’s Business Research, Access to Capital: Where We’ve Been, Where 

We’re Going (March 2005). Brush, C. G.; Carter, N.; Gatewood, E.; Greene P. G.; and Hart, 

M. M. Gatekeepers of Venture Growth: A Diana Project Report on the Role and 

Participation of Women in the Venture Capital Industry (Oct. 20, 2001). 

36Bates, Timothy and William Bradford (2003). “Minorities and Venture Capital, A New 

Wave in American Business.” Kauffman Foundation. 

Page 27 GAO-06-617 Financial Services Industry
While minority- and women-owned businesses may have traditionally 

faced challenges in obtaining capital, as noted earlier, Census data 

indicate that such businesses are forming rapidly. Officials from some 

financial institutions we contacted, primarily large commercial banks, told

us that they are reaching out to minority- and women-owned businesses. 

Some commercial banks are marketing their financial products to 

minority- and women-owned businesses by, for example, printing financial 

services brochures in various languages and assigning senior executives 

with diverse backgrounds to serve as the spokespersons for the 

institutions efforts to reach out to targeted groups (e.g., a bank may 

designate an Asian executive as the point person for Asian communities). 

However, officials at a bank and a trade organization told us that the loan 

products marketed to minority- and women-owned businesses did not 

differ from those marketed to other businesses and that underwriting 

standards had not changed. 

Bank officials also said that their companies had established partnerships 

with trade and community organizations for minorities and women to 

reach out to their businesses. Partnering allows the banks to locate 

minority- and women-owned businesses and gather information about 

specific groups of business owners. Bank officials said that such 

partnerships had been an effective means of increasing their business with 

these target groups. 

Finally, officials from some banks said that they educate potential 

business clients by providing technical assistance through financial 

workshops and seminars on various issues such as developing business 

plans and obtaining commercial bank loans. Other bank officials said that

their staffs work with individual minority- or women-owned businesses to 

provide technical assistance. 

Officials from banks with strategies to market to minority- and womenowned businesses said that they faced some challenges in implementing 

such programs. Many of the bank officials told us that it was timeconsuming to train their staff to reach out to minority- and women-owned 

businesses and provide technical assistance to these potential business 

customers. In addition, an official from a bank said that Regulation B 

limited the bank’s ability to measure the success of its outreach efforts. 

The official said that because of Regulation B the bank could only estimate 

the success of its efforts using estimates of the number of loans it made to 

minority- and women-owned businesses. 

Some Commercial Banks 

Have Developed Programs 

for Minority- and WomenOwned Businesses 

Page 28 GAO-06-617 Financial Services Industry
We requested comments on a draft of this report from the Chair, U.S. 

Equal Employment Opportunity Commission (EEOC). We received

technical comments from EEOC and incorporated their comments into 

this report as appropriate. 

We also requested comments on selected excerpts of a draft of this report 

from 12 industry trade associations, federal agencies, and organizations 

that examine access to capital issues. We received technical comments 

from 4 of the 12 associations, agencies, and organizations and 

incorporated their comments into this report as appropriate. The 

remaining eight either informed us that they had “no comments” or did not 

respond to our request. 

As agreed with your offices, unless you publicly announce the contents of

this report earlier, we plan no further distribution until 30 days from the 

report date. At that time, we will send copies of this report to the Senate 

Committee on Banking, Housing, and Urban Affairs. We also will send 

copies to the Chair of EEOC, the Administrator of SBA, and the Secretary 

of the Department of Commerce, among others, and will make copies 

available to others upon request. In addition, the report will be available at 

no charge on the GAO Web site at http://www.gao.gov. 

If you or your staff have any questions about this report, please contact me 

at 202-512-8678 or at williamso@gao.gov. Contact points for our Offices of 

Congressional Relations and Public Affairs may be found on the last page 

of this report. GAO staff that made major contributions to this report are 

listed in appendix IV. 

Orice M. Williams 

Director, Financial Markets and 

 Community Investment 

Agency Comments 

and Our Evaluation 

Page 29 GAO-06-617 Financial Services Industry
Appendix I: Objectives, Scope, and Appendix I: Objectives, Scope, and Methodology 

Methodology 

The objectives of our report were to discuss (1) what the available data

show regarding diversity at the management level in the financial services 

industry, from 1993 through 2004; (2) the types of initiatives that the 

financial services industry and related organizations have taken to 

promote workforce diversity and the challenges involved; and (3) the 

ability of minority and women-owned businesses to obtain access to 

capital in financial markets and initiatives financial institutions have 

recently taken to make capital available to these businesses. 

