Demonizing diversity in financial services

Diversity, equity, and inclusion, or DEI, is not a crime.

Yet the new presidential administration and a group of Republican attorneys general are wasting no time pressuring federal contractors, including major banks and asset managers, to end “illegal DEI” and answer questions that may only result in lawsuits.

The same week the new president was sworn in, state attorneys general sent threatening letters to Bank of America, BlackRock, Citigroup, Goldman Sachs, JPMorgan Chase, and Morgan Stanley. Some of the same firms have been targeted recently for their considerations of environmental, social, and governance criteria. Amid that pressure, all major US banks have withdrawn from climate coalitions, and some asset managers have followed.

Companies have largely stopped using “ESG” publicly. Whether asset managers will be scared away – or alternatively continue to use all data they see fit to make sound decisions – is a bit of a question. Some will see it as their fiduciary responsibility to do so.

We are about to see how the corporate world responds to the assault on diversity initiatives. With little doubt, things are about to intensify. The easiest response will be to scrap programs outright, but that doesn’t mean doing so is right or responsible.

Among the many, many executive orders the president signed in his recent show of power are at least two that seek to dismantle DEI practices. One primarily focuses on DEI within the federal government and the other on private business. The latter revoked several prior executive orders from former presidents, including Lydon B. Johnson’s famous EO 11246, which outlined nondiscrimination requirements within the government and for contractors and subcontractors.

Critically, Johnson’s order included placement goals, but not quotas – already, companies are not allowed to set recruitment numbers to meet affirmative action rules, according to the Department of Labor. Instead, hiring benchmarks can be used to give employers an idea about whether their workforces and contractors reflect the diversity in their communities.

If there are big discrepancies, employers can revise policies that may be having the effect of hindering employment opportunities, and they can broaden recruitment and outreach, the DOL wrote in 2023. The regulator also pointed to training and apprenticeship programs that can help workers and applications in underrepresented groups.

However companies decide to respond to the crusade against DEI, it would benefit everyone to continue promoting diversity and opportunity, in whatever form that takes.

The executive order doing away with EO 11246 is a bullying tactic against employers, wrote Jenny Yang, former chair of the Equal Employment Opportunity Commission, and Pamela Coukos, former senior advisor at the Office of Federal Contract Compliance Programs, in a response to the president’s actions.

“Under Title VII of the Civil Rights Act of 1964, employers have long-standing obligations to ensure fair workplace practices and should feel confident continuing to use the wide array of established, effective strategies for advancing diversity, equity, and inclusion that do not involve explicit consideration of race or other protected traits in employment decisions,” they wrote. “This moment is a critical time for employers to reaffirm their commitments to equal opportunity by investing in the kinds of employment practices that create real change in removing long-standing barriers to opportunity.”

We certainly hope that resonates in the financial services business.