Was Wells Fargo’s CEO wrong about the pipeline of Black talent?

Telling it like it is.
Telling it like it is.
Image: Reuters/Lucy Nicholson
We may earn a commission from links on this page.

Wells Fargo CEO Charlie Scharf had to backpedal last week after Reuters surfaced details of a June memo in which he addressed the shortage of diversity on the company’s operating committee. “[T]he unfortunate reality,” he wrote, echoing comments he had made on a video call with employees, “is that there is a very limited pool of Black talent to recruit from.”

One had to wonder whether Scharf or his handlers stopped to think about the demoralizing effect a message like that might have on the company’s existing Black workforce. And it could certainly be argued that the head of America’s most reputationally challenged bank ought to be a lot more careful in general using words with the potential to offend.

But was Scharf actually wrong? Leadership in the US banking sector is 81% white at senior levels. Had Scharf suggested that the operating committee in fact has ample Black talent to choose from, would he not have sounded equally tone deaf (and inexplicably complacent with the industry’s makeup)?

Perhaps the problem with Scharf’s statement is that it triggers a long-held—and by now widespread—frustration with executives who reflexively invoke the “pipeline” to explain poor progress on diversity. It’s a flimsy excuse for anyone to use, but especially for CEOs, who are the very people who should be held to account for the state of the pipeline.

Maybe future public handwringing by CEOs lamenting their candidate pools ought to be preceded by a checklist that encourages the executives to first ask themselves:

  • Have I scrutinized and successfully overhauled my company’s hiring process to root out bias and actively recruit Black candidates?
  • Have I created a culture of inclusion to keep the pipeline I have from leaking?
  • Have I personally mentored, or given internships to, or made connections for young people? Have I done this for young people beyond the children of friends and associates who look just like me?
  • Have I supported political campaigns, legislation, and tax policies that would expand opportunities for more people, or have I only lobbied for things that limit what my company owes society and preserves more of my own wealth?

The diversity divide

Scharf’s characterization of the pipeline at Wells Fargo hardly makes him an outlier. PwC’s annual corporate directors survey, published this week, finds that 41% of US board members say a lack of qualified candidates has impeded efforts to increase board diversity—tying it with long-serving directors’ reluctance to retire as the most-cited reason why boards haven’t made better progress on diversity.

Interestingly, there is a huge gender divide on this question (pdf, p. 24), with 47% of men but only 25% of women seeing the candidate pool as a major cause of the holdup.

Maybe women are less inclined to blame pipelines when they see so many other obstacles to diversity. For instance, PwC, which surveyed nearly 700 corporate board members across US industries, found that only 34% of male directors, versus 80% of female directors, even agree that diversity on a board enhances board performance. And while 58% of female directors say they would support tying diversity and inclusion metrics to executive compensation, only 32% of their male counterparts agree.

In his mea culpa last week, Scharf announced that the bank’s operating committee members “will be evaluated based upon their progress in improving diverse representation and inclusion in their area of responsibility,” with a “direct impact” on bonus pay. He also apologized “for making an insensitive comment,” which he said reflected his own unconscious bias. “There are many talented diverse individuals working at Wells Fargo and throughout the financial services industry,” he wrote, “and I never meant to imply otherwise.”

But notably, the apology memo didn’t backtrack on his assessment of the talent pipeline. “I’ve worked in the financial services industry for many years,” he noted, “and it’s clear to me that, across the industry, we have not done enough to improve diversity, especially at senior leadership levels.”

If that’s the case, then it’s time for executives like Scharf to talk less about the pipeline and focus more on strengthening it.