[House Hearing, 116 Congress]
[From the U.S. Government Publishing Office]





 
                   AN OVERVIEW OF DIVERSITY TRENDS IN
                    THE FINANCIAL SERVICES INDUSTRY

=======================================================================

                                HEARING

                               BEFORE THE

                       SUBCOMMITTEE ON DIVERSITY

                             AND INCLUSION

                                 OF THE

                    COMMITTEE ON FINANCIAL SERVICES

                     U.S. HOUSE OF REPRESENTATIVES

                     ONE HUNDRED SIXTEENTH CONGRESS

                             FIRST SESSION

                               __________

                           FEBRUARY 27, 2019

                               __________

       Printed for the use of the Committee on Financial Services

                            Serial No. 116-4
                            
                            
                            
                            
 [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]                  
 
 
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                 U.S. GOVERNMENT PUBLISHING OFFICE
                    
35-693 PDF               WASHINGTON : 2019      
 
                            

                 HOUSE COMMITTEE ON FINANCIAL SERVICES

                 MAXINE WATERS, California, Chairwoman

CAROLYN B. MALONEY, New York         PATRICK McHENRY, North Carolina, 
NYDIA M. VELAZQUEZ, New York             Ranking Member
BRAD SHERMAN, California             PETER T. KING, New York
GREGORY W. MEEKS, New York           FRANK D. LUCAS, Oklahoma
WM. LACY CLAY, Missouri              BILL POSEY, Florida
DAVID SCOTT, Georgia                 BLAINE LUETKEMEYER, Missouri
AL GREEN, Texas                      BILL HUIZENGA, Michigan
EMANUEL CLEAVER, Missouri            SEAN P. DUFFY, Wisconsin
ED PERLMUTTER, Colorado              STEVE STIVERS, Ohio
JIM A. HIMES, Connecticut            ANN WAGNER, Missouri
BILL FOSTER, Illinois                ANDY BARR, Kentucky
JOYCE BEATTY, Ohio                   SCOTT TIPTON, Colorado
DENNY HECK, Washington               ROGER WILLIAMS, Texas
JUAN VARGAS, California              FRENCH HILL, Arkansas
JOSH GOTTHEIMER, New Jersey          TOM EMMER, Minnesota
VICENTE GONZALEZ, Texas              LEE M. ZELDIN, New York
AL LAWSON, Florida                   BARRY LOUDERMILK, Georgia
MICHAEL SAN NICOLAS, Guam            ALEXANDER X. MOONEY, West Virginia
RASHIDA TLAIB, Michigan              WARREN DAVIDSON, Ohio
KATIE PORTER, California             TED BUDD, North Carolina
CINDY AXNE, Iowa                     DAVID KUSTOFF, Tennessee
SEAN CASTEN, Illinois                TREY HOLLINGSWORTH, Indiana
AYANNA PRESSLEY, Massachusetts       ANTHONY GONZALEZ, Ohio
BEN McADAMS, Utah                    JOHN ROSE, Tennessee
ALEXANDRIA OCASIO-CORTEZ, New York   BRYAN STEIL, Wisconsin
JENNIFER WEXTON, Virginia            LANCE GOODEN, Texas
STEPHEN F. LYNCH, Massachusetts      DENVER RIGGLEMAN, Virginia
TULSI GABBARD, Hawaii
ALMA ADAMS, North Carolina
MADELEINE DEAN, Pennsylvania
JESUS ``CHUY'' GARCIA, Illinois
SYLVIA GARCIA, Texas
DEAN PHILLIPS, Minnesota

                   Charla Ouertatani, Staff Director
                Subcommittee on Diversity and Inclusion

                     JOYCE BEATTY, Ohio, Chairwoman

WM. LACY CLAY, Missouri              ANN WAGNER, Missouri, Ranking 
AL GREEN, Texas                          Member
JOSH GOTTHEIMER, New Jersey          FRANK D. LUCAS, Oklahoma
VICENTE GONZALEZ, Texas              ALEXANDER X. MOONEY, West Virginia
AL LAWSON, Florida                   TED BUDD, North Carolina
AYANNA PRESSLEY, Massachusetts       DAVID KUSTOFF, Tennessee
TULSI GABBARD, Hawaii                TREY HOLLINGSWORTH, Indiana
ALMA ADAMS, North Carolina           ANTHONY GONZALEZ, Ohio, Vice 
MADELEINE DEAN, Pennsylvania             Ranking Member
SYLVIA GARCIA, Texas                 BRYAN STEIL, Wisconsin
DEAN PHILLIPS, Minnesota             LANCE GOODEN, Texas


                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on:
    February 27, 2019............................................     1
Appendix:
    February 27, 2019............................................    25

                               WITNESSES
                      Wednesday, February 27, 2019

Garcia-Diaz, Daniel, Director, Financial Markets and Community 
  Investment, U.S. Government Accountability Office (GAO)........     5

                                APPENDIX

Prepared statements:
    Garcia-Diaz, Daniel..........................................    26

              Additional Material Submitted for the Record

Budd, Hon. Ted:
    Electronic Transactions Association White Paper entitled, 
      ``How FinTech is Addressing the Financial Needs of the 
      Underserved,'' dated January 2019..........................    47