To address objective one, we requested Employer Information Reports 

(EEO-1) data from the Equal Employment Opportunities Commission 

(EEOC) for the financial services industry. The EEO-1 data, which is 

reported annually generally by firms with 100 or more employees, provides 

information on race/ethnicity and gender for various occupations, within 

various industries, including financial services.1

 We used the racial/ethnic 

groups specified by EEOC; whites, not of Hispanic origin (whites); Asians 

or Pacific Islanders (Asians); Blacks, not of Hispanic origin (AfricanAmericans); Hispanics or Latinos (Hispanics); and American Indians or 

Alaskan Natives (American Indians) for our analysis. The EEO-1 

occupations are officials and managers, professional, technicians, sales 

workers, clerical workers, and others. The other category includes 

laborers, craft workers, operatives, and service workers. We defined the 

financial services industry to include the following five sectors: depository 

credit institutions (including commercial banks), holdings and trusts 

(including investment companies), non-depository credit institutions (such 

as mortgage bankers), securities firms, and insurance (carriers and 

agents). We also requested and analyzed EEO-1 data for the accounting 

industry. 

We chose to use the EEO-1 database because it is was designed to provide 

information on representation by a variety of groups within a range of 

occupations and industries, covered many employers, and had been 

collected in a standardized fashion for many years. Although the EEO-1 

data generally do not capture information from small businesses with less 

than 100 employees, we believe, due to their annual mandatory reporting,

they allow us to characterize the financial services industry of firms with 

100 or more employees. We also corroborated the EEO-1 data with other 

available studies, particularly a 2005 study by the Securities Industry 

 1

Federal contractors with 50 or more employees are also required to report EEO-1 data. 

However, we did not include these firms in our analysis. See 29 C.F.R. Part 1602, Subpart B. 

Page 30 GAO-06-617 Financial Services Industry
Appendix I: Objectives, Scope, and 

Methodology 

Association on diversity within the securities sector.2 We did consider 

other sources of data besides EEO-1, but chose not to use them for a 

variety of reasons including their being more limited or less current.3

We requested and analyzed the EEO-1 data, focusing on the “officials and 

managers” category, for the years 1993, 1998, 2000, and 2004 for financial 

services firms having 100 or more employees. We compared that data from

the selected years to determine how the composition of management-level

staff had changed since 1993. We also analyzed the data based on the 

number of employees in the firm or firm size. The four firm size categories 

we used were 100 or more employees, 100-249 employees, 250-999 

employees, and 1,000 or more employees. We also requested EEO-1 data 

for the accounting industry for 2004, and therefore did not perform a trend 

analysis. The scope of our work did not include developing appropriate 

benchmarks to assess the extent of workforce diversity within the 

financial services industry. 

EEOC collects EEO-1 data from companies in a manner that allowed us to 

specify our data request and analysis by financial sector (e.g., commercial 

banking or securities). EEOC assigns each firm a code based on its 

primary activity (referred to as the North American Industry Classification 

System [NAICS] or the Standard Industrial Classification [SIC]). For 

example, a commercial bank will have a specific code denoting 

commercial banking, whereas a securities firm would have its own 

securities code. In addition, EEOC assigns codes to companies and their 

subsidiaries based on their primary line of business. For example, a 

commercial bank with an insurance subsidiary would have a separate 

code for that subsidiary. By requesting the EEO-1 data by the relevant 

codes, we were able to separate the different financial services businesses 

within a firm and then aggregate the data by sector. Although the NAICS 

 2

See Securities Industry Association, 2005 Report on Diversity Strategy, Development and 

Demographics: Executive Summary (November 2005). 

3

We considered using data from Census’ Current Population Survey (CPS), Public Use 

Microdata Sample (PUMS), Special EEO Tabulation File, and the American Community 

Survey (ACS). The CPS is reported by individuals and includes smaller employers, and the 

PUMS is reported by households; however due to small sample sizes, reliable estimates to 

specific minority groups could not be derived. The Special EEO Tabulation File’s most

recent data are based on the 2000 census and thus were more dated than other data

sources. The ACS only has data since 2002 and therefore did not allow us to show shifts

over a large span of time. 

Page 31 GAO-06-617 Financial Services Industry
Appendix I: Objectives, Scope, and 

Methodology 

replaced the SIC in 1997, EEOC staff are to assign both codes to each firm 

that existed prior to 2002 to ensure consistency.4

We conducted a limited analysis to assess the reliability of the EEO-1 data. 

To do so, we interviewed EEOC officials regarding how the data are 

collected and verified as well as to identify potential data limitations. 

