Corporate America faces a higher bar on racial inequality

In recent days, corporate America has made its strongest statements yet on racial inequality. But the protesters marching through small U.S. towns and gathering in large cities around the world want more than words. 

Business leaders now face a reckoning that won’t be hashtagged away. Many are under pressure from activists, customers and even their own employees to demonstrate tangible actions.  

“The sense of urgency is something we and many corporate leaders haven’t seen in our lifetime,” said Stephanie Creary, assistant professor of management at the Wharton School at the University of Pennsylvania, and who researches identity and diversity. Creary said she and more than a dozen of her academic colleagues have been “inundated” with calls from large and small businesses “all trying to figure out what to do next.”

A shift in public opinion is pushing companies to do more. Most American voters now support Black Lives Matter, according to a survey by online polling firm Civiqs. That support has jumped to 53% from 46% since the death of George Floyd in police custody on May 25.

The vast majority of the public now expects CEOs to express support for racial equity and factors that in when deciding where to spend money. In a poll released Wednesday by Morning Consult, 81% of respondents said they agreed that CEOs should express or reaffirm that their company’s hiring process is equitable and accessible to diverse populations, and that they should provide specifics about how they will ensure that.

Nearly 70% of the more than 11,000 people polled in May and June said how a CEO reacts to an issue, such as the Black Lives Matter movement, would permanently affect their decision to buy from the company.

Many police-involved deaths have inspired protests, but the video of a Minneapolis police officer kneeling on Floyd’s neck for nearly nine minutes struck a nerve that has catalyzed huge crowds at marches and political debates in Washington, D.C. Floyd’s death and those of Breonna Taylor, Ahmaud Arbery and other Black Americans sparked a national conversation that appears to be gaining momentum rather than fading away.

Several companies are now lobbying for laws to stop police-involved deaths and hate crimes. Delta Air Lines signed a letter with dozens of companies calling for police reforms, including mandating de-escalation training to reduce the use of force. General Mills, Land O’Lakes and KPMG also signed.

“Sesame Street” teamed up with CNN on a town hall for kids. In the episode, Elmo’s Dad defined racism and explained the reason why protesters are marching in the streets. The NFL, the sports organization that shunned Colin Kaepernick for taking a knee during the national anthem, has had a public change of heart on the protest of players. And NASCAR drivers, who draw many fans from conservative-leaning parts of middle America, held a moment of silence before a race in Atlanta. NASCAR this week banned Confederate flags from events.

The upheaval has been fueled, in part, by the coronavirus pandemic and recession, which has laid bare Black Americans’ unequal access to education, higher-paying jobs and health care. Black Americans are dying at nearly two times the rate of white Americans from suspected virus-related cases, according to the Covid Tracking Project. As the virus spreads, many Black Americans continue to go to work at grocery stores, hospitals and nursing homes — jobs where they’re deemed essential yet get low wages. And in many major urban school districts, Black children live in homes where they don’t have internet access or a computer that allows them to attend school at home.

Jade Magnus Ogunnaike, deputy senior campaign director for Color of Change, said people aren’t just marching for racial equity, they’re calling for economic justice. She said some major companies, such as Nike and McDonald’s, that have put out emotional commercials and sharp statements still pay their workers wages so low that it’s difficult for them to feed their families. 

“If you have extreme wealth inequity and extreme pay inequity, that is incompatible with this moment,” she said. “When we talk about Black Lives Matter, we don’t only mean Black Lives Matter in death. We mean that the actual quality and conditions that Black people live in matter.”

While many Black Lives Matter protests have happened before, crowds are larger, marches are scattered throughout the country and participants are more diverse, said Chris Miller, head of global activism strategy at Ben & Jerry’s. That, he said, has prompted more mainstream companies to step out and speak up.

Walmart CEO Doug McMillon said protests have created a distinct opportunity to bring about change.

“What we see is a moment here, a moment where we can make a bigger difference,” he said recently in an interview on CNBC’s “Squawk Box.”

Companies have spent years reacting to reports of racial discrimination or bias that thrust them into the spotlight. 

Employees at both General Motors and Fiat Chrysler have reported multiple instances of nooses hanging in at least two plants since 2017, according to lawsuits and media reports.

In an emailed statement Tuesday, GM said it met with national, state and local civil rights leaders and Ohio’s attorney general’s office following racial harassment issues at its Toledo plant. It said it added mandatory training at the plant on inclusion and zero tolerance for discrimination and now requires all North American workers to take it.

Nearly three years ago, Ford Motor was ordered to pay up to $10.1 million to settle sexual and racial harassment charges for a group of workers at two Chicago-area plants after an investigation by the U.S. Equal Employment Opportunity Commission.

In each instance, automakers have condemned such actions, launched internal investigations including bringing in outside investigators, and fired employees found responsible for the racist acts.

GM CEO Mary Barra was one of the most outspoken of the automotive executives regarding the country’s systemic racism after the deaths of Floyd and other Black Americans. She is commissioning an “Inclusion Advisory Board” of both internal and external leaders, which she will chair.

“It’s my responsibility as CEO of this company to make sure it doesn’t fall off the agenda,” Barra said Tuesday during a LinkedIn webcast.

Executives with Ford and Fiat Chrysler also spoke out against racism and racial inequality in messages to employees following Floyd’s death.

Starbucks changed its policy to allow anyone to use its bathrooms after police arrested Donte Robinson and Rashon Nelson, two Black men, at one of its Philadelphia cafes in April 2018. The two men were waiting for business meeting to begin and sat down without ordering anything. An employee called the police. A video of the incident, posted on Twitter, went viral and led to protests and calls for boycotts of the coffee chain. 