                   AN OVERVIEW OF DIVERSITY TRENDS IN
                    THE FINANCIAL SERVICES INDUSTRY

                              ----------                              


                      Wednesday, February 27, 2019

             U.S. House of Representatives,
           Subcommittee on Diversity and Inclusion,
                           Committee on Financial Services,
                                                   Washington, D.C.
    The subcommittee met, pursuant to notice, at 2:05 p.m., in 
room 2128, Rayburn House Office Building, Hon. Joyce Beatty 
[chairwoman of the subcommittee] presiding.
    Members present: Representatives Beatty, Clay, Green, 
Gottheimer, Gonzalez of Texas, Lawson, Dean, Garcia, Phillips; 
Wagner, Mooney, Budd, Hollingsworth, Gonzalez of Ohio, Steil, 
and Gooden.
    Ex officio present: Representatives Waters and McHenry.
    Chairwoman Beatty. The Subcommittee on Diversity and 
Inclusion will come to order. Today's hearing is entitled, ``An 
Overview of Diversity Trends in the Financial Services 
Industry.''
    Without objection, the Chair is authorized to declare a 
recess of the committee at any time. Also, without objection, 
members of the full Financial Services Committee who are not 
members of this subcommittee are authorized to participate in 
today's hearing.
    The subcommittee is meeting today pursuant to the notice to 
hear testimony on an overview of diversity trends in the 
financial services industry. I will now recognize myself for 5 
minutes to give an opening statement.
    To the Members, I would also like to advise you that votes 
may be called around 2:20 or 2:30. We will proceed with opening 
statements from myself, from Ranking Member Wagner, and 5 
minutes to our witness, if time allows, before recessing for 
votes.
    Thank you for joining me today for this first historic 
hearing of the newly established Subcommittee on Diversity and 
Inclusion. I would like to take time to thank Ranking Member 
Ann Wagner and the members of this committee for serving on the 
Subcommittee for Diversity and Inclusion, which I am proud to 
Chair.
    Diversity and inclusion issues are important to me. Before 
I came to Congress, I worked directly with government agencies, 
nonprofits, and major corporations, including financial 
institutions, on how to create more diverse workplaces. As 
such, I understand the challenges that both industry and 
government face in overcoming the obstacles that can prevent 
the full inclusion of diverse populations. I am honored to 
bring my experience on this issue to the committee.
    Under the leadership of Chairwoman Waters, the Financial 
Services Committee created this subcommittee to 
institutionalize the consideration of diversity and inclusion 
issues, create a forum for discussing diversity data and 
trends, raise awareness, and review and assess how the 
financial services industry maintains and grows their 
inclusiveness of people of color, women, urban and rural 
persons, persons of disability, LGBTQ, millennials, Native 
Americans, and Active Duty servicemen and our Nation's 
veterans.
    It is no secret that the lack of diversity and inclusion in 
our society leads to persistent income inequities and also 
growing the wealth gap, which we are prepared to explore.
    Now, let us look at some statistics. According to the U.S. 
Census Bureau, within the next 25 years more than half of all 
Americans are expected to belong to a minority group.
    Additionally, the Equal Employment Opportunity Commission, 
commonly known as the EEOC, reported in 2013 that while women 
represent 53.2 percent of the professionals, they make up only 
about 38.6 percent of employees at the management level.
    The EEOC also reported in 2013 that although African 
Americans and Hispanics collectively represent almost half of 
the service workers and laborers industries, they are 
disproportionately underrepresented in the professional and 
management ranks.
    A larger, more diverse talent pool should lead to a more 
diverse workforce, and yet, despite increased awareness of the 
business importance of diversity in the workplace and elsewhere 
in society, troubling disparities persist that affect 
recruitment, retention, and promotion.
    These disparities are very pronounced in the financial 
services industry in particular, as today's hearing and our 
witness' testimony will demonstrate. For instance, according to 
the U.S. Government Accountability Office (GAO), from 2007 to 
2015, the percentage of African-American managers in the 
financial services industry decreased from an already low 6.5 
percent to 6.3 percent and remained largely unchanged for women 
at 45 percent.
    As I look around this room, we are representative of 
different cultures, different regions of the country, and 
different views. As the Noble Laureate Maya Angelou has 
appropriately famously quoted, and I paraphrase, in diversity 
there is beauty and there is strength. We should know that 
diversity makes for a rich tapestry, and we must understand 
that all threads of that tapestry are equal in value, no matter 
their color.
    During the course of this Congress, we will analyze 
diversity and inclusion trends and data, exercise oversight of 
what regulators and industries are doing in this space, 
highlight best practices, and consider legislation that may be 
needed to change the culture in government and industry, and 
move the needle in a positive direction on the issues of 
diversity and inclusion in our Nation.
    Numerous studies have proven empirically that diversity 
increases productivity and the bottom line. Yet, the data on 
diversity and inclusion efforts in our Nation's industries and 
government are not aligned. We need to find out why and we need 
to fix it now.
    I look forward to working with all of the members of this 
committee in a bipartisan manner and conducting this 
subcommittee with civility and respect for all members.
    Now, I would like to say, welcome to the Subcommittee on 
Diversity and Inclusion. I look forward to hearing the 
testimony of today's witness, Mr. Daniel Garcia-Diaz, who 
serves as Director in GAO's Financial Markets and Community 
Investment team, and is an expert in analyzing and assessing 
diversity and inclusion.
    The Chair now recognizes the ranking member of the 
subcommittee, the gentlewoman from Missouri, Mrs. Wagner, for 4 
minutes for an opening statement.
    Mrs. Wagner. Thank you so much, Madam Chairwoman. It is an 
honor to be with you this afternoon, holding the inaugural 
hearing of this new, very important subcommittee. I look 
forward to working with you and Chairwoman Waters as we examine 
how best to promote diversity and inclusion in the financial 
services industry.
    Women and minorities are growing their numbers and securing 
leadership positions on Main Street, Wall Street, and as 
elected officials. However, there is still much work to be done 
to ensure the financial industry, along with many other sectors 
of the U.S. economy, is reaping the benefits of our country's 
diversity.
    While we need more data and information, research shows 
that diversity and inclusion can bring both social and economic 
benefits to the workplace. A study by the Milken Institute 
found that diversity in the composition of organizational 
groups affects outcomes such as turnover and performance. 
Several studies have revealed a connection between greater 
diversity and enhanced financial returns. Further, corporate 
scandals are less common on boards where women and minorities 
are represented.
    This subcommittee's jurisdiction includes overseeing the 
effectiveness of the Offices of Minority and Women Inclusion, 
known as OMWIs, at Federal financial services agencies. Earlier 
this month, I contacted the eight regulatory agencies with 
Offices of Minority and Women Inclusion to further understand 
agency efforts to increase diversity and inclusion.
    Today, I do want to welcome Daniel Garcia-Diaz, who 
authored a November 2017 GAO report examining diversity in the 
financial services sector.
    We thank you, Daniel, for taking the time to share your 
results with us.
    The findings of the report show that industries' good 
intentions are not necessarily resulting in increased diversity 
across the sector. This is an issue across the American 
economy, from the technology industry to the media.
    While there is no question that companies are committed to 
providing opportunity for all employees, and there are many 
success stories, the report demonstrates that the overall level 
of diversity within the industry did not significantly improve 
from 2007 to 2015.
    After reading this report, it is clear that recruitment and 
retention are the primary challenges that companies face as 
they try to address diversity in their ranks. Talent among 
those with diverse backgrounds is equal, but we must do more to 
promote equality of opportunity.
    The financial services industry, led first by OMWIs, can 
find ways to better seek out and train promising diverse 
candidates at first-, mid-, and senior-level career stages. 
Opportunity starts early, as we have seen in STEM-related 
professions. It starts early with education and finding ways to 
attract high school students and undergraduate and graduate 
students to careers in the financial services sector.
    I so look forward to working with my friend, Chairwoman 
Beatty, on these twofold initiatives: ensuring that the 
financial services industry is benefiting from America's 
diversity; and ensuring that people from diverse backgrounds 
and all socioeconomic levels have the resources, access, and 
pathways to benefit from our robust financial services 
industry, an industry that has improved the quality of life for 
so many Americans.
    I thank you all for coming to this inaugural Diversity and 
Inclusion Subcommittee hearing.
    And I thank you, Director Garcia-Diaz, for your testimony 
this morning.
    I yield back.
    Chairwoman Beatty. Thank you.
    The Chair now recognizes the ranking member of the full 
Financial Services Committee, Mr. McHenry, for 1 minute.
    Mr. McHenry. Thank you, Madam Chairwoman, and thank you for 
your leadership.
    I also want to thank the ranking member of the 
subcommittee, Ann Wagner, who is the Full Committee vice 
ranking member as well, for her leadership and commitment to 
this important issue.
    I support Chairwoman Waters' decision to create this new 
subcommittee, and I continue to support her work on the issues 
facing diversity and inclusion in the financial services 
sector.
    Additionally, I want to commend Ranking Member Wagner for 
her diligence on this issue and leadership. Two weeks ago, the 
ranking member sent letters to all the Offices of Minority and 
Women Inclusion, better known as OMWIs, at the regulatory 
agencies to better understand their actions on diversity. The 
responses from these letters and the information gleaned from 
this hearing will help this subcommittee identify the 
appropriate role of Congress on a going-forward basis to 
facilitate greater diversity in the industry and at regulatory 
agencies.
    I look forward to the hearing, and I certainly appreciate 
all the work that the GAO does in a disciplined study at the 
direction of Congress.
    Chairwoman Beatty. The Chair now recognizes the chairwoman 
of the full Financial Services Committee, Chairwoman Waters, 
for 1 minute.
    Chairwoman Waters. Thank you very much, Madam Chairwoman.
    Today, we are convening for the first time the Subcommittee 
on Diversity and Inclusion, which will examine and resolve the 
systemic economic exclusion of women, people of color, persons 
with disabilities, LGBTQ-plus individuals, veterans, and other 
members of our society who have to fight for a seat at the 
table.
    I am pleased that the subcommittee is beginning with this 
hearing on an issue that has stymied the financial services 
industry: including women and minorities in management.
    Beginning in February of 2005, 14 years ago, the Financial 
Services Committee requested that the GAO review diversity 
trends in the financial services industry. In 2006, GAO looked 
at diversity from 1993 to 2004 and reported that the 
percentages of minorities in management rose from 11.1 percent 
to 15.5 percent, with the percentage of African Americans 
rising from 5.6 percent to 6.6 percent.
    GAO has since updated its report several times. In GAO's 
most recent report covering 2007 to 2015, minority 
representation increased from 17 percent to 21 percent. 
However, the percentage of African Americans in senior roles 
decreased from 6.5 to 6.3 percent, and all minorities continued 
to be underrepresented.
    For years, policymakers, diversity advocates, and diversity 
professionals in the financial services industry have sent the 
message that diversity and inclusion must be more than words. 
They require action and resolve. Unfortunately, the data shows 
that the financial services industry lacks both today.
    This subcommittee begins the process of shining light on 
these trends and begins its work to improve the industry so 
that our financial system works for everybody.
    And I am so pleased that Mrs. Beatty has taken the 
leadership on this Diversity Subcommittee. There is nobody, no 
one else who could do the job better than she can.
    I yield back the balance of my time.
    Chairwoman Beatty. Thank you.
    Today, we will welcome the testimony of Daniel Garcia-Diaz. 
Mr. Garcia-Diaz is Director of Financial Markets and Community 
Investment at the United States Government Accountability 
Office (GAO). He is also the author of the GAO report, ``Trends 
in Management Representation of Minorities and Women and 
Diversity Practices, 2007-2015.''
    The witness is reminded that his oral testimony will be 
limited to 5 minutes. And without objection, his written 
statement will be made a part of the record. The witness is 
reminded to turn on his microphone and abide by the three 
lights in front of him: green means go; yellow means wrap it 
up; and red means stop.
    Mr. Garcia, you are now recognized for 5 minutes to give an 
oral presentation of your testimony.

