The Supreme Court's recent ruling on affirmative action isn't binding on the U.S. financial services industry, but its impacts on lenders could still be substantial.
Two weeks after the June 29 decision, there is a growing consensus that diversity, equity and inclusion policies and programs at banks and credit unions — and across corporate America — are about to face a lot more scrutiny. Some programs could face legal challenges that are inspired by the Supreme Court's ruling that race cannot be used as a factor in college admissions.
Banks and credit unions, and their corporate counsels, are likely now in the midst of trying to figure out the possible ramifications of the court's decision. Initiatives that could be under the microscope include internship programs for minority students and representation goals aimed at increasing workforce diversity, legal experts say.
Lenders may be reviewing their existing programs and thinking about how to restructure them in ways that don't violate the court's ruling but still achieve the same goals, according to the legal experts.
While the ruling does not directly affect private employers — the use of affirmative action in employment is rarely legal under Title VII of the Civil Rights Law of 1964, which prohibits employment discrimination based on race, color, religion, sex and national origin — the implications may still be far-reaching, said Esther Lander, an attorney at the Akin law firm.
"I think the consequences of the opinion will be a lot more attention [paid] to diversity initiatives," Lander said. Some initiatives may "not pass Title VII scrutiny, and they're going to be illegal."
In recent years, banks have become more intentional about creating workforce diversity and tracking their efforts in a more transparent way. That's especially true since the May 2020 murder of George Floyd, which sparked new conversations about racial inequity. While some banks were already prioritizing diversity in their ranks, others stepped up efforts to attract, retain and promote people of color.
The initiatives run the gamut from setting goals to increase the number of ethnically diverse members of senior leadership,
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Some of those efforts, including internship programs, may now get a deeper look, Lander said.
"A lot of companies … have dedicated internship programs for minorities or diverse candidates to try to have a pipeline for hiring, and those will be scrutinized to see if they're purely race-based or open to anyone who has a compelling story as to why they will add diversity to the culture of the employer," Lander said.
Several banks declined to talk about how they expect the Supreme Court's ruling to impact their DEI programs. A handful of others issued statements declaring their intentions to plow ahead with their ongoing efforts to create more diverse workforces.
JPMorgan Chase, the largest U.S. bank by assets, said in a statement that it is "actively reviewing" the court's decision. JPMorgan is one of many banks that has been working to diversify the composition of its employee base, including at the senior management level.
"[We] remain fully committed to an inclusive workforce made up of top talent that includes diverse backgrounds and perspectives, which we believe is critical for generating the best ideas, enjoying a stronger corporate culture and delivering better results for our shareholders and, importantly, our customers," the $3.7 trillion-asset company said in the statement.
Wells Fargo, the fourth-largest U.S. bank with $1.9 trillion of assets, said in a statement that it is "committed to advancing diversity, equity and inclusion" among its employees, as well as in the communities in which it operates. The company said it believes "having diverse representation and perspectives, equity and inclusion across the bank are critical to [its] ability to serve the evolving needs of colleagues, customers and communities."
Citizens Financial Group in Providence, Rhode Island, said in a statement that it is still "committed to ensuring an environment that builds a sense of inclusion and belonging, values the uniqueness of all people, and where decisions are made with fairness and consistency," both inside and outside the company.
"Banks are uniquely positioned to help address critical economic needs and build stronger communities," Citizens added. "Having diverse perspectives helps enable better decision making, risk management and unlocks greater innovation."
The American Bankers Association, a trade organization, said the banking industry "remains strongly committed to diversity, equity and inclusion as a business imperative."
"Banks across the country will continue to implement lawful initiatives focused on recruiting and retaining diverse talent to represent the communities they serve," the industry group said in a statement.
The rollback of affirmative action in higher education has also given many credit union leaders pause about how to proceed.
In recent weeks, members of the African American Credit Union Coalition, who sit at the helm of institutions across the country, have been concerned about how the court's decision will affect their diversity, equity and inclusion policies, said Renée Sattiewhite, president and chief executive of the Snellville, Georgia-based organization.
She said that credit union decision-makers who establish standards of fairness across their organizations are now viewing campaigns for cultural diversity as "more of a business case than a feel-good concept." Despite initial worries about the Supreme Court's decision, there are potential positives in executives' needing to reexamine their programs from a new angle, she said.
"It's still about business, and it's never going to stop being about business, but financial institutions are here, especially in the credit union system, to serve the underserved. … Well, it doesn't get any more underserved than the rollback of affirmative action," Sattiewhite said.
Some legal experts said that while the number of legal challenges to DEI programs will probably increase, diversity efforts as a whole are unlikely to disappear. In fact, Lander said, some banks might defend their policies as lawful while forging ahead with the initiatives.
Some banks may not be worried about reputational harm from a reverse-discrimination case in the same way they might be in a discrimination case, Lander said.
"The other piece of it is this is a very conservative court that is stacked a certain way, and I think forward-thinking companies don't want to be viewed as in agreement with that," she added.
Frank Gargano contributed to this story.