EEOC has conducted a series of data reliability analyses for EEO-1 data to 

verify the consistency of the data over time. For example, EEOC reviewed 

the 2003 EEO-1 data for its report on diversity in the financial services 

industry.5

 As part of this review, EEOC deleted 81 of the 13,000 

establishments because the data for the deleted establishments were not 

consistent year to year. The EEOC staff do not verify the EEO-1 data, 

which are self-reported by firms, but they do review the trends of the data

submitted. For example, EEOC staff look for major fluctuations in job 

classifications within an industry. On the basis of this analysis, we 

concluded that the EEO-1 data are sufficiently reliable for our purposes. 

To address objective two, we interviewed a range of financial services 

firms, including commercial banks and securities firms. We also 

interviewed representatives from a large accounting firm to discuss 

workforce diversity in the accounting industry. We chose these firms for a 

variety of reasons including whether they have ever received public 

recognition of their diversity programs or on the basis of 

recommendations from industry officials. We also interviewed 

representatives from industry trade organizations such as the American 

Bankers Association, the Securities Industry Association, the Independent

Insurance Agents and Brokers of America, the American Institute of 

Certified Public Accountants, and Catalyst, which is a private research 

firm. We reviewed the trade organizations’ available studies and reports to 

document the state of diversity within the different sectors of the financial 

services industry. In addition, we reviewed publicly available data on 

firms’ programs by searching their Web sites. We also interviewed 

representatives of federal agencies such as the Bureau of Labor Statistics 

of the Department of Labor, the Minority Business Development Agency of 

the Department of Commerce, the Small Business Administration, and 

federal bank regulators. Additionally, we collected and analyzed 

demographic data on enrollment in accredited Masters of Business 

 4

EEOC implemented the NAICS in 2002.

5

Equal Employment Opportunity Commission, Diversity in the Finance Industry (April 

2006). 

Page 32 GAO-06-617 Financial Services Industry
Appendix I: Objectives, Scope, and 

Methodology 

Administration (MBA) programs from Association to Advance Collegiate 

Schools of Business and MBA graduation data from the Graduate 

Management Admissions Council®

. 

To address objective three, we reviewed 20 available studies and reports 

from federal agencies, such as the Small Business Administration and the 

Minority Business Development Agency, and academic studies on the 

ability of minority- and women-owned businesses to access credit. We also 

interviewed officials from banks, investment firms and private 

equity/venture capital firms to discuss their initiatives to provide capital to

minority- and women-owned businesses.6

 Moreover, we interviewed 

officials from organizations that represent minority- and women-owned 

businesses such as the U.S. Hispanic Chamber of Commerce, the Pan 

Asian American Chamber of Commerce, National Black Chamber of 

Commerce, and the National Association of Women Business Owners. In 

addition, we interviewed officials from organizations that examine access 

to capital issues, such as the Milken Institute and the Kauffman 

Foundation.

We conducted our work from July 2005 to May 2006 in Washington, D.C., 

and New York City and in accordance with generally accepted government 

auditing standards. 

 6

Banks included national, community, minority-owned banks, and one women-owned bank.

We also selected the firms based on our interviews with organizations that represent

minority- and women-owned businesses. We were seeking firms that may have initiatives to 

assist minority- and women-owned businesses in obtaining capital. 

Page 33 GAO-06-617 Financial Services Industry
A

Diver

ppendix II: Overall Statistics on Workforce 

sity in the Financial Services Industry

Page 34 GAO-06-617

Appendix II: Overall Statistics on Workforce 

Diversity in the Financial Services Industry 

This appendix provides Employer Information Report (EEO-1) data on the 

number of employees within the financial services industry by position 

(see fig. 6) and more specific breakouts of the various racial/ethnic groups 

by position (see fig. 7). 

Figure 6: EEO-1 Data (Number of Employees) on Workforce Diversity in the Financial Services Industry by Position,

Racial/Ethnic Group, and Gender (2004)

Office and Other

clerical workers

Sales

workers

Officials and Professionals Technicians

managers

Total

Minority women

White women

Minority men

White men

Source: GAO analysis of EEOC data.

0

300

600

900

1,200

1,500

Number of employees (in thousands)

830

1,210

243

509

233184

35 42 18 20 16 19 21 13 10 7

285

326

69 101

57 49 78 49

155

590

91

324

Financial Services Industry
Appendix II: Overall Statistics on Workforce 

Diversity in the Financial Services Industry

Figure 7: EEO-1 Data on Workforce Diversity in the Financial Services Industry by Position and Racial/Ethnic Group (2004) 

0

5

10

15

20

Office and Other

clerical workers

Sales

workers

Officials and Professionals Technicians

managers

Total

All minorities combined

White

American Indian

Asian

Hispanic

African-American

Percentage

27%

73%

15%

85%

22%

78%

36%

64%

34%

66%

24%

76%

24%

76%

Percentage minority employees

Source: GAO analysis of EEOC data.