 STATEMENT OF DANIEL GARCIA-DIAZ, DIRECTOR, FINANCIAL MARKETS 
AND COMMUNITY INVESTMENT, U.S. GOVERNMENT ACCOUNTABILITY OFFICE 
                             (GAO)

    Mr. Garcia-Diaz. Chairwoman Beatty, Ranking Member Wagner, 
and members of the subcommittee, thank you so much for the 
opportunity to be here today to discuss GAO's work on trends in 
workforce diversity in the financial services industry. I am 
especially pleased to be participating in the first hearing of 
the newly established Subcommittee on Diversity and Inclusion.
    Over the years, GAO has worked with the Financial Services 
Committee to share information on the extent that minorities 
and women are making headway in the financial services 
industry, particularly at the management level.
    My statement today draws from our most recent report, 
issued in November 2017. Specifically, I will focus on trends 
in minority and women representation among managers in 
financial firms from 2007 through 2015, and practices these 
firms have identified to address challenges in increasing 
diversity.
    Unfortunately, the trends are clear: Management-level 
representation of minorities and women showed marginal to no 
increase from 2007 through 2015.
    The situation is more worrying when we look at 
representation at the senior level. Specifically, minority 
representation increased from about 11 percent to 12 percent in 
this period. In addition, African-American representation 
decreased not only in percentage terms, but also in absolute 
numbers.
    Among first- and mid-level managers, that is just right 
below the senior level, minority representation increased from 
19 to 22 percent in this period.
    When we look at women representation, we found that it 
remained unchanged at the senior level, at around 30 percent. 
However, women representation was much stronger among first- 
and mid-level managers, at almost 48 percent.
    We also looked at representation by different sectors 
within the financial services, and generally banks and lenders 
had greater representation of minorities than the other 
sectors, such as insurance and securities. In fact, the 
insurance sector lagged banks by almost 3.5 percentage points.
    Women representation in management tended to be the highest 
in the insurance sector. The security sector tended to have the 
lowest level of women representation.
    For today's hearing, my team examined EEOC data for 2016, 
the most recent available at this time, and we observed little 
or no change since 2015 across many of these measures for 
minorities. And we also noticed some growth in women 
representation among first- and mid-level managers.
    Many firms recognize that an inclusive workforce can help 
attract the best and the brightest and can contribute to 
innovation in products and services. But simple aspiration for 
achieving a diverse workforce is not enough. Diversity 
management requires intentional and strategic action that is 
sustained over the long haul.
    For this reason, we consulted with financial firms, 
industry groups, and others to understand the types of 
practices that they have identified to improve upon current 
trends. We consistently heard from experts that firms should 
engage in broad-based recruitment. In other words, firms need 
to cast their nets wider and not limit themselves to the same 
schools and the same academic disciplines.
    In addition, establishing mechanisms to hold managers 
accountable can help firms move towards their workforce 
diversity goals. As we have noted in our past work, leadership 
commitment to diversity is essential, but experts tell us that 
middle managers may not be as committed as leadership.
    Accountability measures to ensure that leaderships' and 
managers' efforts are aligned can be established in a variety 
of ways. For example, one firm representative stated that 
linking managers' compensation to diversity goals has been an 
effective practice for retaining women and minorities. 
Establishing such accountability measures could help ensure 
that leadership's vision is carried out.
    Finally, firms and stakeholders we met with agreed that 
data analysis to assess the diversity of their workforce and 
spotting potential bottlenecks and problems is a key part of 
effectively managing workforce diversity.
    Before I conclude, I would like to highlight for the 
subcommittee GAO's completed and ongoing work in this area. We 
have issued eight reports related to diversity in the financial 
sector. We also have completed a recent report on Board 
diversity at the Federal Home Loan Banks and are currently 
examining the diversity of these banks' workforce and business 
activities. Building on this wealth of experience, we look 
forward to assisting the subcommittee.
    This concludes my opening remarks. Thank you again for the 
opportunity to speak today, and I will be glad to answer any 
questions you have.
    [The prepared statement of Director Garcia-Diaz can be 
found on page 26 of the appendix.]
    Chairwoman Beatty. Thank you, Mr. Garcia-Diaz.
    I now recognize myself for 5 minutes for questions.
    Mr. Garcia-Diaz, I have a series of questions, but to get 
through my 5-minute time period, I am going to reference a 
study. The 2015 international management consultancy firm 
McKinsey & Company first published a report entitled, 
``Diversity Matters,'' which makes the business case for 
diversity. That report has since been updated, and the most 
recent version was published just in January of 2018, entitled, 
``Delivering Through Diversity.''
    The most recent report used a dataset of over 1,000 
companies in 12 different countries, using two measures of 
financial performance: earnings before interest and taxes to 
measure profitability and economic profit margin to measure 
value creation.
    This data was used in a combination of diversity and 
inclusion efforts of 17 companies from around the globe to 
study where diversity matters most and how leading companies 
have used it successfully.
    Are you familiar with this report?
    Mr. Garcia-Diaz. With the body of work that McKinsey has 
done, yes, and it seems to build on what we have seen in the 
past. But this particular report, no, I have not evaluated it.
    Chairwoman Beatty. So let me give you a little more data 
before I ask you to respond.
    The report found that companies in the 25 percent for 
executive-level gender diversity were 21 percent more likely to 
outperform on profitability and 27 percent more likely to have 
superior value creation.
    Additionally, the report found that companies in the top 25 
percent for executive-level ethnic and cultural diversity were 
33 percent more likely to have industry leading profitability.
    Conversely, the report found that the less diverse 
executive teams were 29 percent less likely to achieve above-
average profitability.
    In your report, there is a section on research on potential 
benefits of workforce diversity, and I believe it is on page 7. 
Can you briefly discuss your findings in that section and how 
they support the findings that I gave you in the McKinsey 
study?
    Mr. Garcia-Diaz. We scanned the literature for the 2017 
report and generally found studies that certainly support the 
idea that a more diverse culture at a firm can contribute to 
product innovation, idea generation in groups. It also can 
contribute to higher levels of satisfaction at work, which of 
course can be correlated with better performance.
    In terms of the association between diversity and financial 
performance, for the studies we looked at there have been 
attempts to make an association. Often, the challenge with 
those studies is the causation part. It may be correlated, but 
we don't know the direction of causality.
    But, again, generally there is a consistent story that is 
being conveyed through these studies that financial performance 
can be positively impacted by a diverse workforce. But of 
course that is an area where I would say that continued study 
and research would be needed to really pin these issues down.
    Chairwoman Beatty. Okay. Thank you.
    As you know, in our larger Committee on Financial Services, 
we deal a lot with banks and credit unions and securities and 
other activities, insurance and funds and trusts. In your 
report, you provided a breakdown of financial services 
industries in those same sectors.
    There was also some alarming data of decreasing numbers, 
and you can pick a minority group, whether it is women, whether 
it is African Americans, or whether it is Hispanics.
    Did the GAO explore some of these trends in the data and 
why they exist? Or can you tell me if there are specific 
diversity management practices that could help us address these 
discrepancies?
    Mr. Garcia-Diaz. Yes. The challenges with the data that we 
are working with from EEOC is it is hard to figure out what is 
going on behind the numbers. So we did consult with experts in 
the field and industry representatives and firms to get an idea 
of what is going on. And some of the issues that we heard are 
certainly kind of, if you have been working in diversity and 
inclusion issues for a while, sort of the same set of issues 
are behind it.
    One thing I would just highlight in the few seconds here is 
that one thing maybe that we heard was the impact of the 
financial crisis having on the trends in diversity, and in 
particular, firms' ability to continue some of the efforts they 
had in place prior to the financial crisis, to ensure that 
there were adequate recruitment and retainment efforts and 
seeing through the promotion process to higher levels of 
management.
