His point was more nuanced than has been reported, but he should have known better than to wade into a debate he could never win.
This past summer, the chief executive of Wells Fargo sent out a firm-wide memo. He later held a Zoom call on the same topic.
Three months later, the
memo was reported by Reuters. A firestorm was
sparked, and the C.E.O.
issued a clarification. Many are now calling for him to be
fired and the bank to be
boycotted.
What did this guy do that was so terrible? Here’s the offending line from his memo:
“While it might sound like an excuse, the unfortunate reality is that there is a very limited pool of Black talent to recruit from.”
Why Scharf Is Right
On its face, that statement sounds damnable. Yet before you rush to judgment, consider the following two details, both of which got lost in the brouhaha:
Detail #1: The Sentence Tells Only Half the Story — Because the Full Sentence Didn’t Get Quoted
It’s shameful that Reuters
omitted the rest of the sentence in question. That’s because Scharf didn’t say, “There is a very limited pool of Black talent to recruit from.”
As American Banker reported (at the time of the comment), Scharf said, “There is a very limited pool of Black talent to recruit from
with this specific experience” (my emphasis).
Seeing the sentence in full changes things, doesn’t it? Let’s unpack the omission.
By way of background, in 2018, the Federal Reserve imposed on Wells a
very specific, extensive, and rare set of regulations. These restrictions come
on top of similar ones from the Office of the Comptroller of the Currency.
The requirements are esoteric; the folks who are most capable of addressing them are those who have already done so, usually at another bank.
In other words: The number of people —
regardless of race — on whom Wells can draw is tiny. Again, this has nothing to do with the color of someone’s skin; we’re talking about a subset (compliance experts) of a subset (banking executives).
As it happens, the screenwriter Aaron Sorkin anticipated this scenario 20 years ago.
As his West Wing alter ego, Toby, declares,
“You’re like the guys who say, ‘Are you telling me you could only find one African-American speechwriter good enough to work at the White House?’ I’m amazed I found that many! ‘Good enough to work at the White House’ is a pretty small population to begin with. And guys who can write entire sections of a State of the Union? I’d be as surprised if there were as many as nine of us.”
Detail #2: Scharf’s Actions Speak Louder Than His Words
The controversial quote came from a memo in which Scharf announced… diversity initiatives. Indeed, his record on this issue reveals that the C.E.O. is committed to change:
He’s pledged to double the number of Black leaders at the firm within five years.
He’s tied executive compensation to diversity goals.
He’s required teams that interview potential employees to be diverse, and demanded that hiring managers consider diverse candidates for positions that pay more than $100,000.
In other words: Let’s not let philosophizing obscure the facts.
Why Scharf Is Tone-Deaf
All that said, the fact is, Scharf still made an egregious mistake. For the sake of argument, let’s assume that he was 100% correct: Black executives who specialize in federal banking regulations are rare.
As a high-profile figure, Scharf should have realized that his remark was incendiary. After all, he’s a rich white guy, in a position of tremendous power, seemingly denigrating a whole class of minorities, at a time when race relations are roiling America.
Put simply, even if he’s right, this is the wrong time to make that argument.
Indeed, Scharf appears to have recognized this reality. The first few words of his statement — “While it might sound like an excuse” — indicate that he knew how sensitive the situation is and how explosive his assertion would be. When you play with fire, you usually get scalded.
What’s more, Wells is the wrong company to opine about race relations right now. Just last month, the bank settled
a case about its discriminatory hiring practices against… Black applicants. And before that, in 2012, in one of the largest fair-lending payouts in history, the bank settled allegations that it gouged Black borrowers.
The bottom line: Scharf should have known better. Even though he’s eminently qualified to opine on the subject, he should have realized that the reasons Black people are underrepresented on Wall Street is not a debate he, or his company, is able to win at the moment.
Indeed, one of a C.E.O.’s most important duties is public relations. That means knowing when to speak up and when to shut up. This is especially critical when you’re the head of the world’s fourth-largest bank: You should know that on certain matters, you’ll be presumed guilty until proven innocent.
Is this fair? Of course not. But that’s why C.E.O.s get paid the big bucks.