5.3

10.1

19.9

.5

6.0

7.7

9.7

.4

8.8

5.2

9.8

.4

7.9

4.6

8.9

.3

4.5 4.0

6.6

.3

6.1

7.1

13.3

.4

4.3

12.3

16.5

.6

Note: Percentages may not always add exactly due to rounding. 

Page 35 GAO-06-617 Financial Services Industry
Appendix III: D

A

iversity in Key Positions in the

ccounting Industry

Page 36 GAO-06-617

Appendix III: Diversity in Key Positions in the 

Accounting Industry 

This appendix discusses workforce diversity of management-level 

positions in the accounting industry for 2004 as depicted by Employer 

Information Report (EEO-1) data. Additionally, it describes the findings of 

a report by the American Institute of Certified Public Accountants 

(AICPA) that assessed diversity within the accounting industry in a broad

range of positions. Finally, the appendix summarizes efforts by AICPA and 

a large accounting firm to increase diversity in key positions. 

Minorities Account for 14 

Percent of ManagementLevel Positions in the 

Accounting Industry 

According to the 2004 EEO-1 data, minorities held 13.5 percent (5.9 

percent for minority women and 7.7 percent for minority men) of all 

“officials and managers” positions, white women held 32.4 percent while 

white men held 54.1 percent of all official and manager positions in the 

accounting industry (see fig. 8).1

 Contrary to the financial services sector 

where diversity among firms generally did not vary by firm size, EEO-1 

data also show that larger accounting firms are in general more diverse 

than smaller firms. For example, minorities accounted for 17.8 percent of 

all officials and managers in accounting firms with 1,000 or more 

employees. For firms with 100 to 249 employees, minority representation 

for officials and managers accounted for 10.1 percent. 

 1

Percentages may not always add exactly due to rounding. 

Financial Services Industry
Appendix III: Diversity in Key Positions in the

Accounting Industry

Figure 8: EEO-1 Data on Workforce Diversity in the Accounting Industry at the 

Management Level by Firm Size, Gender, and Racial/Ethnic Group, and Gender 

(2004) 

Minority women

Minority men

White women

White men

Source: GAO analysis of EEOC dat.a.

0

10

20

30

40

50

60

Percentage

7.7

32.4

54.1

5.9

10.3

31.5

50.7

7.5 7.5

32.3

54.3

5.8 4.5

33.5

56.4

5.6

More

than 1,000

employees

250-999

employees

100-249

employees

All firms

with 100+

employees

Note: Percentages may not always add to 100 due to rounding. 

Within the minority category in the accounting industry, EEO-1 2004 data

show that Asians held 7.3 percent of all management-level positions, 

which is more than the representation of African-Americans (3.0 percent) 

and Hispanics (3.0 percent) combined (see fig. 9). 

Page 37 GAO-06-617 Financial Services Industry
Appendix III: Diversity in Key Positions in the

Accounting Industry

Figure 9: EEO-1 Data on Workforce Diversity in the Accounting Industry at the 

Management Level by Firm Size and Racial/Ethnic Group (2004) 

7.3

3.0 3.0

.2

11.0

3.7

2.9

.2

7.3

2.6

3.3

.2

3.8

3.4

2.6

.2

Percentage

14%

86%

10%

90%

13%

87%

18%

82%

Percentage minority employees

Source: GAO analysis of EEOC data.

All minorities combined

White

American Indian

Asian

Hispanic

African-American

More

than 1,000

employees

250-999

employees

100-249

employees

All firms

with 100+

employees

0

2

4

6

8

10

12

Note: Percentages may not always add exactly due to rounding. 

AICPA Study Identified a 

Lack of Diversity in the 

Accounting Industry 

AICPA’s 2005 demographic study showed that, in 2004, minorities 

represented 10 percent of all professional staff, 8 percent of all certified 

public accountants (CPA), and 5 percent of all partners/owners employed 

by CPA firms. 2 Correspondingly, the representation of whites among 

 2

AICPA, The Supply of Accounting Graduates And the Demand for Public Accounting 

Recruits – 2005 For Academic Year 2003-2004 (2005). AICPA surveyed 5,821 certified 

public accounting firms, and 1,423 responded. 