    Chairwoman Beatty. Thank you.
    I now recognize the gentlewoman from Missouri, the ranking 
member of the subcommittee, Mrs. Wagner, for 5 minutes.
    Mrs. Wagner. I thank the Chair.
    Mr. Garcia-Diaz, it is important to understand, I think, 
the data in your report. Can you tell me briefly, how do you 
define diversity for the purposes of your report? And what were 
the parameters that you identified? Are those consistent with 
other diversity and inclusion evaluations?
    Mr. Garcia-Diaz. Yes. So diversity is actually a very broad 
concept. It can include racial and ethnic characteristics, 
male/female. Those were the ones that we focused on in this 
study in particular, because that is what was available in the 
data.
    When we think about diversity and inclusion, these are 
certainly very important components of it, these 
characteristics, these dimensions, but not the only ones. So 
when we think about diversity, we need to think about diversity 
in veteran status, age, and things like that. And that is the 
way we at least envision it.
    There is no one picture of what a diverse organization 
looks like. If you can imagine a credit union in Maine versus a 
global bank in New York City, diversity might be interpreted 
differently in those situations.
    Mrs. Wagner. There is a need to do, I think, outreach and 
education in STEM at the undergraduate level.
    A 2018 Bloomberg article cited testimony from the founder 
of the Women in Technology and Entrepreneurship in New York, 
Judith Spitz, who was the CIO of Verizon. And Ms. Spitz stated 
that their research showed that although there are increasingly 
higher numbers of women in undergraduate institutions, there 
are only about 1 percent of them who are studying, for 
instance, computer science. Computer sciences and similar 
disciplines are becoming increasingly crucial to the financial 
services sector.
    I believe this is a major impediment when it comes to 
gender diversity in the financial sector. How do you suggest we 
remedy this situation?
    Mr. Garcia-Diaz. That certainly speaks to the original kind 
of pipeline of potential candidates that you have to apply for 
a financial services job.
    And as the industry has moved to look at other programs 
beyond MBAs, but looking at math programs, engineering 
programs, there is this balancing concern, that while you may 
be getting disciplinary diversity, you are not necessarily 
getting, for example, gender diversity, particularly because in 
some of the sciences, math, and engineering, it tends to skew 
towards male representation.
    Mrs. Wagner. Our subcommittee is striving to promote 
increased diversity and inclusion in the financial services 
sector. There are two ways, I think, that this can be 
accomplished, through punishment or through incentives, the 
carrot and the stick notion, so to speak.
    Your research has spoken to the advantages of incentives. 
Why do you think the current set of incentives is not really 
working?
    Mr. Garcia-Diaz. Well, I think there has been over the 
years a shift from this notion of diversity is the right thing 
to do, we need to do more of it. But how do you make that 
compelling and incentivize that behavior for managers to 
promote diversity at all levels of their organization?
    So I think this is where the business case argument or 
framework comes into play, where you find real business reasons 
why diversity contributes not only to the bottom line, but to 
the well-being of the organization, employee satisfaction, and 
things like that.
    Once you have achieved an organization that is inclusive of 
people of different backgrounds, race, religion, and so on, 
ultimately that makes it more inviting for candidates to apply 
for those types of jobs and you get this virtuous cycle going 
that according, at least, to some of the conversations we have 
had with experts, doesn't necessarily exist right now in the 
financial services.
    Mrs. Wagner. Any specific incentives that have been proven 
to increase diversity in these financial firms, do you think?
    Mr. Garcia-Diaz. It is one of those things where I wish I 
could say that there are two or three things. But when we talk 
to the experts, they have to try all different methods--
    Mrs. Wagner. We talked about flex time. We talked about 
lifestyle issues, mentorship. I have gone through your GAO 
study, and do any of those kinds of things come to mind?
    Mr. Garcia-Diaz. Yes. Our work highlights, actually, things 
like mentorship, outreach to the community and schools to 
introduce students to the financial services, that it is a 
viable career path.
    Mrs. Wagner. We see that in STEM quite a bit, but we would 
love to see that more so in the financial services sector.
    Mr. Garcia-Diaz. I think a lot more can happen in that 
space. And, again, if you take my comment earlier that had some 
of those efforts slowed down since the financial crisis, then 
it would be a useful area for a lot of firms to focus on.
    Mrs. Wagner. My time has expired. I yield back.
    Chairwoman Beatty. Thank you.
    The gentleman from Texas, Mr. Green, the chairman of our 
Subcommittee on Oversight and Investigations, is now recognized 
for 5 minutes.
    Mr. Green. Thank you, Madam Chairwoman. I am so honored to 
be a part of this subcommittee. I am especially honored because 
you are the chairperson and you have always been involved with 
the committees with which I have been associated. And I wanted 
to make sure that I was here today to be a part of this 
historic meeting. This is unprecedented, and I am proud and 
honored to be associated with this subcommittee.
    Let me quickly indicate that I believe the tone and tenor 
are set by the persons at the top. And if you have a diversity 
mentality, you are likely to understand recruitment and 
retention. You are likely to understand unconscious bias. You 
are likely to understand why you have to intentionally move 
forward in your recruiting efforts to acquire and maintain 
diversity. And you understand that it is important to train 
your managers and your employees about inclusion and 
unconscious bias.
    So let me just ask this question, if I may. Have we, in our 
efforts to diversify, placed emphasis on bonuses for the people 
at the top who can cause diversity to be reflected throughout 
the organization? Bonuses.
    Mr. Garcia-Diaz. Yes. And I think you are touching on 
issues that we have highlighted as critical, not only the 
leadership commitment to diversity, but to begin to set those 
goals and priorities for the whole organization. Then, how do 
you carry that out? How do you ensure that people are taking 
actions to address that?
    In our 2017 report, we reiterated here in the testimony is 
the issue of introducing accountability for middle managers, to 
ensure that they are living up to this vision, which includes 
linking managers' performance at meeting diversity goals to 
their compensation. That would be one method, for instance.
    Mr. Green. And to what extent is this being done throughout 
the industry?
    Mr. Garcia-Diaz. We don't have data on that. It is strictly 
at this point anecdotal, what we have heard, that some firms 
are doing this. If it is widespread, we just don't have the 
data on that.
    Mr. Green. And have you found in your research that where 
it is implemented, you get greater results, better results?
    Mr. Garcia-Diaz. Yes. And so for the firms that did report 
using, they thought it did actually contribute positively to 
their ability to not only recruit but also retain talented 
minorities and women.
    Mr. Green. And is it true that you found--I think you have 
said as much, but I will just ask and then I am going to yield 
back because I know that time is of the essence--that when you 
have a person who intentionally, who is at the top, who 
intentionally wants to recruit and diversify, that you get 
greater results?
    It seems that the answer would be a simple ``yes,'' but I 
would like it for the record.
    Mr. Garcia-Diaz. Yes. It is a simple answer. Yes, that is a 
practice that in our interviews with experts and researchers 
have identified that it needs to be intentional.
    Mr. Green. So the reverse of that would be then that if you 
find places where you don't have the balance that we seek, the 
diversity, there is a good likelihood that someone at the top 
is not emphasizing it appropriately.
    Mr. Garcia-Diaz. That is one possibility.
    Mr. Green. I thank you.
    Madam Chairwoman, I will yield back, because I understand 
time is of the essence.
    Chairwoman Beatty. Thank you. The gentleman yields back.
    To the Members, votes have been called on the Floor, so the 
committee will pause for votes and resume immediately after 
votes. The committee stands in recess.
    [recess]
    Chairwoman Beatty. The committee will come to order.
    The gentleman from Ohio, Mr. Gonzalez, is now recognized 
for 5 minutes.
    Mr. Gonzalez of Ohio. Thank you, Madam Chairwoman.
    Let me first start by saying how much I am looking forward 
to working with my fellow Buckeye, Chairwoman Beatty, and also 
Ranking Member Wagner on this subcommittee. In my short time in 
Congress, I have learned that these two women have an unmatched 
commitment to improving the lives of their constituents and are 
both excellent choices to lead this subcommittee.
    Mrs. Beatty, in particular, I have followed for many years 
and know that this important issue is one that she has been 
championing in my home State, and I look forward to working 
with her on helping make Ohio a shining example of a diverse 
and inclusive financial sector and workforce.
