Occupy Wall Street from Within: Dodd-Frank’s Diversity Mandate

As Occupy Wall Street protesters criticize high unemployment and economic inequality, a little-known diversity mandate embedded in the Dodd-Frank Wall Street Reform and Consumer Protection Act (H.R. 4173 / Public Law 111-203) is forcing a different kind of occupation within those very financial institutions. In 2012, Wall Street firms must be prepared to prove they’ve made a good faith effort to employ women and minorities or else they stand to lose billions of dollars worth of contracts with the federal government.

In other words, Dodd-Frank is mandating that more women and minorities must occupy lucrative Wall Street jobs that heretofore have been dominated by white men who, in gender and ethnicity, resemble Gordon Gekko, the anti-hero of the movie Wall Street and of its sequel.The Dodd-Frank provision is buried within some 850 pages of legislative text designed to strengthen the financial sector, promote economic recovery and job growth, protect consumers, and permanently end taxpayer bailouts of private institutions. Section 342 of Dodd-Frank embeds 20 Offices of Minority and Women Inclusion at virtually every major financial regulatory agency of the federal government: Treasury, the Securities and Exchange Commission, the Federal Deposit Insurance Corporation, the Office of the Comptroller of the Currency, the 12 Federal Reserve banks, and the newly created Consumer Financial Protection Bureau.

The offices are designed to serve as watchdogs, monitoring the diversity of the agencies and the government contractors and subcontractors with which they do business. The list includes “financial institutions, investment banking firms, mortgage banking firms, asset management firms, brokers, dealers, financial services entities, underwriters, accountants, investment consultants and providers of legal services.”Wall Street’s issues with gender diversity date back to the now infamous “Boom-Boom Room,” Smith Barney’s basement party room where lap dances took place in the 1990s. Since then, females across the industry have shared similar tales about how they were sexually harassed with vulgar talk; excluded from business lunches, meetings and golf outings; and how their careers were hindered or damaged.

While consciousness has been raised and while the numbers of female and minority executives have improved, the vast majority of Wall Street firms lack diversity in the upper ranks. And that disparity could be a big problem in the eyes of Dodd-Frank regulators. Wall Street does billions of dollars in business with the federal government for services that include debt issuances, sales of government assets, as well as more general advisory services.

That business now may hinge on a Wall Street firm’s ability to correct racial and gender imbalances. According to Dodd-Frank language, if a federal agency’s compliance director concludes that a contractor has not made “a good faith effort to include minorities and women in its work force,” the agency head is authorized to cancel the contract. In other words, contracts worth billions are at stake — a dollar amount designed to be so significant even the wealthiest 1% would take notice.How can you determine whether Dodd-Frank diversity mandate applies to your firm? Chances are Dodd-Frank does apply if the following describes your current firm:

  • Your company is an investment banking firm, mortgage banking firm, asset management firm, broker, dealer, financial services entity, underwriting, accounting, investment consulting, or law firm.
  • Your company does business with the federal government’s financial agencies: Treasury, the Securities and Exchange Commission, the Federal Deposit Insurance Corporation, the Office of the Comptroller of the Currency, the 12 Federal Reserve banks, and the newly created Consumer Financial Protection Bureau.

What should you do if you determine that Dodd-Frank diversity mandate applies to your firm? Your company must demonstrate that it has made a “good faith” effort to employ women and minorities. Clearly, “good faith” is subject to regulatory interpretation. However, Wall Street firms that demonstrate incremental improvement year over year in the diversity of their workforce may be better positioned for compliance than those that do not.

Article Continues Below

Employers also need to make sure that rounds of recent layoffs have not had a disparate impact on protected classes: workforce reductions and reorganizations have a way of eroding diversity ratios. Still, steady improvement may not be enough if regulators determine an organization could and should be doing more. To prepare for impending diversity regulations, potential next steps include the following:

  • Define the baseline. Quantify the percentage of qualified women and minorities in the labor markets from which you recruit.
  • Quantify the percentage of women and minorities in your current workforce, broken out by level, function, and geography.
  • Compare your company’s diversity to the diversity of the labor market and identify opportunities for improvement.
  • Focus the diversity talent pool and pipeline initiatives on the levels, functions, and geographies where they’re needed the most.
  • Identify, map, and cultivate relationships of diverse talent at all of your favorite target companies.

