Earlier this year, the investment firm Arjuna Capital challenged 12 financial services and technology companies in which its clients own stakes to publicly disclose how much their female and minority employees earn in comparison to white men.
Research has shown that companies with higher percentages of women and minorities in decision-making roles tend to be more profitable and make better long-term decisions than those that lack diversity, and Arjuna asked for the median pay gap as a means of pressuring companies to bring more gender and racial equity to their management ranks.
To date, only one of the dozen has complied — Citigroup.
Citi did so knowing full well that the initial news coverage would not be flattering. The data showed that female employees are paid far less than male employees — even though women make up more than half of the global workforce — and journalists seized on that point.
"Citigroup's business is money, but not a lot of it goes to its female employees," read the opening line in a New York Daily News story.
But to Citi officials, it was an issue of credibility, said Sara Wechter, the company's global head of human resources.
Months earlier, Citi had disclosed its goals for increasing female and minority representation at the management level and executives saw the challenge from Arjuna as an opportunity to measure progress in a very public way.
"It was a rough morning when we put out the numbers, but then the news cycle changed," Wechter said. Eventually, the stories became less focused on the numbers and more focused on Citi's transparency about the numbers.
"When you are willing to put out the raw number, it gives you so much credibility because you are admitting where there is a problem," Wechter said.
Its willingness to go further than its peers in releasing pay-gap data is among the reasons that Citi has made strides in the annual American Banker/Reputation Institute Survey of Bank Reputations.
Citi's reputation has also been bolstered by its decision to take a stand on polarizing social issues, such as gun control and climate change, and by its ongoing commitment to improving the cities it serves.
Customer scores for most of the 40 banks in the ranking dropped in 2019 when compared with 2018, but Citi essentially held steady amid the powerful downward trend.
Citi still trails most regional banks on the seven reputation components — citizenship, governance, innovation, leadership, performance, products and workplace — but it stacks up well against other large banks, a category that also includes Bank of America, HSBC, JPMorgan Chase and Wells Fargo.
Its score for each component was higher than the average for the large banks, with both customers and noncustomers.
"In an environment of reputation decline among U.S. retail bank customers, Citi has been able to buck the trend by reaping the benefits of their corporate responsibility efforts, especially with respect to workplace initiatives," said Sven Klingemann, the research director at the Reputation Institute.
Pioneer on the pay-gap issue
Those workplace initiatives include its transparency around disclosing pay-gap data.
Arjuna, a self-described impact investor, successfully pressured some financial services and tech companies to disclose their adjusted gender pay gap last year. That figure takes into account factors like type of work and level of experience.
But this year Arjuna requested companies disclose their unadjusted gender pay gap, which compares the median pay for all women to the median pay for all men.
While adjusted data shows if there is equal pay for equal work, the unadjusted data shows if there is equal opportunity in high-paying jobs, Arjuna argues.
Citi was the first of the large banks to disclose its adjusted figures, and several rival banks quickly followed suit. But that data was relatively uncontroversial. Banks found, for the most part, that men and women doing similar jobs are paid roughly the same amount of money.
It was after the request to disclose unadjusted figures that Citi stood apart from rivals. JPMorgan, Wells Fargo, Bank of America and Bank of New York Mellon all, in one way or another, tried to block Arjuna-backed shareholder resolutions that would have required them to disclose the data.
Why? "Companies are reluctant to publish unflattering data," said Natasha Lamb, a managing director at Arjuna.
Citi's numbers weren't flattering either. In a blog post in January, the company said, globally, its female employees earn a median of 29% less than its male employees on an unadjusted basis. It also said that, in the U.S., the median pay for minorities is 7% lower than the median for nonminorities.
Citi said bluntly that the gaps exist because the majority of higher-paying, mid- to senior-level manager positions are held by men — and, in the U.S., mostly white men.
"Our problem is not about gender equality or diversity," Wechter said in an interview. "It really is about representation at the most senior levels of the organization."
For banks, there are risks to making such data public. According to the Reputation Institute, unequal pay by gender is right up there with deceptive sales practices as the issue that could most harm reputations, so why voluntarily release data that could generate negative publicity?