    Lastly, I want to thank Chairwoman Beatty and Ranking 
Member Wagner for starting this subcommittee in what I consider 
to be exactly the right place, which is a thorough review of 
what the data tells us about our present situation. I think we 
start with data, we start with an open, honest dialogue about 
what our current position is, how we got here, what the trends 
are. And then, as we are grounded in data, we consider 
policies, their effects positively or negatively, and how that 
will stay foremost in our mind.
    So I think that is an excellent way to start, and I thank 
both of you for that leadership.
    I am proud of two great examples in Ohio, one is KeyBank, 
headquartered right outside my district in Cleveland, Ohio. 
They have received the designation as one of DiversityInc.'s 
Top 50 Companies for Diversity, having a board of directors 
that is 50 percent diverse by gender and race. This includes 
implementing a mentor program for senior and junior employees, 
focusing on holistic benefits packages, and training management 
employees in unconscious bias.
    Huntington Bank, also headquartered in Ohio, has also made 
tremendous strides in diversity. In 2018, Huntington invested 
$142 million in the economic success of diverse businesses. 
Huntington is also committed to encouraging a diverse 
workforce, with a board of directors that is 30 percent 
diverse, a senior management team that is 42 percent diverse, 
and a total workforce that is 64 percent diverse.
    The progress made at Key and Huntington show that the 
industry has made strides forward, although I recognize that 
there is certainly much work to be done.
    So, Mr. Garcia-Diaz, first, I want to thank you for waiting 
out our votes, and everybody else who stuck around. I think the 
data that you presented is obviously important data, and what 
we have seen today is primarily aggregate data.
    When you drill down into regions, subregions, different 
sectors of the industry, are there certain areas where we are 
seeing bright spots that we can be excited about, that we can 
say, hey, this area or this part of the industry is doing a 
really good job on this front and maybe we need to kind of 
study them a little bit?
    Mr. Garcia-Diaz. Yes. If you look at the data even in our 
2017 report--we actually have an appendix that goes down to 
State-level reporting, not just national--you see actually a 
dramatic variance across States. And that shouldn't surprise 
us. So you can look at California and Florida, and they have 
obviously a large Hispanic population, and as a result you do 
see higher than average.
    Mr. Gonzalez of Ohio. Did you control for that in the data 
at all?
    Mr. Garcia-Diaz. No. We are just reporting--we are not 
doing an econometric kind of analysis where we are controlling 
for other features. It is more of descriptive statistics.
    Mr. Gonzalez of Ohio. Okay.
    Mr. Garcia-Diaz. But I think that is an area that does 
provide actually some good areas for future work, to look at 
that kind of variation not only across region but types of 
industries.
    Mr. Gonzalez of Ohio. Okay. Great.
    And then a second question, kind of in the same vein. When 
this has been done well and when folks have kind of achieved 
meaningful outcomes in diversity, what best practices are you 
seeing, or did you not go into that much in the reporting?
    Mr. Garcia-Diaz. We did consult with firms and industry 
groups to identify what seemed to be promising practices. You 
mentioned some of them in your remarks. Those include mentoring 
programs. We also, to add to some of the items that you 
mentioned, family-friendly policies are especially is useful 
for women to be able to stay in the organization long enough so 
that they can get promoted to the higher levels.
    Mr. Gonzalez of Ohio. Great. Thank you.
    And I yield back the balance of my time.
    Chairwoman Beatty. Thank you.
    The gentlewoman from California, the chairwoman of our full 
Financial Services Committee, is now recognized for 5 minutes.
    Chairwoman Waters. Thank you very much, Madam Chairwoman.
    I do have a question that I would like to raise about 
recruiting. Mr. Garcia-Diaz, since 2005 this committee has 
asked the GAO to review diversity in the financial services 
industry. In multiple reports, GAO has continued to emphasize 
that, and I quote: ``Without a sustained commitment among 
financial services firms to overcoming challenges to recruiting 
and retaining minority candidates, limited progress will be 
possible in fostering a more diverse workplace.'' 
Unfortunately, GAO's conclusions are correct.
    Now, what barriers, if any, exist that prevent financial 
services firms from increasing minority recruitment? What more 
could financial services firms do to improve their recruitment 
practices? What can Congress do to hold them accountable?
    Mr. Garcia-Diaz. In order to make that recruitment more 
effective than it has been, financial services institutions 
need to look beyond their traditional sources of talent--and we 
identified just looking beyond the typical schools, academic 
programs, and things like that--to identify new sources of 
diverse candidates for their recruitment.
    In addition, firms can do more in terms of reaching out to 
the communities, to schools, to get students and potential 
candidates connected and realize that this is a potential 
career path for them and to start that process of stimulating 
interest in the industry.
    Chairwoman Waters. I think you have indicated in your 
report that the talent pools from which financial services 
firms could hire individuals are diverse. Specifically, you 
found that one-third of the persons obtaining graduate or 
undergraduate degrees between 2011 and 2015 were racially or 
ethnically diverse. However, this level of diversity is not at 
all reflected in the financial services industry.
    Many of them tell us they go to the colleges and 
universities and they are all telling us they go to Georgia and 
they are recruiting, but it is not reflected in their pool of 
workers. So what is happening between the time that they 
recruit, so-called, and the fact that they are not hired and 
they don't show up in their workplace? What do you think 
happens?
    Mr. Garcia-Diaz. Well, there is the other problem. Even if 
you are doing the recruitment in the right area, if the 
candidates are looking at the firm and they are finding that 
the firm is not as diverse as it could be, that itself can act 
as a barrier.
    And so whenever we look at any of these approaches, it is 
not just one thing. It is not just go to one school and try to 
recruit there. It has to be a combination approach which 
includes more extensive outreach and education about what they 
do for those students, because the academic programs that we 
have nationwide are extremely diverse.
    Minority candidates and women are not hiding. They are out 
there. They are available. But a lot of times it is making the 
case, and making it convincing, that this is a possibility for 
them.
    Chairwoman Waters. Can you think of any incentives?
    Mr. Garcia-Diaz. I'm sorry?
    Chairwoman Waters. Can you think of any incentives?
    Mr. Garcia-Diaz. For?
    Chairwoman Waters. Incentives that could be offered to the 
firms, the financial firms on Wall Street, that would be 
interesting?
    Mr. Garcia-Diaz. The leadership of the firms have to put 
pressure and incentives for managers to really take this 
responsibility seriously and to heart. It is not a check-the-
box activity. It is a more substantial commitment that is 
required.
    And so that goes back to what I think is kind of the 
fundamental part, which is making sure that middle managers in 
the organization who are doing the interviews and the 
recruitment are held accountable, that they are, in fact, doing 
the best job they can to share information with potential 
candidates and recruit them.
    Chairwoman Waters. That is an interesting idea, incentives 
to management who have the responsibility for hiring, and that 
could be done in any number of ways and perhaps in their annual 
reviews and some other kinds of things.
    Mr. Garcia-Diaz. Yes. That is the kind of accountability 
mechanisms that you can have, that it is part of their 
performance review. Potentially, it is a consideration in pay 
and bonus. And even just reporting requirements and being 
subjected to scrutiny is another powerful tool.
    Chairwoman Waters. Well, thank you so much.
    And I yield back the balance of my time.
    Chairwoman Beatty. Thank you.
    The gentleman from Wisconsin, Mr. Steil, is recognized for 
5 minutes.
    Mr. Steil. Thank you.
    Mr. Garcia-Diaz, thanks for coming today.
    I want to follow up on the question that my colleague, Mr. 
Gonzalez, had. As I looked at your report, I noticed that 
diversity trends in the financial services industries are not 
uniform across some of the subgroups. So, for instance, banks 
and credit unions tended to be more diverse than, say, 
insurance companies.
    Do we observe any common features in more diverse 
industries and companies? Or what leads one industry to have a 
more diverse workforce than another, based on your research?
    Mr. Garcia-Diaz. Yes. To speak to those specific trends, I 
think is a little bit challenging, given the data that we have. 
However, in doing the research, we did identify studies where 
there are certain types of jobs in the financial industry that 
may be perceived as being less welcoming of women, let's say. 
So certain areas would be like trading in the securities 
business and, in fact, you see that the securities 
representation line is relatively low compared to other 