Because Dodd-Frank diversity regulations are still being written, few Wall Street employers are fully conscious of its impending diversity mandate. One head of diversity for a global investment bank told me he fears that by the time those regulations are announced next year, there simply will not be enough time for Wall Street firms to come into compliance. Consequently, my colleague maintains that the time to act is now.

Dodd-Frank is the law. Wall Street companies can either ignore its diversity mandate at their peril or they can invite a growing occupation of corner offices and trading desks by female and minority employees. Interestingly, the latter choice also stands to make the workforce more economically diverse, which, in turn, may put Wall Street back in touch with Main Street. In fact, what may be most intriguing about the Dodd-Frank is the transformative potential of its diversity mandate. It holds the promise of reforming Wall Street from within.

Krista Bradford (krista.bradford@tgsus.com) is the founder and CEO of The Good Search, an innovative retained executive search firm that delivers top talent clients never dreamed existed. Bradford also leads the firm's talent acquisition research and intelligence division, Intellerati, which offers services in support of corporate executive search and recruiting teams as well as diversity talent pools, succession benches, and custom intelligence that gleans competitive insights from the talent ecosystem. Prior to founding her firm more than a decade ago, Bradford served as an Emmy Award- winning investigative reporter and television journalist. She studied at Harvard University and Columbia University, ultimately obtaining her BA at The New School. Bradford is a noted recruiting industry expert, national speaker, and columnist. Her blog "The Investigative Recruiter" is counted among the recruiting industry’s Top 20 blogs.

Topics

24 Comments on “Occupy Wall Street from Within: Dodd-Frank’s Diversity Mandate

  1. This may be the best time in recent memory to be a minority- or woman-owned contractor seeking to do business with the federal government. See: http://www.washingtonpost.com/business/capitalbusiness/commentary-new-law-a-boon-for-women–and-minority-owned-firms/2011/06/01/AGxHCfJH_story.html

    This article is a good summary of the facts. Last month, we published an analysis of Section 342 of the Dodd/Frank Act, which establishes several Offices Of Minority And Women Inclusion at financial institution regulators. We have outlined major opportunities resulting from this Section.

    See: http://www.creativeinvest.com/pubs.html

    Also see: http://www.prlog.org/10893460-firm-details-opportunities-resulting-from-doddfrank-act-section-342.html?hosted

    Please see our blog posting on 342: http://twisri.blogspot.com/2010/07/sec-342-office-of-minority-and-women.html

    Finally, we have set up an Office of Minority and Women Inclusion Group on Linked-In: http://www.linkedin.com/groups?gid=3352594&trk=myg_ugrp_ovr

  2. Government mandated diversity is always an epic failure.
    See what happened to 7000 students at the University of Delaware when they had mandated diversity:
    http://bit.ly/tN1Szq and http://bit.ly/qXFbe9
    And the extremists who created this program at the University of Delaware are trying to bring it back.
    Why do some people assume that with the correct mix of different races and genders this will automatically get INTELLECTUAL diversity?
    The Democrat Party considers itself diverse, yet Democrats all have the same opinions on public policy – where is the INTELLECTUAL diversity here?
    To say that getting the right mix of diversity will somehow reform Wall Street from within is laughable at best and discriminatory (you are assuming ONLY white males are greedy) at worst.
    Why not aim to hire the best qualified people who act with integrity as the top goal? It’s most possible that you will obtain some skin deep and gender diversity using this approach!

  3. Five laws prohibit discrimination on the basis of race, color, religion, sex, national origin, physical handicap and mental handicap in any terms, conditions, or privileges of employment. The five EEO laws are:

    (1) The Equal Pay Act of 1963, as amended.
    (2) Title VII of the Civil Rights Act of 1964, as amended by the Equal Employment Opportunity Act of 1972 and the Pregnancy Disability Act of 1978.
    (3) The Rehabilitation Act of 1973, as amended.
    (4) The Age Discrimination in Employment Act of 1967, as amended.
    (5) The Civil Rights Act of 1991.

