Dive Brief:
- Wells Fargo operating committee members' efforts to increase representation and inclusion of diverse employees at the bank will be reflected in their year-end pay packages, CEO Charlie Scharf told staff in a memo Tuesday, according to Bloomberg.
- Scharf set a goal Tuesday to double the number of Black leaders at the bank within the next five years. He also said Wells Fargo would add a new diversity and inclusion-focused position reporting directly to the CEO. Black people comprise 6% of Wells Fargo's senior management, the wire service reported.
- The moves come as the May 25 killing of George Floyd has incited a swell of protests and awareness surrounding racial inequality. A number of financial institutions over the past week have said they're closing — or closing early — Friday to let employees observe Juneteenth, which honors the belated announcement of the abolition of slavery.
Dive Insight:
Few of the top U.S. banks connect diversity goals to individual pay. Goldman Sachs last March said the bank's business managers would be judged by their ability to meet diversity goals and that the metric would be directly tied to determining compensation and promotions, according to Bloomberg. Citi uses representation goals among the non-financial targets it considers when deciding executive compensation.
Scharf on Tuesday vowed to add more Black people to the bank’s operating committee, but said Wells Fargo's "unique" regulatory issues may hinder his efforts. The bank has 12 public enforcement actions, including a $1.95 trillion asset cap imposed by the Federal Reserve, resulting from Wells Fargo’s well-publicized 2016 fake accounts scandal.
"The unfortunate reality is that there is a very limited pool of Black talent to recruit from with this specific experience as our industry does not have enough diversity in most senior roles," Scharf said.
Of the more than 80 top executives at the six largest U.S. banks, only Citi CFO Mark Mason is Black.
"Our progress will not be a straight line given the experience required in some of our roles, but I would ask that you judge our progress two years into my tenure as CEO," said Scharf, who took over Wells Fargo's top role in October.
Beyond the banking sector, it's still rare to see diversity goals tied to compensation. At least 3% of S&P 500 members include some form of diversity metric in their executive compensation plans, Bloomberg data showed.
But Jeanne Branthover, global head of financial services at headhunting firm DHR International, said more companies may follow Wells' lead.
"Change will happen if you tie it into someone’s compensation," she said.