Will backlash over Scharf's remarks hinder Wells Fargo’s diversity push?
Wells Fargo has taken a series of steps to increase workforce diversity, but blowback over CEO Charles Scharf’s comment that there is “a very limited pool of Black talent” for key jobs has raised questions about whether those initiatives have been dealt a serious blow.
Louis Montgomery Jr., head of the human resources and diversity officers practice at Korn Ferry, said the fallout could be limited because Wells Fargo has already established several programs to promote inclusion, including one tying senior leaders’ compensation to their progress in increasing diversity within their departments.
“It won’t over the long haul undermine their efforts, but I do think it will cause them to focus their efforts a bit more differently than perhaps in the past so they can get access, because the talent is there,” he said. “For whatever reason, they may not have been looking in all the right places.”
Jodie Grove, head of belonging and inclusion at Meet & Engage, a recruitment technology company in London, took a more negative view. She said job candidates might think Scharf’s comments “reflect a level of ignorance” about Black people and other underrepresented groups.
“Existing Black employees might also start to question whether they are valued within the organization,” Grove said in an email. “All of this could make it harder for the company to hit its diversity targets.”
More than ever, banks are devoting attention and resources to diversity — partly because the coronavirus pandemic’s toll has exposed racial and economic inequities and partly because of the civil unrest that followed the killings of Black Americans such as George Floyd and Breonna Taylor. Lenders are committing vast sums of money to address racism — Bank of America, Citigroup and PNC Financial Services Group in Pittsburgh each committed $1 billion, while Huntington Bancshares in Columbus, Ohio, pledged $20 billion over five years — and hiring chief diversity officers or elevating such roles to the C-suite.
Many have pledged to meet certain hiring and promotion targets. In its first Corporate Social Responsibility Report, which was released this month, Truist Financial in Charlotte, North Carolina, disclosed plans to increase senior leadership diversity from 11.9% to 15% over three years. Truist was formed in December from the merger of BB&T in Winston-Salem, North Carolina, and SunTrust Banks in Atlanta.
Scharf, who is nearing the end of his first year as top executive of Wells Fargo, was caught in a firestorm Wednesday after a Reuters report a day earlier that he told employees in a June 18 memo about diversity initiatives that “the unfortunate reality is that there is a very limited pool of Black talent to recruit from” for people with experience in fixing the “unique set” of regulatory and control challenges facing Wells Fargo. Regulators cracked down on the San Francisco company after its fake-accounts and other scandals, and the Federal Reserve has imposed a cap on its asset growth until Wells Fargo resolves its problems.
Scharf made similar remarks during a virtual meeting with employees later in the summer, the Reuters story said.
The CEO quickly walked back those comments in a lengthy statement to employees Wednesday in which he apologized “for making an insensitive comment reflecting [his] own unconscious bias” and said the industry has “not done enough to improve diversity, especially at senior leadership levels.”
He also highlighted what Wells Fargo is doing to hire and promote women and minorities, including a the launch of a “returnship” program for professionals who want to resume full-time banking careers; the addition of two Black executives to the operating committee; the building of relationships with historically Black colleges and universities and Hispanic-serving institutions; and the development of anti-racism training.
“There is no question Wells Fargo has to make meaningful progress to increase diverse representation,” Scharf wrote in the statement. “As I said in June, I have committed that this time must be different.”
Wells Fargohas pledged to double Black leadership over the next five years. In the June memo, Scharf said 6% of senior managers are Black while 21% are racially or ethnically diverse.
Wells Fargo introduced the returnship program, called Glide Relaunch, in early September. The program seeks professionals with at least seven years of work experience who have taken a voluntary career break of at least two years and now want to come back to banking full-time.
It does not explicitly call for diverse candidates, but the structure and qualifications of the program are designed to attract a diverse pool of candidates, according to Indhira Arrington, head of targeted sourcing at Wells Fargo. The positions begin as paid internships and can convert to full-time jobs.
In 12 days, it attracted more than 800 applicants, mostly women, Arrington said. The program, which will initially include about 40 people, was one of several that Scharf announced in a March memo to employees.
“What I can tell you from the application stats is that the pool is quite diverse, both from a gender perspective and from an ethnicity perspective,” Arrington said in an interview last week. “We will look for the most qualified candidates first that meet the requirements, but we know the diversity is going to come.”
Set to begin in November, the 10-week program will culminate in job offers across a variety of business lines, and each position will pay a base salary of at least $100,000 annually, with potential for bonuses.
Arrington said Wells Fargo is putting more money toward diversity efforts, not pulling back, during a crucial moment in the nation’s history when discussions about race and equity are rising to new levels.
“Diversity leads to innovation, which leads to market growth, which leads to business success,” Arrington said. “So for me the biggest return on investment in this program is bringing more diversity to Wells Fargo … so that we can harness the value of that diversity to drive our business growth.”
She expressed confidence that the bank is moving in the right direction.
“At the end of the day, what gets measured gets done and now diversity is embedded into everything we do, including who owns accountability for it. And that starts with Charlie and the business,” she said.