The corporate finance and accounting area underperforms compared to other job functions when it comes to diversity, equity and inclusion, according to a new study.
People of color comprise only 11 percent of the total workforce in corporate finance, and just 6 percent of senior finance roles, according to data from the research firm Gartner. Finance and accounting rank among the lowest of any corporate function and underperform the departmental average for employing people of color by 6 percentage points. In comparison, other job functions like communications, research and development, and quality control and quality assurance rank high, at 44 percent, 42 percent, and 29 percent, respectively. The average is 17 percent, so representation for people of color in accounting and finance is below average.
The study comes at a time when more companies have announced plans to increase diversity in their ranks, in response to the wave of protests last year sparked by the Black Lives Matter movement. Some major accounting firms, including the Big Four, have made commitments to diversity, equity and inclusion (DEI), while organizations like the American Institute of CPAs, the Institute of Management Accountants and the California Society of CPAs have also done more outreach aimed at encouraging greater diversity in the profession, but progress on the longstanding problem has fallen short of expectations.
“It’s concerning to see finance’s poor performance in DEI, particularly when CFOs themselves play a direct role in the resource allocation decisions that could help overcome some of the barriers to a more diverse function,” said Kotei Kotey, a senior advisory specialist in the Gartner Finance practice, in a statement Tuesday. “This is not merely a ‘hiring problem’ to be managed from the HR office; finance leaders have a direct impact on this issue through making themselves available to mentor and influence junior-level diverse candidates, as well as prioritizing funding for company and department-wide DEI initiatives.”
Gartner’s data also found disparities in terms of gender. It indicated that 52 percent of finance employees are women, which is far higher than the average of 42 percent for all corporate functions. But despite this relatively positive overall performance, there’s still a long way to go when it comes to advancing women to senior finance roles. Women comprised nearly 60 percent of junior-level roles, but just 40 percent of senior roles.
The falloff in advancement was even greater for employees who identified as people of color. Sixteen percent occupied junior-level roles, while only 6 percent of senior-level positions were filled by people of color.
PricewaterhouseCoopers is one of the firms that has been trying to expand diversity in its ranks as well as its clients. PwC U.S. chairman Tim Ryan has spearheaded a group called CEO Action for Diversity and Inclusion. Sheri Wyatt, PwC’s assurance diversity and inclusion leader and sustainability partner, has been helping client companies track their DEI efforts as it relates to overall environment, social and governance, or ESG, reporting.
“It’s been an interesting six-plus months around diversity and inclusion,” she told Accounting Today. “We really saw the volume and the speed in which companies were looking to address D&I really increased after the events of 2020 where racial equity issues were really spotlighted. That’s not to say companies weren’t doing things before, but that really accelerated many companies’ journeys around D&I. It’s a really good fit with the broader discussion. I think ESG has also been taking on significant momentum with companies. Their CEOs and CFOs have been making commitments around the progress they are looking to make with ESG, and D&I fits in really nicely within the overall ESG journey.”
She recently wrote an article on the PwC website about how D&I can fit into ESG reporting. “Specific to D&I, what we’re seeing more and more companies do is to look to be more transparent around where they are in their D&I journey, where they fit, what they’re doing, and what they aspire to be,” Wyatt told Accounting Today. “We released our transparency report in August 2020, where we talked about our journey and our aspirations. That’s really been a springboard to many of the conversations we’ve had with our clients, where the questions that they ask are how did you get there in order to be transparent, and what steps did you put in place to get to that point of disclosing the data that you shared and taking the actions that you’re planning to take? The advice we give to companies is it starts with understanding your strategy around D&I, assessing your values compared to the strategy, and aligning those two and defining an inspiring story around where you’ve been and where you aspire to be. Disclosing data without having a story and a framework around it really doesn’t help not only your employees, but also the broader stakeholders really understand where you are and what your commitments are.”
Gartner also has advice for companies to follow in their finance and accounting departments. They should provide a clear outline of the steps needed to advance within the finance department and a close examination of any areas that may be causing a drop off in the talent pipeline for diverse employees and/or candidates. Companies should also encourage a culture of lateral movement by making it easy for employees to find internal opportunities and provide adequate financial compensation for doing so. They should also set up guidelines to make sure managers are communicating new roles and opportunities to all employees.
“We see progressive finance leaders in this area partnering with HR leaders to establish pay equity metrics, encourage consistent financial accountability when it comes to DEI metrics across departments and provide assistance to other departments in setting up DEI budgets,” said Kotey in a statement. “CFOs should be motivated to do better with these metrics, beyond it being the right thing to do, DEI metrics will increasingly be a part of how society, investors and the media view an organization.”