Despite paying millions of dollars to settle discrimination suits, Wall Street still doesn't seem to be getting it right when it comes to who it hires. How banks compensate is also under renewed scrutiny.
A human resources official at one investment bank (who has asked to remain anonymous) says diversity is not that big a push for some employers. The fact is, their customer base is not that diverse. If it were, investment banks would be falling all over themselves to hire more diverse candidates.
"It's not a focus, until they need it for some reason, like you're sending your deal team to a firm where 50% of senior management is African-American," the HR official says. "If that were the case, the firm, and your all-white deal makers has no schmooze factor."
Rather than simply having quotas, an interesting diversity program might involve hiring people with genuinely different backgrounds. As it currently stands, firms are not so much hiring to diversify their work force as they are to avoid lawsuits or do business with the federal government. Such mandates often require that the companies with which the government does business have an affirmative action program.
Some banks are making genuine efforts to broaden their employee base to reflect the society in which they operate. There's still a way to go, however. "Do we have anyone who grew up in a trailer and ate dirt? Do we have anyone whose dad was on the wrong side of the tracks? We have diversity where we tick off boxes and can run a report," the HR official says.
Pay and Promotion Not Objective
Alan Johnson, a compensation consultant with Johnson Associates in New York, says Wall Street firms are regularly sued. Yet they always seem surprised when it happens, particularly when it involves unfairness with regard to salaries and the promotion process.
"The problem is that most decisions are made on a discretionary basis," he says. "There are no salary grades, no matrix, no schedule. For example, an employee at a major investment bank for 15 years can make anything from $300,000 to $5 million. If the employee is a woman or a minority and is paid on the low end of that scale, they can claim they would have been paid more had they been a white male."
Johnson recommends firms should always involve a subjective, trusted voice in the compensation process, someone who could attest to the fact that a pay package is fair, given the employee's experience. Johnson believes employees claiming gender discrimination would have a less defensible position if this quasi-employee-advocate were involved from the beginning. But he says firms don't take his advice when he suggests that.
"They believe if they pay someone fairly, it will all work out," Johnson says. "I don't agree. It's not that they're trying to be unfair, it's that the process is flawed. There's simply too much discretion."
Diversity may have been, and for some still is, an exercise in box-ticking until recently, but it's moving beyond that into a genuine effort to include different groups in the previously white, male world of finance. Making sure they're being completely fair on pay is the hurdle that banks still have to jump. Until they do, the lawsuits will likely continue.