sectors.
    Mr. Steil. Less welcoming on the entry-level side, is that 
what you mean by less welcoming, or less welcoming across-the-
board?
    Mr. Garcia-Diaz. No, I am talking about at the management-
level side.
    Mr. Steil. Management. Okay.
    Mr. Garcia-Diaz. We heard from experts that there are 
certain types of responsibilities and occupations that may be 
perceived as being more male-dominated and less welcoming in 
that sense.
    And we also heard at least, and we can't tell this from the 
data, but we heard that sometimes in the management figures 
that we are looking at, it is unclear whether the minority 
employee or the woman employee is working kind of in the 
business-forward side of the business as opposed to, say, 
accounting, human resources, and things like that.
    So that is an interesting area, again, that if there were 
data to explore that just because they are in the financial 
services industry, just because they are in banking or 
insurance, we don't really know what their occupation, the 
specific occupation is that they are doing under that rubric.
    Mr. Steil. Got it. Thank you.
    I want to shift gears slightly over to the education side. 
Education is a powerful tool that allows people to get that 
first step up as they head towards a higher-level management 
position in some of these industries.
    I served on the University of Wisconsin Board of Regents 
prior to coming to Congress and was proud of the fact that we 
put in place policies to control the cost of education. So if a 
student was going to UW-Madison and was from a family that made 
less than $56,000 a year median income in the State of 
Wisconsin, the tuition and fees of the University of Wisconsin-
Madison is free, it is covered. And so that gives individuals 
an opportunity to get a step up.
    You mentioned in your testimony that some of the financial 
services firms surveyed told research they had broadened the 
list of schools that they had gone to recruit from, from beyond 
just a handful of maybe elite schools on the East Coast. Can 
you share any information as to how successful those efforts 
may have been?
    Mr. Garcia-Diaz. Yes. Only sort of in terms of what we 
heard from the folks that we interviewed.
    Mr. Steil. Please.
    Mr. Garcia-Diaz. And generally, they were positive about 
those efforts in expanding beyond the normal circle of schools 
that they recruit from. And in particular, it is stated as a 
challenge when managers kind of focus on a few schools and 
trying to get them to actually think more broadly and expand 
beyond what they are accustomed to is one of the challenges 
that some of the folks we interviewed cited.
    And so while I can't speak to what is happening nationally, 
but at least anecdotally, folks are reporting back that it is a 
promising practice.
    Mr. Steil. Thank you. That is helpful.
    I yield back the balance of my time.
    Chairwoman Beatty. Thank you.
    The gentlewoman from Texas, Ms. Garcia, is now recognized 
for 5 minutes.
    Ms. Garcia of Texas. Thank you, Madam Chairwoman. And it 
is, indeed, an honor for me to serve with you and try to tackle 
some of the issues that are in front of us today.
    Before I begin, I just wanted to say that I served as the 
elected city controller in Houston from, oh, 1998 plus 5 years, 
till 2003. And probably one of the most disheartening things 
for me was dealing with the financial world, not because I 
couldn't handle the work, but because of who I faced sometimes.
    It seems like any meeting that I went to, whether it was to 
negotiate a depository contract or a banking contract or select 
investment bankers for a bond deal or anything that I did, it 
really was still a man's world and it was also very White. I 
still remember when they took me up to the floor when they were 
trading with our first pricing. I didn't see anything but, 
quite frankly, blond, blue-eyed men in white shirts and ties.
    I am happy now that the last time I spoke to a public 
finance group, it has changed a little bit. But we haven't 
really quite done enough, it seems.
    So what you said earlier today caught my ear, when you said 
that diversity is interpreted differently in different areas.
    Is there a way to get a better handle on what diversity 
really is and set real goals and timetables for some of the 
people in the financial services industry? Because it seems to 
me that we are not even quite there yet. And it is more than 
diversity, it is also inclusion and really a commitment to it.
    So what else can we be doing in this arena?
    Mr. Garcia-Diaz. I think that is the significant challenge 
ahead of us, is what does it look like and then what do we need 
to do to get there. And, as I mentioned before, there is really 
no easy answer to that question.
    But I think there are steps that firms can take to really 
enhance their diversity management in their organization, but 
first you have to commit to it, you have to see this as a 
priority, and then do other things that we highlight in our 
prior work, practices that help organizations achieve the kind 
of diversity that they are hoping to achieve.
    And what informs that, in terms of what does that diversity 
look like, is really looking at who your customer base is, 
where are you located, what does your community look like.
    Ms. Garcia of Texas. Right. Because I have always thought 
that the easy answer is that your workforce should look like 
the people that you are serving.
    Mr. Garcia-Diaz. That you are serving, yes.
    Ms. Garcia of Texas. So that is easy enough. I just 
sometimes get really baffled that they make it so hard.
    I will move on to another question related to that. We have 
focused on the services. Have you seen any studies or have you 
all done any studies on them looking at the access to those 
institutions?
    Mr. Garcia-Diaz. Access by?
    Ms. Garcia of Texas. By the customer, the consumer?
    Mr. Garcia-Diaz. I don't have any information on that. I'm 
sorry.
    Ms. Garcia of Texas. You don't at all? It is just the 
diversity and inclusion of the workforce in terms of the 
studies you have done so far?
    Mr. Garcia-Diaz. Yes, part of it. We have done--the agency 
has done work in terms of looking at, in a very specific area, 
looking at business activities and contracting with and 
conducting business with minority organizations to support 
minority- or women-owned businesses, if that is what you are 
referring to.
    Ms. Garcia of Texas. Right. So what service have you 
actually done just on inclusion? You had diversity--you know, 
coincidentally, I also was an EEOC hearings examiner, and they 
tend to just look at the numbers, look at the percentages, and 
look at the EEO profiles of the companies. But you can have 
someone--again, I will use my experience when I was controller.
    If a minority or a woman came in with the investment 
banking team, it was usually the one who was carrying the 
presentation books and was never really included on being part 
of the presenters. They just carried the books.
    And I used to sometimes just have to look at the person and 
say, ``Well, you know, Mary Sue, you haven't said anything. 
What do you think?'' I would have to ask to get them included.
    So how do we really look at inclusion, making sure that 
they are really part of the company, given training, given 
opportunities to grow within that particular company?
    Mr. Garcia-Diaz. That is the cultural shift that has to 
happen. And one of the things we identify is the education and 
training component to make people aware of the consequences of 
the kind of behavior you described just now.
    Ms. Garcia of Texas. Thank you.
    Thank you, Madam Chairwoman.
    Chairwoman Beatty. Thank you.
    The gentleman from West Virginia, Mr. Mooney, is now 
recognized for 5 minutes.
    Mr. Mooney. Thank you, Madam Chairwoman.
    So, Mr. Garcia-Diaz, thank you for coming and for providing 
your expertise. I really appreciate it.
    We can all agree that efforts to increase diversity can 
always be improved, but it is important to point out that 
diversity and inclusion are two different factors. That is why 
this committee has two different names for that.
    So in the Harvard Business Review study researchers have 
found that diversity in the workforce will not succeed without 
the inclusion factor. The study cited Verna Meyers, a noted 
diversity advocate, who stated, ``Diversity is being invited to 
the party; inclusion is being asked to dance.''
    So, Mr. Garcia, inclusion is the driving force to make 
lasting impacts on the diversity of a workforce. So if that is 
the goal, what has the data shown are the most crucial factors 
affecting inclusion?
    Mr. Garcia-Diaz. Yes. And you are absolutely right, I think 
a lot of the research does point to the importance of inclusion 
as--diversity is not enough in a lot of ways, and that you do 
need that inclusiveness to make sure that people are making 
meaningful contributions in the firms that they work for.
    In terms of the data, our data doesn't necessarily speak to 
that, at least the data analysis that we did of EEOC 
information that is reported by financial firms. And so it is 
hard to kind of take the temperature, in a sense, of the firms 
and to see to what degree they are embracing and incorporating 
inclusion.
    But in our conversations with experts, again, they 
highlight that is a necessary condition to have a longstanding 
and effective management of your diverse workforce, is the 
inclusion part. And that can actually help with even the notion 
of addressing kind of retention issues and making people feel 
