Wells Fargo agrees to racial equity audit

Wells Fargo plans to conduct a racial equity audit, asking an outside law firm to assess the bank's workforce diversity and determine how its business practices are affecting communities of color.

The $1.9 trillion-asset bank has hired the law firm Covington & Burling to conduct the review and plans to publish the findings by the end of 2023, Wells Fargo said in a press release.

"Commissioning this work is a critical next step in reinforcing our commitment to racial equity and closing the wealth gap in this country," CEO Charlie Scharf said in the bank's press release Tuesday.

Bloomberg

A bank spokesperson declined to comment further.

The decision comes amid ongoing pressure on Wells Fargo to do more to tackle issues of diversity, equality and inclusion. Earlier this year, the San Francisco-based bank recommended that shareholders vote against a proposal calling for its board members to oversee a review to assess adverse impacts on communities of color.

In March, the bank cited "significant and ongoing" diversity, equity and inclusion initiatives as reasons to vote against the shareholder proposal.

Shareholders did reject the proposal, but it garnered significantly more support than it had in 2021— with 36% of shareholders voting in favor, excluding those who abstained from voting, an increase from 13% last year.

Since Wells Fargo's annual meeting in April, the bank has received new scrutiny in connection with diversity initiatives. A New York Times article in June alleged that the bank had conducted fake job interviews with minority candidates to satisfy its diverse hiring policy.

Wells Fargo temporarily suspended that policy before reinstating it last month.

Earlier in the year, Bloomberg reported that Wells Fargo had approved fewer than half of all applicants who sought to refinance their mortgages in 2020, substantially less than several other large lenders. Wells has called that finding "oversimplified."

In 2020, Scharf faced criticism after he reportedly told employees that the bank had trouble reaching diversity goals because of a lack of qualified minority candidates. Scharf later apologized for what he called "insensitive" comments.

In recent years, investors and public activists have increased pressure on corporations to make social justice commitments and act on diversity initiatives. Support for corporate diversity policies, including the disclosure of employee demographics, have gained momentum.

Last October, Citigroup became the first major U.S. commercial bank to agree to an outside racial equity audit, a review that's focused on the company's 2020 pledge to spend at least $1 billion on banking-related initiatives for Black-owned businesses and communities of color. Citi's audit will also be conducted by Covington & Burling.

Race and corporate America

Activist investors vow to keep pressing for racial audits at big banks

Even though recent shareholder proposals aimed at combating racial inequality did not pass, supporters say they got enough votes to keep the issue front and center.

By Jon Prior

May 10

"Companies understand these issues are important and not going away," Edgar Hernández, assistant director of strategic initiatives at the Service Employees International Union, said in an interview. "Investors want a better sense of what companies are doing to address racial equity."

SEIU, a North American labor union representing 2 million workers, has introduced shareholder proposals to hold racial equity audits at various financial institutions, including Wells Fargo, Goldman Sachs, State Street and BlackRock.

All the proposals have failed, but some of the companies, including BlackRock, Morgan Stanley and now Wells Fargo, have still chosen to conduct a review.

"These audits provide companies a good opportunity to better understand their business practices, shortcomings and how their products impact communities of color," Hernandez said.