Page 38 GAO-06-617 Financial Services Industry
Appendix III: Diversity in Key Positions in the

Accounting Industry

professional staff, CPAs, and the partner/owner level at accounting firms 

were all at 89 percent or above (see table 2). 3 In addition, consistent to the 

2004 EEO-1 data for the accounting industry, the AICPA study found that 

the largest CPA firms were, in general, the most ethnically and racially

diverse (see table 3).4

Table 2: Workforce Representation at the Professional, CPA and Partner/Owner 

Levels by Racial/Ethnic Group (2005) 

Gender and racial/ethnic group

Professional 

staff CPA Partner/owner

Minority 10% 8% 5%

African-American 2 1 1

Hispanic 3 3 2

Asian/Pacific Islander 5 4 2

American Indian a a a

White 89 92 95

Other 1% a a

Source: GAO analysis of AICPA data. 

Note: Percentages may not always add to 100 due to rounding. AICPA data are from The Supply of 

Accounting Graduates and the Demand for Public Accounting Recruits (2005). 

a

Less than 1 percent. 

 3

AICPA’s study did not report representation levels of whites and minorities by gender. 

4

The largest firms are defined as those with more than 200 members. 

Page 39 GAO-06-617 Financial Services Industry
Appendix III: Diversity in Key Positions in the

Accounting Industry

Table 3: Workforce Representation at the Professional Level by Racial/Ethnic Group

and Firm Size

Gender and 

racial/ethnic 

group 

More than

200 

employees 

50-200 

employees

10-49

employees 

Fewer

than 10 

employees

All CPA 

firms 

Minority 18% 8% 8% 10% 10%

• AfricanAmerican 3 2 2 2 2

• Hispanic 4 2 3 4 3

• Asian/Pacific 

Islander 11 4 3 4 5

• American 

Indian a a a a a

• Other a

1 a1 1

White 82 91 92 89 89

Other a1% a1% 1%

Source: GAO analysis of AICPA data. 

Note: Percentages may not always add to 100 due to rounding. AICPA data is from The Supply of 

Accounting Graduates and the Demand for Public Accounting Recruits (2005). 

a

Less than 1 percent. 

According to officials from AICPA and a large accounting firm we spoke 

with, one reason for the lack of diversity in key positions in the industry is

that relatively few racial/ethnic minorities take the CPA exam and thus 

relatively few minorities are CPAs. According to the 2004 congressional 

testimony of an accounting professor, passing the CPA exam is critical for 

achieving senior management-level positions in the accounting industry.5

Efforts to Enhance 

Accounting Industry 

Diversity 

According to officials we spoke with from AICPA and an accounting firm, 

similar to the financial services industry, the accounting industry had also 

initiated programs to promote the diversity of its workforce. An official 

from the large accounting firm we spoke with told us that his firm’s top 

management is committed to workforce diversity and has implemented a

minority leadership development program, which ensures that minorities 

and women become eligible for and are recommended for progressively 

 5

Diversity in the Financial Services Industry and Access to Capital for Minority Owned 

Businesses: Challenges and Opportunities, Hearing before the Subcommittee On 

Oversight and Investigations of the House Committee on Financial Services, 108th Cong

(2004). 

Page 40 GAO-06-617 Financial Services Industry
Appendix III: Diversity in Key Positions in the

Accounting Industry

more senior positions. As part of the commitment to workforce diversity, 

the firm also has a mentoring program, which pairs current partners with 

senior management-level minority and women staff to help them achieve

partnership status. In addition, the firm also requires middle- and highlevel managers to undergo diversity training to encourage an open 

dialogue around racial-ethnic and gender issues. An AICPA official said the 

organization formed a minority initiatives committee to promote 

workforce diversity with a number of initiatives to increase the number of 

minority accounting degree holders, such as scholarships for minority 

accounting students and accounting faculty development programs. 

AICPA also formed partnerships with several national minority accounting 

organizations such as the National Association of Black Accountants and 

the Association of Latino Professionals in Finance and Accounting to 

develop new programs to foster diversity within the workplace and the 

community. 

Page 41 GAO-06-617 Financial Services Industry
Appendix IV: 

A

GAO Contact and Staff 

cknowledgments 

Page 42 GAO-06-617

Appendix IV: GAO Contact and Staff 

Acknowledgments 

Orice M. Williams (202) 512-8678 

In addition to the individual named above, Wesley M. Phillips, Assistant 

Director; Emily Chalmers; William Chatlos; Kimberly Cutright; Simin Ho; 

Marc Molino; Robert Pollard; LaSonya Roberts; and Bethany Widick made 

key contributions to this report. 

GAO Contact 

Staff 

Acknowledgments 

(250257) Financial Services Industry
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