that they are part of the organization and they are willing to 
stay there long enough so that they can rise in the 
organization.
    Mr. Mooney. Fair enough.
    My next question has to do with the issue of government 
regulation, rules, mandates, laws versus an industry or a 
business on their own taking initiative for their corporation, 
taking into account their unique circumstances to promote 
diversity and inclusion.
    Because sometimes I feel that the one-size-fits-all 
government regulations may actually have an adverse effect. 
When you try to apply it to every business the same way it may 
actually have a counter-balancing effort as people worry about 
the regulations and start making laws to that.
    So apart from government efforts, what are some of the 
organic solutions that the firms have come up with on their own 
to address the diversity and inclusion challenges?
    Mr. Garcia-Diaz. Again, when talking to experts in the 
area, they repeatedly say there is no single solution that 
works for everyone. And so there has to be flexibility, there 
has to be innovation occurring. But in order to make that 
effective, there has to be sufficient information-sharing. 
Venues like this, the kind of work the subcommittee will do, 
will contribute to that.
    But whether it is Federal agencies, through their OMWI 
offices, or the private sector and what they are doing, sharing 
information about practices that have been effective in their 
case and also reporting on any assessments that they have done 
is critical to getting information out about the range of 
options that are available to promote diversity and inclusion.
    Mr. Mooney. And so the promoting diversity and inclusion 
across multiple businesses, or is this more of a financial 
services sector issue?
    Mr. Garcia-Diaz. Well, it really does apply to everything. 
It applies to us as Federal agencies. It applies to the 
financial sector and other professional services organization.
    Mr. Mooney. All right. I have a minute left here, but I 
will try one more question.
    The GAO report that you authored describes the need to 
improve recruitment and retention. Those two factors will lead 
to the most lasting solutions to the diversity and inclusion 
problems. What did the data show to be the most effective and 
proven solutions in those two categories?
    Mr. Garcia-Diaz. As far as we can tell, it is hard to 
pinpoint just one. Everything we have heard has emphasized the 
multiplicity of action to address both the recruitment and the 
retention question.
    Mr. Mooney. Okay. Well, thank you for your time and 
testimony.
    And thank you, Madam Chairwoman, for having this hearing 
today. I yield back the balance of my time.
    Chairwoman Beatty. Thank you very much.
    The gentleman from Missouri, Mr. Clay, the Chair of our 
Housing, Community Development and Insurance Subcommittee, is 
now recognized for 5 minutes.
    Mr. Clay. Thank you, Chairwoman Beatty.
    Let me say that, Madam Chairwoman and Ranking Member 
Wagner, I appreciate you embarking on a new course by leading 
this new Subcommittee on Diversity so that diversifying 
America's workforce will no longer be mere lip service.
    And as the Chairman of the Federal Reserve indicated in 
this morning's Humphrey-Hawkins hearing, it is time to move 
past the Rooney rule so that not just one minority candidate is 
interviewed for the purpose of window dressing, and we will now 
refer to that new rule as the ``Beatty-Wagner rule.''
    America is made better by its rich diversity. Our 
institutions of higher learning are enhanced when more voices 
are included on campuses. Our religious institutions grow and 
prosper when the congregations are not segregated. Our athletic 
fields are more interesting when people from all walks of life 
are able to participate together. And our apartment buildings, 
neighborhoods, and co-ops are more comfortable to inhabit when 
not everyone looks the same, speaks similarly, or has identical 
neighbors on every floor.
    Mr. Garcia-Diaz, let me ask you, during your research for 
this report were you able to determine what percentages of 
financial firms provided training on unconscious bias? And did 
any firms note that some forms of training were found to be 
more successful than others, such as in-person training versus 
online training?
    Mr. Garcia-Diaz. Yes, sir. We don't have any figures on the 
frequency of the use of that kind of training to address 
unconscious bias. In our interviews with industry 
representatives and advocacy groups that was definitely one of 
the tools to use and to address the issue of unconscious bias. 
Training can't do it by itself, though, and it has to be in 
culmination with other efforts. But, yes, that is--
    Mr. Clay. But you and I will agree that that is one of the 
major impediments, major barriers to diversifying workforces in 
financial services, or in any other industry in this country.
    Mr. Garcia-Diaz. Yes. That would be a significant concern, 
and not just in the financial services industry but broadly 
speaking.
    Mr. Clay. But broadly, sure.
    Mr. Garcia-Diaz. Yes.
    Mr. Clay. And so can you offer any suggestions on how we 
attack that?
    Mr. Garcia-Diaz. I think just the question that you asked 
of how frequently, how prevalent is this type of training, how 
is this being used. And also the different varieties. As you 
just pointed out, you can do it online, you can do it in 
person, you can do it in different formats. And so having more 
information, obtaining more information on the variety of 
options for training and what seems to work more would be 
something that is needed to really advance the ball.
    Mr. Clay. And regarding retention, could you comment on 
what workplace inclusion practices can improve companies' 
minority and women retention rates?
    Mr. Garcia-Diaz. Yes. And I will start off with one that I 
think is very important. It is holding management accountable 
for the organization's diversity goals, ensuring that their 
work, their performance, and their ability to take these 
matters seriously aligns with their leadership's own commitment 
to diversity and inclusion.
    Other kind of steps, practices that would be helpful for 
retention includes employee engagement, obtaining a lot of 
qualitative information about what their experiences are in the 
firm that may not be reflected necessarily in just straight 
numbers.
    Mr. Clay. All right. And my time is up. Thank you, Madam 
Chairwoman. I yield back.
    Chairwoman Beatty. Thank you.
    The gentleman from Texas, Mr. Gonzalez, is now recognized 
for 5 minutes.
    Mr. Gonzalez of Texas. Thank you.
    And, thank you, Mr. Garcia-Diaz, for being here today.
    I have a question. Has the GAO looked at promotions 
separately from new hires? In other words, are we promoting 
more minorities from within? And is the rate at which 
minorities are promoted to management positions different from 
the rate that minorities are hired into management?
    Mr. Garcia-Diaz. Yes. And, unfortunately, one of the 
limitations of the EEOC data is that it doesn't allow us to see 
people's movement within the organization, like in the case of 
promotion. We just see these balances, how many people in its 
account.
    But in the report, in our 2017 report, and in testimony, we 
look at the potential pipelines that feed into these promotions 
outside of the management level. And so we have statistics that 
there is quite a bit of diversity in sort of professional jobs 
that are non-management, sales jobs that potentially the firm 
can draw from to promote into the higher management levels.
    Mr. Gonzalez of Texas. So the answer is, we don't know.
    Mr. Garcia-Diaz. We don't know.
    Mr. Gonzalez of Texas. And finally, in my district, we have 
about an 80 or 90 percent Hispanic population, but we still 
struggle with inclusion in upper management for non-minority-
owned businesses. Can you advise if the GAO could get a better 
handle on challenges faced in the hiring of a diverse workforce 
if, for example, the data was looked at on a State-specific 
scale or on a regional scale?
    Mr. Garcia-Diaz. Yes. In our 2017 report we include some 
statistics on the State level based on the EEOC data. But the 
emphasis still falls on effective recruitment strategies that 
firms should be adopting, again, looking broadly and doing 
intentional recruiting of minorities, identifying the pool, 
draw them in, so that they have the opportunity to be 
interviewed, to be considered for the job.
    At the end of the day, it is the talents and what you bring 
to the table that will hopefully lead to a job. But they need 
to first show up at the interview. And firms have to do an 
effective job to draw those candidates in for consideration.
    Mr. Gonzalez of Texas. Very well. I yield back the balance 
of my time.
    Chairwoman Beatty. Thank you.
    The gentleman from Florida, Mr. Lawson, is now recognized 
for 5 minutes.
    Mr. Lawson. Thank you, Madam Chairwoman.
    And, Mr. Garcia-Diaz, welcome to the committee.
    I worked in the financial services area for 36 years, and 
during my tenure there what I have found out is that in most 
cases in the financial services industry when they do recruit 
minorities into the area, oftentimes, which is not discussed, 
is they don't really last, because they don't have the support 
that is needed in the area because sometimes it is the new 
entrances, whereas in the majority population, where some of 
these individuals or students are exposed because of family 
connection and the jobs that they have in college and so forth, 
they have more of an appreciation on how it works and how they 