JPMorgan has so far rebuffed Arjuna's calls for more transparency around pay differences by gender, arguing that its diversity efforts are self-evident.
In its 2019 proxy statement, in which it urged shareholders to reject Arjuna's proposal to disclose median pay-gap data, JPMorgan noted that women make up 45% of its operating committee and lead some of its highest-revenue business lines, including asset management, consumer lending and capital markets.
It also argued that such disclosures could have unintended consequences.
"We understand that a blunt metric like median pay gap may be helpful for a certain discussion about pay, representation and public policy, but it is not the answer," JPMorgan's proxy statement said. "For example, if a company with a high concentration of women in entry-level jobs wanted to even out its median pay metric, it could do so by limiting entry-level job opportunities for women."
Lamb and other activist investors reject that argument, however.
What the pay-gap data exposes most of all is a lack of diversity in the management ranks. Tracking it, Lamb said, forces companies to set goals while helping them honestly assess whether they have the right policies in place to ensure that they are attracting, retaining and promoting women and people of color. Are talented women, for example, quitting because the work-at-home or travel policies are not conducive to raising families?
"If we keep doing things the way we've been doing them, then nothing is going to change," Lamb said.
Citi, she added, is "taking all the right steps. It's setting hiring and promotion targets and being very transparent and honest" about how it intends to achieve more diversity.
Echoing Wechter, she said, "The first step is admitting you have a problem."
A good citizen
Once a poster child for corporate wrongdoing — it has paid nearly $20 billion in fines and legal settlements for various financial-crisis-era misdeeds — Citi has, under Michael Corbat, worked diligently to improve its public image.
Corbat, Citi's chief executive since late 2012, has been unafraid to take stands on controversial social issues.
After last year's mass shooting at a Florida high school, Citi was the first major U.S. bank to impose restrictions on gun sales by its customers in the retail industry and processing of payments for gun purchases by its credit card partners.
"As an avid outdoorsman and responsible gun owner, I know that some will find our policy too strict while others will find it too lenient," Corbat wrote in March 2018 email to employees.
"We don't have the perfect solution," in the effort to both support constitutional rights and keep children safe, he said. "But we shouldn't let that stop us from doing our part."
On climate change, Citi has committed to sourcing renewable power for 100% of its energy needs by 2020 and was the only U.S. bank to participate in a 2017 United Nations pilot program in which banks examined risks in their loan and investment portfolios under various global warming scenarios.
Two years earlier, it pledged $100 billion in financing within 10 years for activities that would help accelerate a transition to a low-carbon economy, such as wind farms, mass transit and energy-efficient buildings — and is already 95% of the way there.
Like many banks whose reputations suffered in the wake of the financial crisis, Citi has been very intentional about promoting its corporate social responsibility efforts. It has for a decade put out an annual report detailing initiatives that aim to better the lives of its customers, communities it serves and society at large. It also publishes a separate report highlighting its commitment to diversity.
Many of Citi's ads are similarly themed. One 60-second television spot tells the story of how Citi helped the Public Lighting Authority of Detroit secure financing to replace and repair about 40% of streetlights that weren't working, at a time when most other banks viewed the city as too great of a credit risk. Another spot detailed its role in financing the rebuilding of a housing project near John F. Kennedy Airport in New York that was decimated by Superstorm Sandy, spotlighting its broader commitment to affordable housing financing. (Citi has been the nation's No. 1 affordable housing lender for nine straight years, according to Affordable Housing Finance magazine.)
Ed Skyler, Citi's executive vice president for global public affairs, said that spreading the message of corporate responsibility matters because, these days, customers, employees and prospective employees want to know where companies stand on pressing social issues and how they are responding.
"You have to be very clear about your values and living up to those values in the decisions you make," Skyler said. "And those decisions can be clients that you take on or, just as powerfully, clients and transactions that you don't take on."