    The goal of equal employment opportunity is that the most qualified applicants be hired, as you suggest. Only that doesn’t always happen. In fact, qualified women and qualified minorities are under-represented in senior executive roles. The Dodd-Frank diversity mandate neither establishes quotas nor does it say women and minorities should be hired instead of white men. Rather, it states a “good faith effort” must be made to employ women and minorities, quite simply because there are so very few women and minorities in those positions of power, a phenomenon referred to as the “glass ceiling”. In other words, organizations will need to show that they tried to be fair by including for consideration those who have been previously excluded.

  4. Interesting article with solid content but I see little changing in terms of diversity. I do not think Wall Street gives a damn what the government wants. Never did, never will.

    Wall Street tends to hire conspirators as opposed to employees. Those who can operate in the gray and oily areas that exist between the letter of the law and it’s spirt tend to be most effective; and prized.

    Diversity as a government mandated program of policy will never work due to male entrenchment and tradition. The good news is that women for example, do not need the governments help as they are already taking over the world of business.

    See Atlantic’s brilliant cover story entitled “The End of Men” as an example.

    http://bit.ly/aSwqKx

    Diversity is, to me, corporate welfare and at times, laughable. I of course question if diversity creates a better workplace product or simply the illusion of a better workplace. Or neither, or both but that is fodder for another article.

    As far as Wall Street is concerned, any attempts at enforcing diversity will be met with all of the stonewalling and shenanigans that this diseased entity can muster. Real power is never given – only taken and as as far as women are concerned, I think they are on their way to making significant inroads.

    See Atlantic’s brilliant cover story, “The End of Men” for added insight.

    The real question here is not related to the law or the connection of Main Street To Wall Street. The real question is, when women are in the corner office, will they behave in a manner that is different from those who are the current occupants.

    Time will tell the story.

  5. @brainful diversity.

    You are of course, correct in your assessment but few will agree publicly as it is not a very popular viewpoint. That is sad for a country that needs honest dialogue and needs it fast.

  6. Krista – excellent, timely article.
    Howard – I am disappointed in your characterization of diversity as “corporate welfare”. I view the millions of unqualified white men who, for many decades benefitted from segregation and institutionalized discrimination, as the recipients of corporate welfare.

    Attempts to correct historical wrongs, while difficult and expensive, perhaps impossible are not futile. Real power must be taken — i agree with that. But in order to “take” power, women and minorities need a government that supports and recognizes the need for change. Wall Street firms may elect to ignore Dodd-Frank; but an employee’s claims that he or she was the victim of discrimination is strengthened by it.

    And somewhere along the way, in our haste to make the “business case” for diversity, we have forgotten the real reason for its importance. One can debate whether or not diversity initiatives improve the bottom line, or improve the “intellectual diversity” all the day long. The truth is that for many years companies intentionally and systematically excluded entire populations from opportunity. This type of exclusion is still embedded in the attitudes, policies and practices of some employers. It must be rooted out, corrected. For the good of the company, perhaps. For the good of the workforce, and for the good of communities, for certain.

  7. Camen Hudson – You said, “The truth is that for many years companies intentionally and systematically excluded entire populations from opportunity. This type of exclusion is still embedded in the attitudes, policies and practices of some employers.”

    So your solution is to discriminate against the LARGEST group – white males – to fight discrimination?? Wow, that is a rather racist concept, don’t you think?
    In fact, it’s that kind of thinking that turned 7000 students at the University of Delaware into human subjects of thought control experiments:
    http://bit.ly/tN1Szq and http://bit.ly/qXFbe9

    Why do some people assume that with the correct mix of different races and genders this will automatically get INTELLECTUAL diversity?
    The Democrat Party considers itself diverse, yet Democrats all have the same opinions on public policy – where is the INTELLECTUAL diversity here?
    To say that getting the right mix of diversity will somehow reform Wall Street from within is laughable at best and discriminatory (you are assuming ONLY white males are greedy) at worst.
    Why not aim to hire the best qualified people who act with integrity as the top goal? It’s most possible that you will obtain some skin deep and gender diversity using this approach!

