Inside-Out: Corporate America and Racial Inequality
Updated: Jul 16, 2020
The United States is at a significant crossroads. Edified by the killings of Ahmaud Arbery, George Floyd, Breonna Taylor, and several other people of color, the collective social consciousness has been forced to confront an ugly truth; systemic racism continues to suffuse the black experience in this country. Among the voices condemning the current state of affairs, Corporate America has been remarkably outspoken.
Organizations across commerce that typically remain silent in times of upheaval have expressed solidarity with the black community and amplified calls for reform on social justice issues. Some have gone further, pledging resources such as investment capital, retail space representation, and strategic partnerships in order to help bolster black business interests. While these developments have been encouraging to witness, many of these same corporations continue to neglect the racial disparities that persist in their own workspaces.
African Americans makeup 13.4% of the total US population and yet only 3.3% of all corporate senior leadership positions are held by black professionals. Furthermore, of the firms that currently make up the Fortune 500, only 4 are led by black CEOs. To this day, African Americans continue to face barriers to entry and advancement in highly lucrative fields. These barriers rarely meet the criteria of overt racism, and yet they have proven to be no less effective.
In highly competitive and homogenous industries such as tech and finance, it is customary for companies to source talent from predominantly white feeder schools. Internal referrals also contribute to the lack of diversity as they are likely to be close friends or relatives of current employees. Maintaining homogeneity is an attractive approach as it is convenient and lowers the likelihood of conflict in the workplace. However, it can often lead to dysfunction in the form of groupthink which is a deterrent to creative thought and accountability.
Any competent financial advisor or fund manager can attest to the importance of diversification in portfolio management. The allocation of capital to a variety of unrelated assets maximizes collective profit by incorporating the benefits of each individual investment while mitigating losses by localizing risk. The same philosophy validates diversification in human capital. Conventional wisdom dictates that organizations with diverse talent pools possess a wider variety of perspectives, professional experience, and skills to leverage. In light of this, Diversity and Inclusion initiatives have become a growing trend. However, the implementation of these initiatives is often treated as a selling point rather than a cultural commitment. I distinctly recall coming to this realization during my tenure with a previous employer.
During a town hall, the CEO (a white male) spent a considerable amount of time praising the efforts of various Employee Resource Groups (ERGs) in the Diversity and Inclusion space. ERGs are voluntary, employee-led groups that seek to foster a diverse, inclusive workplace in alignment with the mission of the organization in question. Given the general lack of minorities in the industry, this display of enthusiasm was a welcome sight. However, he then proceeded to muse offhandedly that he did not understand how these groups could represent the interests of specific dimensions of diversity and simultaneously be inclusive! This anecdote highlights what I believe to be the key to transforming any firm’s corporate culture: leadership buy-in. Top-down support is instrumental to organic inclusivity culture.
A true commitment to Diversity and Inclusion requires direct representation in the C-Suite. Firms must recognize the need for leadership teams that reflect the racial makeup of society as a whole. Minority decision-makers are just as capable of contributing to the bottom line as their peers and, as an added benefit, they possess the inherent awareness of racially insensitive behaviors to avoid as an organization. To supply these minority leaders of tomorrow, internal and external talent pipelines must be established and continuously groomed.
Some estimates suggest that, in recent months, corporations have donated nearly half a billion dollars towards racial justice advocacy efforts. While these contributions are certainly commendable, monetized virtue signaling is no substitute for accountability. Black professionals are still being denied access to the same career trajectories as their peers. Black students are still being denied access to the same early career opportunities as their classmates. American capitalism cannot be praised for commoditizing the fight against racial injustice. Substantive action must be taken if this country is to properly address the systemic inequalities that minorities face, especially in the corporate world.