Citi is a public company with a responsibility to make money for shareholders, so it can't just stop financing activities that some customers, employees or impact investors may find objectionable, Skyler said. Despite its commitment to financing clean energy projects, Citi remains one of the world's largest lenders for the exploration of fossil fuels, according to Rainforest Action Network.
"We don't just cut off companies we've worked with for many years," Skyler said. "What we try to do is work with them and help them make the transition" to a low-carbon economy. "We're in a client business, and you don't want clients to think you're going to cut and run when things get a little challenging."
He added that the transition is already taking place: Citi is close to hitting its environmental financing targets six years ahead of schedule.
"We're not forcing this down anyone's throats," he said. "The client demand is there."
Diversity goals
There's a strong business case to be made for bringing more gender and racial balance to the management ranks and it's on Wechter, the head of human resources, to make sure senior executives are fostering inclusive environments and taking measurable steps to help Citi meet its diversity goals.
Citi has already made huge strides in diversifying its leadership. When Jane Fraser, now the CEO for Latin America, first joined the management team in 2014, there were only two women who reported directly to Corbat. Today, five of Corbat's 14 direct reports, including Fraser, are women.
Citi's chief financial officer, Mark Mason, is African-American, and its chief risk officer, Bradford Hu, and its general counsel, Rohan Weerasinghe, are Asian. There are also six women on the 16-person board of directors.
To keep the momentum going, Citi needs to be more intentional about filling the pipeline with more women and minorities, Wechter said. As a starting point, it aims to achieve two diversity goals by 2021: increasing female representation at the assistant vice president through managing director levels to 40% globally, from the current 37%, and increasing African-American representation in the U.S. to 8%, from 6%.
It is also setting ambitious diversity goals for hiring summer interns and entry-level employees. It has made meaningful progress on that front — 26% of this year's summer interns are minorities, up from 15% two years ago, and 47% are women, up from the "high 30s" two years ago, Wechter said. Its goal is to get to 30% underrepresented minorities and 50% women.
"It's not about just getting people in the senior ranks, it's about bringing people in the door in absolute numbers," Wechter said. "If we do not fix the incoming class representation, we are not going to be able to fix the holistic problem we are talking about."
One way Citi is widening its search for young talent is by recruiting at a wider array of schools, including historically black colleges. Its leaders are doing more mentoring at colleges and it has set up programs through its various affinity groups to offer pointers in resume building and job interviewing.
It's up to business-line heads to make sure their divisions are building their pipelines and preparing women and minorities for more responsibilities through stretch assignments, mentoring and networking opportunities. Once a month they are to report their progress at operating committee meetings, and if they are falling short of expectations, Wechter will let them know about it.
Fraser said the color-coded progress report is effective.
"There's nothing like having a red, yellow or green slide put up against your name in front of your peers to make sure you are paying attention to this," said Fraser, who oversees operations in about two-dozen countries and co-leads the women's affinity group at Citi.
Fraser is considered one of Citi's most ardent champions for advancing the careers of women, though it wasn't a role she always embraced.
"Growing up in banking in the [male-dominated] '80s and '90s ... I wanted to [succeed] on my own merits, not because I was a woman," she said. "And I felt that women who were taking on the mantle, pushing for more women, got the 'women's' label."
Now Fraser has a different view. She believes diversity is "increasingly important to a firm's ability to compete" and, as one of Citi's most-senior women, she feels a responsibility to help women and minorities overcome barriers to advancement so that the company can better serve an increasingly diverse market.
"It's very important to create an environment that's inclusive," Fraser said. "The world is so divisive, and there's so much change going on. If you don't have diversity of thought around the table, you don't compete well."
Wechter and Terry Hogan, Citi's head of talent and diversity, echoed that sentiment.
Hogan said that teams made up of men and women with diverse experiences and backgrounds "bring perspective that reflect our client base and allow us to be better prepared to innovate for our clients."
Plus, said Wechter, it matters to clients, particularly large corporate clients seeking sophisticated banking or institutional services.
"We now have clients coming to us and asking about the [makeup of females and minorities] on the team that's representing them," she said.
"I love that corporate customers are asking these questions," Wechter said. "It's the right thing."