can move through the system.
    And my question would be, for example, I have Florida A&M 
University, one of the Historically Black Colleges and 
Universities (HBCUs), in my district that has a great school of 
business and engineering. And do many of the companies, are 
they still, from your knowledge, are they going around to 
recruit at the universities a couple of times a year to make 
sure that they can attract some of the students into the 
financial industry to improve our diversity?
    Mr. Garcia-Diaz. Yes. And I think one of the important 
points is when you are drawing folks of different backgrounds, 
different experiences, everyone relies to some extent on some 
sort of mentoring. It may be family because they have been in 
the business, so they know it. Others don't have that.
    And so a forward-looking organization will be setting up 
either mentorship programs or some sort of sponsorship program 
for employees coming in to ensure that they understand how to 
navigate through the organization, how to progress in your 
career, and those are critical parts to addressing actually the 
retention issue.
    Sometimes it might be easy to get someone in the door, but 
then to keep them is a whole different matter. And, 
particularly, you want to set up folks for success. And so 
programs, and they are out there and they exist, and we have 
been told that they have been quite effective in assisting 
folks in their career.
    Mr. Lawson. Sometimes, when I am back in the district, I do 
banking on Saturdays because it is open from 9 until 12. And in 
the banking area, and this is, I am just going to say, this is 
with Bank of America, what I have noticed is the trend has 
been, because a lot of the Hispanic members, individuals go 
into banking now, I have seen where they have increased the 
number of Hispanic-speaking individuals in the banking industry 
so they can deal with all of the customers who come in.
    But over the last couple of years, when I have gone into 
those institutions, I haven't been able to see whether there 
has been an increase in minority, African-American 
representatives like they have done on the Hispanic areas in 
that financial institution. But I thought it was great what 
they did for Hispanic because sometimes there is a language 
barrier that some of the people can help with a little bit 
more.
    I have always viewed diversity as something that should be 
a part of the American way of life, because the whole 
population in America has been changing. In your dealings and 
in the research that you have, how do you all approach these 
institutions about trying to create more diversity in the 
workforce?
    Mr. Garcia-Diaz. I think one of the important components is 
for, whether they are banks or securities or insurance 
companies, whatever they are, is that they have 
institutionalized kind of the thinking behind diversity and 
inclusion in their operations and to do it consistently across 
all levels, whether it is the entry level teller kind of jobs 
in the bank, but thinking about how people can progress through 
the organization all the way to the top.
    And so we have identified some key practices that are 
essential. I mentioned a few before, like leadership commitment 
and accountability. But other things include data analysis, 
knowing what the shape of your workforce looks like, where are 
you losing candidates for potential promotion, what is their 
composition and makeup. Those are critical parts for an 
organization to become self-aware about how they stand, how 
they are doing in terms of diversity and inclusion.
    Mr. Lawson. Okay. Thank you. I yield back.
    Chairwoman Beatty. Thank you.
    The gentlewoman from Pennsylvania, Ms. Dean, is now 
recognized for 5 minutes.
    Ms. Dean. Thank you, Madam Chairwoman. And I thank you for 
this hearing and the focus of the hearing.
    And thank you, Mr. Garcia-Diaz, for being here and for 
offering us your expertise and your guidance.
    I, too, echo my colleagues' sentiments about diversity 
being our strength. And it is not just a pretty sentiment. We 
actually know that it works in industry, in the financial 
services industry, and in all industries.
    As we diversify, as the research shows that as we have 
people of different ethnicities, gender, backgrounds, 
experiences, geography, ethnicity, the enterprise does better 
because they get better ideas.
    I represent Montgomery County and Berks County in 
Pennsylvania. I am a newly elected Member. I have to admit that 
I have been so proud of the mentorship that senior Members have 
offered us incoming freshmen, regardless of our age. And so I 
want to talk to you about the idea of mentorship.
    As I visit my area high schools, I want to talk about the 
talent pool and making sure that that talent pool knows of the 
opportunities, whether it is in financial services or other 
industries. So I noticed, for example, in the GAO 2017 report, 
one suggestion for overcoming recruiting challenges was to 
offer programs to increase awareness of financial services.
    So to follow along on the line of questioning you were just 
having, could you describe in detail--and I am going to give 
you specifics on the ground. Montgomery County is considered 
the third most affluent county in Pennsylvania, but there are 
pockets of great need, terrific resources and opportunity, but 
educational unevenness, economic unevenness.
    So I visit my Norristown area high school students. They 
don't know all the opportunities in front of them. And this is 
literally what we talked about. We need mentors in these 
schools at the high-school level, if not even earlier.
    Can you describe some of these relationship-building, 
mentorship-building programs, how can I get them, tap into them 
in the financial services industry in my Fourth Congressional 
District? What does the curriculum look like? How are they 
implemented?
    And are there certain literally training programs for 
students so they can come visit financial services 
institutions? Can you give us some sense on how I can access it 
for my students?
    Mr. Garcia-Diaz. While we didn't look at specific types of 
programs that are out there, there are a lot of groups that are 
trying to generate these kinds of partnerships between, say, a 
bank and a school or the large local employer with the schools 
to reach out to students. And it is something just in our 
conversations that we have had when we were doing the 2017 
report.
    We can certainly share names of certain organizations that 
can kind of facilitate that and help thinking. They tend to 
specialize more on those type of efforts than we do.
    But that holds a lot of potential. And it is not only 
important for firms to engage their own employees; it is also 
important that they engage their community because that is 
going to be their future workforce. And how do they bring them 
in through the door, how do they make sure they are aware.
    Because sometimes it is just: Is this a possibility for me? 
Is this something that I could do? Conveying that clearly to 
certainly young folks and going in school right now would be 
very helpful. But we can get you some information on the types 
of organizations that can help with those kind of partnerships.
    Ms. Dean. And if you could provide that to the committee.
    Mr. Garcia-Diaz. Oh, yes.
    Ms. Dean. I think it would help across the country to know 
about things like that.
    Are there any best practices you can share, and/or are 
there any, among those programs, are there any scholarship 
opportunities? What can you say about those two ideas?
    Mr. Garcia-Diaz. We can look into it and get back to you on 
that. There are, I know, a lot of efforts, for instance, like 
in the financial literacy area where financial institutions are 
engaging schools and trying to incorporate financial literacy 
in the curriculums and things like that, which, even though it 
is not directly related to this, but it does get at the 
partnerships that exist out there that can be leveraged to have 
school-age children sort of recognize this as a possible career 
path.
    Ms. Dean. And I am going to ask a very broad question 
really late in my time here and probably it has been discussed. 
But what is the secret to, not out to maybe the talent pool, 
but at the retention and hiring time and promotion, what is the 
secret to changing the trends that we see?
    Mr. Garcia-Diaz. I think the secret, if there is one, but I 
am going to venture a guess here--
    Ms. Dean. Unleash the secret, yes.
    Mr. Garcia-Diaz. --is really that it has to be intentional, 
it has to be strategic, and it has to be sustained. If you 
don't have it, if you don't do that, it will fall apart.
    Ms. Dean. Thank you.
    Thank you, Madam Chairwoman.
    Chairwoman Beatty. Thank you.
    I would like to thank our witness, Mr. Garcia-Diaz, for 
your testimony today.
    The Chair notes that some Members may have additional 
questions for this witness, which they may wish to submit in 
writing. Without objection, the hearing record will remain open 
for 5 legislative days for Members to submit written questions 
to this witness and to place his responses in the record. Also, 
without objection, Members will have 5 legislative days to 
submit extraneous materials to the Chair for inclusion in the 
record.
    This hearing is adjourned.
    [Whereupon, at 4:42 p.m., the hearing was adjourned.]

                            A P P E N D I X



                           February 27, 2019
                           
                           
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