Black and Latinx leaders at BlackRock Inc. Are quitting so quickly that it’s nearly offsetting the Wall Street firm’s efforts to diversify its ranks, according to an audit by former US Attorney General Eric Holder and the law firm where he’s senior counsel.
Retention was identified as one of BlackRock’s challenges, even as the world’s largest money manager met some goals on diversifying its overall workforce since 2020, according to the review by Covington & Burling LLP, which was retained by BlackRock to conduct the audit.
Attrition rates of Black senior leaders almost equaled increases in hiring, leaving senior Black representation roughly flat last year, the 74-page report says. Attrition also impacted Latinx staffing which, combined with recruiting, resulted in just a 0.5% advance in Latinx representation at the company. The numbers at BlackRock are consistent with the broader “Great Resignation” that’s impacting the financial-services sector, the report says.
The firm’s first-ever racial audit also found that BlackRock has already met its 2024 goal of boosting overall Black and Latinx staffing by 30% in the US. Black workers are now at 7.8% and Latinx workers are at 7.7%. It also says the investment firm made progress toward reaching its targets for Black and Hispanic leaders. But at the end of last year, it still remained about 77 executives shy of the 2024 goal of doubling the number of Black and Latinx senior leaders to 280.
The findings are “an indication that BlackRock takes the process seriously,” which is a good sign, said Renaye Manley, deputy director of strategic initiatives at the Service Employees International Union, which made the proposal for a racial audit in 2021.
Following the murder of George Floyd by police in May 2020, shareholder groups have put increasing pressure on companies to conduct racial audits to see whether they contribute to discrimination. The audits analyze companies’ business models—from policies to products and services—to determine whether they cause, reinforce or perpetuate discrimination. They also make recommendations to improve the prospects for under-represented groups, particularly Black employees and leaders.
About 20 reports are expected in the next year from companies including State Street Corp., McDonald’s Corp. And Apple Inc. Companies that have already completed audits include Citigroup Inc., JPMorgan Chase & Co. And Google parent Alphabet Inc.
BlackRock Chief Executive Officer Larry Fink has said his company is caught between investors who insist on more attention to so-called environmental, social and governance principles and those who say ESG goals hurt investment returns and distract companies from profits.
On Wednesday, the conservative group America First Legal said it filed a complaint with the US Equal Employment Opportunity Commission asking the federal agency to open a civil rights investigation into whether the BlackRock Founders Scholarship internship for minority students is discriminatory to non-minority students.
BlackRock said its hiring and promotion decisions are driven entirely by merit. The company hires more than 1,000 graduates and interns each year representing hundreds of universities, and the Founders Scholarship is just one option, according to spokeswoman Ashley Beale. In a web posting, BlackRock said the recently completed audit shows both the gains the company has made and suggestions for improvement.
“The report highlights our significant progress to date,” Beale said. “Looking forward, we still have more work to do and we remain committed to our strategy.”
BlackRock, which has $9.1 trillion of assets under management, said in March 2022 that it hired Covington, along with DEI consultant Working Ideal, to assess its efforts and make recommendations. The New York-based firm is in midst of a three-part, multi-year commitment to improve internal diversity and broaden its racial equity in the US.
Based on BlackRock’s attrition data from the start of 2021 through the end of last year, voluntary resignations most seriously involve Black employees at the managing director level, followed by the associate level, the Covington report says. For Latinx professionals, voluntary attrition is highest at the associate level, followed by the vice president level.
BlackRock formed a task force last July to assess the reasons for the attrition rates for key leaders and determined that departing leaders cited the absence of a clear path forward, gaps in a sense of trust and belonging, and inconsistent day-to-day experiences because of a lack of accountability for managers. Covington said its own assessments mirrored those findings.
The goal of the racial audit is to set a baseline for improvement and ongoing engagement, SEIU’s Manley said.
“We want BlackRock to take advantage of the broad and diverse talent pool out there,” she said. “And if they are having trouble attracting and retaining talent, as the report says, they have to develop more robust internal processes to make sure this pattern is disrupted.”