Financial Crisis Puts Diversity Gains at Risk

Advocates for diversity hiring on Wall Street worry that the financial crisis will derail progress

By Alison Damast and Dan Macsai

Increased diversity on Wall Street could be another victim of the financial crisis.

In recent years advocacy groups have pushed up the number of blacks and other traditionally underrepresented minorities being hired and promoted by financial firms. Now, as financial firms downsize or disappear, many of those new hires may find themselves competing with more senior employees in the search for new jobs.

"As we all know, when anything goes wrong in this country, black employees are hit harder than most," said Barbara Thomas, president and CEO of the National Black MBA Assn., which held its annual conference and job fair in Washington, D.C., earlier this month. "There's a saying: 'When America gets a cold, black America gets pneumonia.'"

Diversity hiring in the finance and insurance industries has been on the upswing in recent years. Blacks made up 13.1% of the total industry workforce and 6.4% of managers in 2006, compared with 12.9% and 6.4%, respectively, in 2003, according to the U.S. Equal Employment Opportunity Commission. Hispanics were 7.6% of the total industry workforce and 4.4% of managers in 2006, vs. 6.9% and 4% in 2003.

Looking Outside Finance

Of the top 50 firms for diversity listed by DiversityInc. magazine, 11 were financial firms, with Bank of America (BAC), Merrill Lynch (MER), and American Express (AXP) in the top 10, said co-founder Luke Visconti. Visconti added that the actual effect on diversity when companies merge or downsize will likely vary according to the companies' layoff and retention policies.

Thomas said the Black MBA organization has been trying to refocus on industries less affected by the financial crisis: health care and biotech, global media and entertainment, energy, and food and beverages. "We've been encouraging our members to pursue these industries," she said.

Yvonne Hart, associate director of MBA student programming at the Robert Toigo Foundation, which awards fellowships to minority students at business schools, said her organization has been keeping a close eye on how the financial crisis is affecting minority students. "We always have concerns about that, and definitely those concerns have intensified over the past 12 months," Hart said. "One of the things people are worried about is the increased competition that is going to be out there. There will be more people for fewer seats, and experienced people, who maybe out of desperation might be more amenable to taking a role for a junior person. So what does that do to that junior person out there? It's one of our main concerns."

Women Also Hurt

Hart said her organization has changed its programming in response to the recent turmoil of the past two weeks, adding six sector-focused Web seminars on navigating industries other than investment banking and intensified interview and mentorship guidance. The group also held a town hall-style conference call meeting last week, in which four professionals from the investment banking industry—including two former Toigo fellows—spoke to 130 minority business school students considering careers in finance, giving them insights and career tips on how to move forward in the new financial landscape.

It's not just racial minorities who are concerned. When word broke of Lehman Brothers' bankruptcy filing, the Forte Foundation, which encourages female MBA candidacies, sent out an e-mail to all the women in their database, reminding them of the career resources the group offers.