  8. Carmen,
    Thanks for your thoughtful comments. Well put. I agree that in the rush to focus on the “business case” for diversity that too many of us miss the real reason these programs are in place. Clearly, it is easier for most organizations to focus a diversity initiative’s impact on the P&L than for us to look ourselves in the mirror to confront ongoing disparities. Every time I hear the phrase “cultural fit”, I am aware that that can be discriminatory if it is taken to mean “someone like us”. Every time praise is lavished on employee referral programs, I am aware that those programs may perpetuate a lack of diversity if the employees that do the referring are, themselves, not diverse. We need to be mindful and we need to talk about these things much more than we do in talent acquisition. We’ve made a great deal of progress, but clearly we have not yet achieve diversity equilibrium. Simply dial up the senior executive team listed on any corporate website of the Fortune 500, and you’ll find leadership teams whose diversity ratios do not reflect the population at large. However, that disparity presents us with the opportunity to make a big difference . . .

  9. Carmen, I do agree that the business case should not be necessary for diversity, and that if there are any discriminatory policies, or policies that result in a de facto segregation, they should be counterbalanced: for example, a university with a strong “legacy” admissions program — if alumni are extremely homogenous — should have some program to counterbalance the effects of that.

    Having said that, where you said “this type of exclusion (discrimination) is still embedded in the attitudes, policies and practices of some employers. It must be rooted out, corrected” … I would add a qualifier to that. Many employers and recruiters vigorously work to attract minorities, would kill (or pay a higher salary even) to attract a qualified minority to a job where they are hard to come by (e.g. a woman engineer at an aerospace company). So while some discrimination may be out there, let’s not forget that minorities also highly sought after, for corporate boards, for tech jobs, and so on.

    I recorded a video recently with a frequent ERE user, who’s a corporate recruiter at a very big company, a big blue-collar kind of company. He said on the video what I just said … that he and most recruiters he knows are very eager to find qualified minorities. Sadly, he later said the video could not be posted, I think for fear that somehow his comments would be construed as racist.

  10. Todd,

    Interesting point on how it is difficult in some functional areas and industries to find qualified candidates. Clearly, shortages of diverse talent — apparent and real — is a challenge that many recruiters face. In some cases, that shortage is represents a catch-22 in experienced hire recruiting. If diverse candidates have been excluded, then they won’t be there to recruit when you need them. Our work in diversity recruitment dates back to helping the Office of the CTO of Microsoft recruit more partner-level technologists who also happen to be women. Clearly, a decade or more ago, there were shortages in computer science because fewer women were making that their major in school. That, in turn, was due in part to a phenomenon, written about in the book Surviving Ophelia, of girls turning away from math and science as they become teenagers. Girls and boys had the same level of proficiency at the age of 9. By the age of 13, the gender gap emerged. The good news is that women now comprise 50 percent of most math and science programs. So in many cases, we’ve got gender diversity at the campus recruiting and entry level. However, Cornell study found they leave the careers in greater numbers as they seek flexibility to raise children or seek to balance family responsibilities.

    In addition to exploring ways to make work and careers more flexible, there is more that employers could do to boost their diversity efforts. For instance, there’s a structural issue that gets in the way of perfectly great diverse talent and great employers finding one another: self-identification. Minority candidates frequently choose not to self-identify for fear of being discriminated against or of becoming a token hire. However, that EEO step of self-identification exists only at the application stage. If you move upstream and focus on the identification of passive diverse candidates, building out diverse talent pools to ensure inclusion, you can move the needle. Diverse candidates often signal their ethnic or racial status in ways that are not obvious. As a result, all too often, brilliant diverse talent is overlooked or ignored. However, if you take an investigative approach to diversity sourcing, you will surface amazing talent that others have missed as you demonstrate a serious commitment to equal employment.

  11. @ Krista & Everyone:
    I commend efforts to make sure that women and systematically discriminated minorities are actively sought out to minimize economic and social inequities in opportunity. (I just “love” the folks who say: “We ended slavery in 1865 and segregation in 1954. Now everybody has an equal opportunity to get to the top.” or “You women have voted since 1920. Why are you still complaining? That $0.72 on the dollar you make compared with men doing the same work should be enough, and if it’s not, it’s your fault”.)

    However, it is necessary but not sufficient that substantial numbers of women and minorities reach the 1%.
    It is more important that the lot of those who are part of the 99% who never will get there improves substantially. See: “Of the 1%, by the 1%, for the 1%” (http://www.vanityfair.com/society/features/2011/05/top-one-percent-201105) by Nobel prize-winning economist Joseph
    Stiglitz.

    Cheers,

    Keith

    ……………………………………………….

