George Floyd—A Tipping Point for the C-Suite?

Despite years of diversity programs and pledges, the killing of George Floyd could just be the tipping point that compels the financial services industry C-suite to finally begin building more equitable, inclusive cultures for black professionals.

Against the backdrop of a worldwide pandemic, the May 25 killing of George Floyd has been the tipping point for a society already on edge. His death at the hands of a white police officer, coming after other recent race-related killings and centuries of discrimination against black people in U.S., sparked global outcries and protests denouncing racism. The outcries have come not only from ordinary citizens but from governments and corporations as well.

I am one of the partners at BlackMoss and, in full transparency, I am an African American who has worked in financial services for over 25 years. I am all too familiar with systemic racism within the financial services industry. At each firm I worked for, I was subjected to both subtle and overt racism. While the level and form of that racism varied, what is most important to highlight is that the racism I faced was imbedded in the firm’s culture and work environment.

Financial services firms, historically mute during cultural, social-economic and political crises, have suddenly found their voices in support of anti-racism. Jamie Dimon (CEO of JPMorgan Chase), Larry Fink (BlackRock), David Solomon (Goldman Sachs) and other leaders within the investment community have made public statements pledging their firms’ support to anti-racism. But are the words just a battle cry for change or simply woke-washing—i.e., signalling anti-racism advocacy through advertising and marketing, but taking no concrete action to affect change within their firms or the industry as a whole?

Companies in the top quartile for ethnic/cultural diversity are 33% more likely to outperform on profitability and those with diverse boards 43% more likely to be profitable, according to a 2017 McKinsey report.

Black people make up 13.4% of the U.S. population and 10% of college graduates but occupy only 3.2% of senior leadership roles at large U.S. companies and just 0.8% of Fortune 500 CEO positions. Among these companies, only four (Lowes, Merck, TIAA, and Tapestry) are led by a black CEO. In 2017, black people comprised 5.4% of Goldman Sachs’s U.S. employees, yet only 2.9% of executives. At Morgan Stanley just 2.2% of executives are black. Despite years of diversity programs and pledges, it is clear that career advancement for black people within financial services firms has been questionable at the senior leadership level.

Making matters worse, an industry supposedly hyperfocused on productivity and profitability has performed very poorly in this key driver of performance. Companies in the top quartile for ethnic/cultural diversity are 33% more likely to outperform on profitability and those with diverse boards 43% more likely to be profitable, according to a 2017 McKinsey report. If financial services firms are going to “walk the talk” and make a measurable and meaningful impact on diversity and inclusion for black people, they must make a stronger and more sustained commitment than they have in past.

So what do financial services firms need to do differently? The first step is for members of the C-suite, which remains primarily white and male, to acknowledge that subtle and overt racism is one reason why they occupy senior leadership positions and why more black people don’t. Acknowledging that you have benefited from these practices is an important first step in fixing the problem.

The next step is for the C-suite to implement specific, measurable anti-racism initiatives, both internally and externally. Make no mistake: employees and clients know the difference between making blanket statements and taking action—so authenticity is absolutely key. The information and data already exists; senior leaders must reach out to employees and clients and really listen without being either judgemental or defensive. Then they need to act on these insights, making the necessary and often difficult changes needed to stamp out racism in their organizations and spheres of influence?

Unlike the coronavirus pandemic, there is absolutely no hope of a vaccine for racism.

Finally the entire C-suite must be held accountable. It is just not enough to nominate a single executive sponsor/spokesperson to post now and again on LinkedIn and Twitter to try to give the impression they are leading the way and doing things differently. Firms must be regularly articulate on the topic and show how progress is being tracked and communicated internally to employees and externally to clients and more broadly.

Financial services firms need to understand that the racism crisis we face today will not disappear overnight. In fact, the crisis will very likely intensify before we see any significant improvement. Unlike the coronavirus pandemic, there is absolutely no hope of a vaccine for racism. Firms that fail to fight racism head-on will see a backlash from employees, clients and partners. Conversely, those that achieve lasting change will benefit not only financially but will also play a part in creating a more equal world.

I was recently on a Zoom call with former black colleagues who work in financial services. We spoke about how unprecedented it is for so many CEOs from top financial services firms to speak out about racism. Several were skeptical as to whether these CEOs would actually follow through on their promises. With so many firms led by white male CEOs and all white male C-suites, it is quite a stretch to imagine a different world. In the end, whilst actions speak louder than words, words are a good start and this time I feel we are at a tipping point for real, long-term change.

When talking about diversity Angela Davis, an American political activist, academic and author stated “Diversity without changing the structure, without calling for structural formation, simply brings those who were previously excluded into a process that continues to be as racist, as misogynist as it was before." In the end it will be up to employees and clients to keep the pressure up on the C-suites of financial services firms to make their words reality. Otherwise, they are just words. Again.

Craig Welch, Partner
craig@blackmosspartners.com