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

Summary: The U.S. workforce force has become increasingly diverse and is projected to become even more diverse in the coming decades. As a result, many private sector organizations have recognized the importance of recruiting and retaining minorities and women for key positions to improve their business or organizational performance and help them better meet the needs of a diverse customer base. The financial services industry is a major source of employment in the United States and affects the economic well-being of its customers. However, questions remain about diversity in the financial services industry, which provides services that help families build wealth and are essential to economic growth. GAO was asked to analyze diversity trends in the financial services industry, particularly in management positions. This report examines (1) trends in management-level diversity in the financial services industry from 2007 through 2015, (2) trends in diversity among potential talent pools, and (3) challenges financial services firms identified in trying to increase workforce diversity and practices firms used to address them. GAO analyzed data from the Equal Employment Opportunity Commission (EEOC) and the Department of Education. The most recent available data were from 2015. GAO also reviewed studies on workforce diversity and interviewed representatives from financial services firms and organizations that advocate for the financial services industry, women, or minorities. EEOC provided technical comments on a draft of this report that GAO incorporated as appropriate. Overall representation of minorities in first-, mid-, and senior-level management positions in the financial services industry increased from about 17 percent to 21 percent from 2007 through 2015. However, as shown in the figure below representation varied by race/ethnicity group and management level. Specifically, representation of African-Americans at various management levels decreased while representation of other minorities increased during this period. Overall representation of women was generally unchanged during this period. Representation of women among first- and mid-level managers remained around 48 percent and senior-level managers remained about 29 percent from 2007 through 2015. Potential employees for the financial services industry, including those that could become managers, come from external and internal pools. For example, the external pool includes those with undergraduate or graduate degrees, such as a Master of Business Administration. In 2015, about 33 percent of the external pool included minorities and around 60 percent were women. The internal talent pool for potential managers in financial services includes those already in professional positions. In 2015, nearly 28 percent of professional positions in financial services were held by minorities and just over 51 percent were held by women. Research, financial services firm representatives, and financial industry stakeholders described challenges to recruiting and retaining members of racial/ethnic minority groups and women and practices that could help address these challenges, including recruiting from a wider variety of schools. Firm representatives said that it is important for firms to assess firm-level data on diversity and inclusiveness. However, firm representatives and other stakeholders differed in their views on whether firm-level diversity data should be made public. For example, one stakeholder stated that sharing diversity data publicly would create incentives for improvement. However, a firm representative said that for firms that are not diverse, making employee diversity data public could make improvement of workforce diversity more difficult for them.