    “The Irish have their have their homeland… The Italians got their families and Church… What do you people have?” – Joseph Palmi (played by Joe Pesci).

    “We’ve got the United States of America… Everyone else is just visiting.”

    -The Good Shepherd (2006)

  12. While the system in the US isn’t perfect and certainly requires some adjustments and fixes, looking at the achievements of the US in the last 200 years, one might conclude that the white middle aged males (or white pigs as some like to call us), haven’t done such a bad job – after all the US constitution was written by these individuals, and they were the ones that (mainly) fought and died to free slaves during the civil war.

    The US was always for equal OPPORTUNITIES but unfortunately under the new paradigms of the left it becomes about equal RESULTS.

    This trend corresponds with the US decline in the world beginning from the sixties.

    While I’m all for equal opportunities, I’m also all against equal results as the left tries to dictate.

    So let’s focus on the equal opportunities component, but let’s not try to dictate the results as the left tries to do.

  13. “I view the millions of unqualified white men who, for many decades benefitted from segregation and institutionalized discrimination, as the recipients of corporate welfare.”

    Carmen my friend, I could not agree with you more on the above statement.

    However, correcting wrongs from the past is simply not possible. All we as a society can do is take what we have been denied over time through the demonstration of enhanced value and agressive intent.

    Sadly, white good ol boys hire white good ol boys. Krista’s brilliant blog speaks to the entrenched lilly white retained search industry. Look at the websites and the pics. They are the whitest people on the planet and they do not want you as a part of the club. Got shirts with tiny alligators on it or a blue blazer? That is not enough. No Female CEO’s, a few women here to appease the masses. A token minority? Maybe, I have not looked recently.

    As an aside, I interviewed at a few of those firms. So I have a dog in this fight and as such, I am one unhappy boy. Think they want to hire a Jewish guy like me? (Go find me a token Jew at some of the big retained search houses. I’ll wait…) Sad for them as I am good. Damn good but that is their loss as well as mine as I simply see this as today’s reality. Fortunatly, things change…

    To my way of seeing things, the old white guys will retire off and die. Truth be told, I hate those guys. Always did. If I were in charge, do you think I would hire one of them? Not if they were bleeding from the head but that is just how I feel as I read all of this. (As my wife would say, “wow, do you think Howard is mad?”)

    I hate injustice and I hate entrenched power and I hate the associated abuses. Pleaase forgive me as I feel that I can be more “honest” and blunt here then I can in my articles as I am just commenting on the work of others. (Thanks Krista. Perhaps you can do an article on male abuse of power in the workplace. that will set me off like a roman candle.)

    As far as women goes, I do not see them as having to do much other than to keep on going. They are slowly taking over and this is a good thing. I would work for a woman over a man anytime. If I have to work for one more short, bloated rage-filled man, I am not sure what I will do. As far as minorities, I do not know how this will shake out but I do not see government legislation, ever, as being the answer.

    Wow. I feel better now. Thoughts my friends?

  14. @Amir: And if we don’t fight very hard for equal opportunity AND a floor below which no one should fall, we end up with the Fortune 400 wealthiest Americans having a combined wealth equal to the bottom 150 million Americans, nearly 50 million in poverty (and almost as many without health insurance), and a stagnating declining income for the vast majority of us
    (http://www.npr.org/2011/11/16/142353732/how-u-s-tax-policies-increased-economic-inequality “While the average income for the bottom 90 percent of taxpayers has remained basically flat over the past 15 years, those in the top 0.01 percent have seen their incomes more than double, to $36 million a year.”).

    Maybe you and some others think this is a good thing, or the poor’s own fault- I don’t.

    (Social mobility and inequality Upper bound http://www.economist.com/node/15908469
    The American dream is simple: work hard and move up. As the country emerges from recession, the reality looks ever more complicated.)

    Keith “Which Side Are You On?” Halperin

  15. Howard,
    I agree with you that “the old white guys will retire off and die” as you put it, so in a way the problem takes care of itself over time.

    Also, let’s be frank, what “the old white guys” do is no different from what any other dominant group in the US economy would have done if they had control – if the economy would have been dominated by women for example (or by African-Americans or Hispanics) it would not have been different, and they would have also tried to keep the status quo.

