Dive Brief:
- Wells Fargo commissioned a third-party racial-equity audit meant to examine Wells Fargo’s ties to diverse communities and support of diversity in its workforce, the bank said Tuesday.
- The bank enlisted Washington-based law firm Covington & Burling for the assessment, which will include input from internal and external stakeholders. Wells Fargo will publish the audit’s results by the end of next year, it said.
- Wells Fargo CEO Charlie Scharf called the audit “a critical next step in reinforcing our commitment to racial equity and closing the wealth gap in this country.” Diversity, equity and inclusion, he added, are “imperative at Wells Fargo, and we consistently strive to measure our progress and hold ourselves accountable.”
Dive Insight:
The upcoming audit surfaces as Wells Fargo navigates several issues with a racial undercurrent. The bank in March came under fire after a Bloomberg analysis found the bank accepted 72% of mortgage refinance applications from White borrowers in 2020 but 47% from Black applicants. Wells Fargo’s numbers improved marginally in 2021. Still, the issue — and others — prompted Sen. Sherrod Brown, D-OH, to call on Scharf ro fix Wells’ shortcomings “once and for all.”
Additionally, about a dozen current and former Wells Fargo employees told The New York Times in May that the bank held phony job interviews for nonwhite and female job-seekers for positions that had already been offered to other candidates. The effort was allegedly meant to satisfy the bank’s “diverse slate” policy, which mandates that at least half of candidates interviewed for certain positions be of a diverse background. The bank paused that policy in June to review it, and instituted changes in August.
Scharf himself landed in hot water in 2020, after characterizing the pool of potential Black candidates as “very limited.” Wells Fargo that year pledged to double Black leadership by 2025 and tie operating committee members’ diversity efforts to their pay. About 9% of the bank’s U.S. executives are Black as of December 2021, up from 5.8% a year earlier, the bank said in a Tuesday press release.
Wells Fargo is hardly the first bank to agree to a racial-equity audit. Among Wells’ peers, Citi pledged to do so last October, and JPMorgan Chase followed in March.
The notion hasn’t always been popular. Wells Fargo — this year and last — advised its shareholders against voting for such an audit, Bloomberg reported.
The bank’s announcement comes, too, as Scharf prepares to testify next week in front of the House Financial Services Committee in a hearing on accountability. A similar hearing with the Senate Banking Committee has yet to be scheduled.
The law firm
Covington & Burling, which counts former U.S. Attorney General Eric Holder in its leadership, has previously conducted racial audits for companies in trouble. The law firm helmed Starbucks’ racial equity audit in 2019, not long after two Black men were accused of trespassing and were arrested in a Philadelphia store despite explaining that they were there for a business meeting.
The incident went viral and Starbucks, which had tried and failed to strike up a conversation on race relations after Michael Brown was killed in Ferguson, Missouri, in 2015, was forced to face allegations of racial discrimination in its stores head on.
Starbucks made several changes following Covington & Burling’s audit, including expanded training and opening more stores in underserved communities.
In its press release Tuesday, Wells Fargo listed several initiatives it has launched to boost racial equity. It’s invested $50 million in 13 Black-owned banks and roughly $420 million in 200 community development financial institutions and nonprofits that serve mostly nonwhite business owners; and has given $107 million in scholarships and programming to historically Black colleges and universities and minority-serving institutions, it said.
The bank last week awarded $7.5 million to the Harris County Homeownership Collaborative in Houston, the first of eight grants in a larger homeownership effort.
