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Wall Street is still very white, male at the top

Even though Wall Street investment banks have made diversity a top priority for the past decade, it may take several more years before women and minorities gain a foothold in the ranks of senior management.
/ Source: Reuters

Even though Wall Street investment banks have made diversity a top priority for the past decade, it may take several more years before women and minorities gain a foothold in the ranks of senior management.

That forecast comes from industry experts, investment bank diversity chiefs and trends in hiring data.

Minorities and women continue to be squeezed in Wall Street’s promotion pipeline when it comes to attaining senior positions — those at the managing director level and above that reaped multimillion-dollar bonuses this year.

“The numbers indicate the squeeze is real,” said Subha Barry, head of diversity at Merrill Lynch & Co.

On an upbeat note, Barry said she would be surprised if Merrill Lynch’s diversity in the middle to senior management ranks doesn’t mirror in five years the composition of the company’s board of directors. Its board includes several women and minorities, including Chairman Stan O’Neal, who is black.

In the past four years, Merrill Lynch’s entry-level hires for diversity “are 100 percent better,” she said.

“The top and the bottom have to meet. The middle is where the work has to be done,” Barry said.

For nearly a dozen years, Barron Harvey has watched Wall Street put its best foot forward mentoring, recruiting and hiring black students at Howard University in Washington D.C.

Harvey has a front row seat as the dean of Howard University’s business school. While there’s plenty more to do, he said Wall Street companies have done a good job of increasing awareness among undergraduate and graduate students about careers in investment banking.

“Let’s face it, banking is not a career that’s promoted in high school or in the community,” Harvey said. “You get exposure through someone who has reached out to you in high school or during your collegiate career.”

Wall Street companies say they put considerable effort into building diversity within their ranks. “Our commitment to diversity is unparalleled,” No. 2 investment bank Morgan Stanley  says on its Web site.

Not to be outdone, Goldman Sachs Group Inc. , the world’s largest investment bank, says its work force represents 150 nationalities and speaks 84 different languages. “...At Goldman Sachs, diversity is a business imperative.”

From 1993 through 2004, overall diversity at the management level in the financial services industry changed only slightly, the U.S. Government Accountability Office said in a report this year. African-Americans, for example, only increased their representation in management a percentage point to 6.6 percent. White females were at a little more than one-third.

In 2004, the share of management positions held by white women, for example, varied from a high of 41 percent in the insurance sector to a low of 27 percent among securities firms, the GAO said. Minorities held 15 percent of management-level positions in the brokerage industry, compared to 18 percent at commercial banks, the GAO said.

“We’re starting to see a critical mass coming through the pipeline,” Harvey said, referring to Wall Street in general. ”But it will take time for the pipeline to show impact at the managing director level.”

A 2005 diversity survey commissioned by the Securities Industry Association showed that women accounted for 44 percent of the industry’s work force, up from 37 percent in 2003. Women account for 46.4 percent of the total U.S. civilian work force, according to the U.S. Labor Department.

“The fact that the percentage of white men is decreasing and the representation of women of all races is increasing is an optimistic sign that the industry is moving toward parity with the general work force,” the SIA said.

Still, Adam Klein, an attorney at Outten & Golden LLP in New York, said there are several reasons why minorities and women may not see investment banking as a good fit. For one, he said they may not get paid the same as their white male counterparts for doing the same job.

Klein’s firm represented former Morgan Stanley bond trader Allison Schieffelin in a sex discrimination lawsuit against the securities firm that resulted in a $54 million settlement with the Equal Employment Opportunity Commission in 2004.

“These diversity efforts don’t say anything about compensation,” Klein said. “That’s the bottom line issue.”

Klein also said informal networking, such as playing golf and strip bar outings — also prevent equal treatment because minorities and women may feel uncomfortable in those settings.

“There’s no way to monitor these because they operate outside the formal constraints of a company’s diversity program,” he said.

Others cite a lack of flexibility.

“They don’t want fewer hours, but control over what they do,” Sharon Hadary, executive director of the Center for Women’s Business Research, said of women’s tendency to leave corporate careers for entrepreneurial ventures.

“The second reason is that they didn’t get an opportunity to influence the strategic direction of the organization, that no one listened to them,” Hadary said.