Wells Fargo & Co. Chief Executive Charles Scharf exasperated some Black employees in a Zoom meeting this summer when he reiterated that the bank had trouble reaching diversity goals because there was not enough qualified minority talent, two participants told Reuters.
He also made the assertion in a companywide memo June 18 that announced diversity initiatives as nationwide protests broke out following the death of George Floyd, an unarmed African-American man, in police custody.
“While it might sound like an excuse, the unfortunate reality is that there is a very limited pool of black talent to recruit from,” Scharf said in the memo, seen by Reuters.
Scharf spent more time listening than speaking during the previously unreported 90-minute call which he initiated. His comments about Black talent rubbed some attendees the wrong way, according to the two employees, who spoke on the condition of anonymity because they feared repercussions.
Not all attendees recalled being offended. “The meeting was incredibly constructive. … I walked away being incredibly surprised at how genuine and sincere he is,” said Alex David, president of the Black/African American Connection Team Member Network.
But several Black senior executives across corporate America said they are frustrated by claims of a talent shortage, and called the refrain a major reason that companies have struggled to add enough racial and ethnic diversity to leadership ranks, despite stated intentions to do so.
“There is an amazing amount of Black talent out there,” said Ken Bacon, a former mortgage industry executive on the boards of Comcast Corp., Ally Financial Inc. and Welltower Inc. “If people say they can’t find the talent, they either aren’t looking hard enough or don’t want to find it.”
Bacon said he was “shocked and puzzled” by Scharf’s comments.
In a statement released by Wells Fargo late Tuesday night, Scharf said: “I am sorry my comment has been misinterpreted. The financial industry and our company do not reflect the diversity of our population. We, at Wells Fargo, are committed to driving change and improving diversity and inclusion.”
Earlier Tuesday, Wells Fargo spokeswoman Beth Richek defended Scharf’s record on diversity.
The CEO of the largest U.S. bank employer has pledged to double the number of Black leaders over five years and tied executive compensation to reaching diversity goals. He is also requiring hiring managers to consider diverse candidates for high-paying roles that are vacant, and ensure diversity on interview teams.
Since Scharf joined the bank a little less than a year ago, it has added two Black executives to its operating committee: Lester Owens, head of Operations; and Ather Williams, head of Strategy, Digital and Innovation.
Wells Fargo’s latest proxy disclosed more diversity data than those of many other companies, including that two of 12 directors at the time were Black and one was “Latino/Hispanic.”
Scharf “is committed to deep and systemic change to increase diversity and has held several forums where there has been candid conversation and unfiltered feedback,” Richek said in a statement.
‘Talent is there’
Introspection across corporate America during the Black Lives Matter movement has cast a harsh light on the lack of diversity.
In boardrooms, African-Americans made up 10% of new director appointments in the Fortune 500 last year compared with their 13% of the U.S. population, according to a 2020 report from executive recruiting firm Heidrick & Struggles. New Hispanic directors were even more scarce, the study found.
Only 7.3% of the five highest-paid executives at financial companies in the Russell 3000 were racial or ethnic minorities, according to data from ISS ESG, an arm of the proxy-advisory firm Institutional Shareholder Services. That number has risen in recent years, yet remains far below the percentage of minority groups in the general U.S. population.
Senior corporate executives and recruiters said the notion of a shallow minority talent pool is frequently cited as a hurdle to improving diversity but probably reflects insular professional and social networks.
Lauren Holland, who chairs a word-of-mouth professional network called Wall Street Friends, said she has 8,000 members in minority communities, and sent out more job posts to them in the last two months than in the last five years.
“I literally get emails every single day from people asking to be added to our list,” she said. “The talent is there. It’s just a matter of the firm accessing it and connecting with it.”
Not enough progress
Experts said one reason board rooms and C-suites lack diversity is that such jobs are often filled by people who have managed businesses, while many people of color have tended to be stuck in roles that lack a direct connection to profits.
“As women and minorities started to gain traction in corporate America, they were trapped in certain jobs companies felt comfortable placing them in, like human resources, administrative-support type functions,” said Teri McClure, former general counsel and chief human resources officer at United Parcel Service Inc., who sits on several boards, including that of JetBlue Airways Corp.
McClure said she frequently hears comments like Scharf’s when companies have not tried hard enough to find diverse candidates or give them the experience to qualify for senior roles.
Some Black directors and executives said they were unhappy with the progress in improving diversity.
“Unless I practically get on a soapbox about it and ask about it every meeting, it gets pushed out,” said Mary Winston, a director at companies including Chipotle Mexican Grill Inc., about some of her past work on boards. “It’s just not as robust a conversation as it should be, and no progress has been made.”
Winston, adding that she is often the only person of color in board rooms, also disagreed with the notion of a talent shortage.
One of the Wells Fargo employees said there simply was no lack of talent: “I can get them 10 to 15 resumes today.”