The Greenlining Institute regularly examines corporate executive board diversity.1 Our 2019 study zeroes in on the gender and racial makeup of bank executive boards, and occurs just as federal policymakers push for diversity in banking and financial inclusion, including the recent creation of a Subcommittee on Diversity and Inclusion within the U.S. House Committee on Financial Services and a June 2019 hearing on “Diversity in the Boardroom.” Greenlining supports efforts in Congress to increase board diversity by requiring disclosure of corporate board demographics (H.R. 3279 and H.R. 1018) and identifying diverse board candidates (H.R. 281).
Our analysis of the 10 largest depository banks in California, defined by deposit market share, found that on average, people of color make up 30 percent of board composition, while making up over 67 percent of California’s population. Bank of the West topped the rankings with a board containing 75 percent people of color.
Why Board Diversity at Banks Matters
When companies are intentional about creating diverse, equitable and inclusive work environments, they help to disrupt the income disparities that inform broader economic conditions in marginalized communities. For financial institutions in particular, the leadership should reflect the communities they serve in order to effectively build trust with consumers and make capital and financial services accessible. And ultimately, a diverse board improves an institution’s bottom line.3
Executive boards are the ultimate decision-makers in financial institutions and drive policies that trickle down to communities. Boards are accountable for the actions and behaviors of their institutions. In order to fight redlining and promote economic development in communities of color, boards need to reflect the diversity of the population they serve. In the United States, people of color make up 41.8 percent of the population. California’s population is more than 67 percent people of color.
Greenlining Standards for Equitable Bank Boards:
- Consider the racial demographics of the United States as a benchmark for representation.
- Consider the gender demographics of the United States as a benchmark for representation.
- Include at least one person of color and one woman for consideration in board candidate searches.
- Publicly disclose executive board members, disaggregating by race and gender.
- We believe that executive boards of national banks that meet Greenlining’s standards for equity will be more likely to create equitable and inclusive policies and have a greater commitment to diverse communities.
Board diversity among California’s largest banks still has room for progress. Overall, the boards of the banks we analyzed fail to mirror the racial and gender diversity of California and most also fail to reflect the demographics of the United States overall. Although Bank of the West ranks highest, with 75 percent of its board made up of people of color, the majority of the banks we studied had fewer than 40 percent people of color on their boards and, on average, people of color made up 30 percent of board composition.
Strategies for Building Diverse Boards
Bank boards should reflect the diversity of California and the nation. We believe that the following strategies will lead to greater racial equity within banks and in their investments in communities. Diverse leadership will help banks understand and meet the needs of their diverse customer base and prioritize reinvestment in currently underrepresented communities.
- Establish a commitment to diversity, equity and inclusion
- Disclose board demographics and policies
- Set goals for representation on boards
- Expand qualifications for board members
- Professional development of bank leadership