    You mention that you are Jewish and it is a disadvantage. Just to remind you, in the past the discrimination against Jews was much worse, but it didn’t stop Jews from succeeding – if they didn’t let you in you just started your own business/ club and didn’t complain about it.

    What we lack is the spirit of can do. In a way the discrimination these days gives us excuses not to put our best effort and that’s bad. Instead of fighting on how to divide the current pie, we should focus more on extending our pie.

    The system these days, although not perfect, is much better than what it used to be so let’s stop complaining about it.

    Keith,
    I’m not sure why your write that “Maybe you and some others think this is a good thing, or the poor’s own fault- I don’t”.

    I’m talking about taking personal responsibility, and stop complaining about things. I don’t think that I mentioned in my previous post that I view the gap in the US as positive, and in fact I view it as a very negative trend. Still, self reliance and personal responsibility is the way to change it, and not whining about it. Whining takes energy from the main focus which should be a can do attitude. It is not the poor’s own fault that they are poor, but it is certainly their responsibility to change it and the best way to achieve it is to stop focusing on the negatives.

  16. @ Amir. Thank you for response. Personal responsibility, self-reliance, and not complaining did not improve the fortunes of millions of people who’ve benefitted from the achievements of the civil rights, women’s rights, and other minority-rights movements. It didn’t work for the millions of others who gave 110% everyday, played by the rules and lost their jobs, their houses, and their savings while the people who did it to them walked away with millions. The Occupy and the Tea Party folks have it right-going back to a saying from an old movie:
    “I’m as mad as hell and I’m not gonna take it anymore!(http://www.youtube.com/watch?v=dib2-HBsF08)”
    Perhaps our greatest personal responsibility is to work together to improve our country for ALL of us instead of saying “I’ll get mine- you get yours”. We’ve had that last attitude more or less for 30 years, and for most us, it really hasn’t worked out all that well…

    Keith “Howard Beale Lives!” Halperin

  17. Definitely a hot topic. The effectiveness of government mandated diversity can be debated forever. From my perspective what this is saying is that there is still work to be done. In a perfect world, diversity would be a non-issue, but as we all know the world is not perfect. As a woman and a minority I have encountered discrimination, but that does not make it “OK”, or that it should not be changed. While government mandated diversity may not be the best method, it does provide awareness, and this is a step in the right direction.

  18. @ Merlynn: Well said. When we scratch beneath the thin veneer of businesses’ profit-maximizing pragmatism, we encounter what’s frequently motivating the people in charge of large businesses: power and the need for control. It’s not fair competition they seek- it’s winning control and staying on top, and making someone else lose if they themselves can’t win (or even if they can). Appealing to their better instincts (or sometimes even their self-interest) or allowing voluntary compliance and self-policing doesn’t really work well with such folks, and as we’ve seen in the financial and housing meltdowns, there are enough folks like this to make a real mess of things when they are left to their own devices, aka, “the omnipotent and omniscient power of the free market’s Invisible Hand, may its Name be forever blessed!” Government-mandated regulation may be like what Churchill said about democracy: “.. the worst form (of government) except all those other forms that have been tried from time to time”.

    Keith “The Raised Middle Finger of the Invisible Hand” Halperin

  19. Excellent discussion…thanks Krista for starting. I’d like to suggest two more steps along the five that Krista listed above to help companies prepare for impending diversity regulations – or to improve their diversity hiring in general:

    …6)Improve the internal hiring process to reduce cycle time – even if you can only do it on a joby-by-job or leader-by-leader basis. Top diverse talent is in high demand, and not often “lingering” in the job market to wait months for a hiring decision.

    7)Align the company’s value-proposition to the diverse pools you’d like to attract and retain. This may be a different way to think about compensation…and may require a less-traditional approach, the creation of a new model or of a “hot jobs” type of track. It is always more expensive to get and keep the best talent – and even more competitive in areas where the pools may be smaller.

    I feel like we can talk about these all day long — for me, especially the compensation topic. I really believe a paradigm shift is required when we think about the relative value of critical talent in any organization…and I’m not sure that traditional approaches are getting the job done. We have the hard work of ovecoming classic discrimination in hiring practices…and the work to attract AND keep diversity into environments where sometimes few have gone before.

Leave a Comment

Your email address will not be published. Required fields are marked *