With its reputation as an inclusive and progressive brand under fire, Starbucks about a month later closed all of its company-owned cafes in the U.S. for a day of employee training aimed at stamping out racial bias. Industry experts estimated that the store closures cost the company millions in dollars in sales. 

After the May training session, Starbucks began regularly surveying its workers about its diversity and inclusion efforts. It also hired law firm Covington & Burling, with former Attorney General Eric Holder leading the effort, to assess Starbucks’ policies and initiatives.

Recent changes to encourage diversity and inclusion include launching an application portal this year that allows store-level employees, from baristas to store managers, to view internal promotion opportunities. In September, it launched a 15-course curriculum developed by Arizona State University to teach topics about bias, empathy and dialogue.

“No company is perfect. What sets Starbucks apart is the Company’s willingness to learn from these missteps and to address their underlying causes,” Holder wrote, in an assessment of its efforts. “The Company did not treat these incidents as a public relations issue to be managed and then forgotten.”

The National Association for the Advancement of Colored People in October 2017 issued a travel advisory for American Airlines after “monitoring a pattern of disturbing incidents reported by African-American passengers.” Among them a report from activist Tamika Mallory about racial bias when a pilot ordered her to deplane after a dispute over her seat.

The NAACP, which couldn’t be reached for this article, lifted its travel advisory in 2018, after commending the Fort Worth, Texas-based carrier for commitments including mandatory implicit bias training for its roughly 130,000 employees. The five-step plan, known by the acronym PAUSE, calls for employees to become better aware of their own judgments and reactions, to figure out how best to approach a situation. The airline also put in place a new process for customers’ complaints about discrimination that includes having an specially trained American Airlines staff member call the passenger to discuss the issue. 

American appointed Kenneth Charles in January as chief inclusion and diversity officer, a new role and department, but CEO Doug Parker said that the not enough has been done.

“All that work, really important work, has had really [a] positive impact,” Parker said in June 4 CNBC interview. “What I think we are all seeing as a country is that those initiatives, while helpful, are insufficient and we need to do more.”

“There are structural barriers in place that keep these disparities in place,” he said. 

In the past two weeks, some corporate leaders have been called out for race-related social media posts and actions in a way that’s reminiscent of the #MeToo movement.

The editor in chief of food magazine Bon Appetit, Adam Rapoport, stepped down this week after an old Halloween photo showed him in brown face and a food writer accused the company of mistreating people of color. Athletic wear company Reebok and several gyms cut have ties with CrossFit after its founder and CEO, Greg Glassman, made light of Floyd’s death and Covid-19 on Twitter. Glassman later resigned. And at some companies, including Adidas and Estee Lauder, sharp criticism by employees has prompted pledges to increase diversity and invest in causes that advance equity.

As company leaders and corporate groups have spoken out, their own makeup has underscored the need for more progress. Business Roundtable, for example, pledged to start a special committee to advance racial equity and justice. The group is made up of 185 chief executives from many U.S. companies — but it has only two Black members.

Only four Fortune 500 companies are led by Black CEOs. 

Many industries, including finance, skew white and male. A year ago, JPMorgan Chase started Advancing Black Pathways, a recruitment program aimed at increasing the number of Black professionals at the firm and helping close the racial wealth gap.

Yet JPMorgan’s efforts have been complicated by its past. Like other banks, it’s perpetuated policies that have made it harder for Black Americans to get lower interest rates, qualify for mortgages or access capital. 

As recently as last year, a Black client and Black employee said the company discriminated against them. Former NFL player Jimmy Kennedy recorded conversations with a bank employee who referred to his race when explaining why he couldn’t sign up as a “private client,” a designation that would have given him access to loans and travel benefits, according to a report by The New York Times.

Kennedy’s JPMorgan financial advisor at the time, Ricardo Peters, said he was passed over for a promotion and transferred to a branch in a less-wealthy area, despite receiving awards for his performance. And he recorded a manager demeaning a Black prospective client and discouraging him from taking her business.

Peters was later fired by JPMorgan. He then filed a discrimination claim with the EEOC and the civil rights division of the Arizona attorney general’s office accusing the bank of discrimination, according to the Times report. Peters worked for JPMorgan in Arizona. JPMorgan denies Peters claim, the Times said.

Sekou Kaalund, JPMorgan Chase managing director and head of Advancing Black Pathways, said that  “like most institutions in America,” the bank has a checkered legacy, which sets up a trust barrier.

He said companies’ pasts – now amplified by protesters – have raised the bar.

“I don’t think people are going to settle for just the statement,” he said. “People are going to look ahead at four, six months, 12 months, three months. ‘What have you done on that statement? How have you brought to life what you said you would do?'”

“People will be looking for action-oriented items and executions versus just pacifying a moment with a statement.”

Companies looking for solutions won’t find a quick fix, said Magnus Ogunnaike of civil rights group Color of Change.

She said Black voices are underrepresented at many companies, but adding a Black person to a company’s board or the C-suite isn’t enough. 

“Black faces in high spaces are not necessarily the answer to this problem,” she said. “A few Black people advancing to the top is not necessarily what people are fighting about right now.”

The progressive group has pressed companies to release diversity reports, raise their minimum wage and examine their portrayal of Black people and police officers. It scored a victory this week when ViacomCBS canceled long-running reality TV show, “Cops” and A&E nixed “Live P.D.,” one of the highest-rated shows on basic cable. 

She said corporate leaders must look top to bottom at their company with a civil rights audit that scrutinizes everything from worker pay and discrimination complaints to how they work with police.

“We need these corporations to not only issue statements that say that they value Black lives, they need to fundamentally look at how their corporations are structured,” she said.

Creary, the Wharton assistant professor, said business leaders need to examine issues within their walls such as who’s ideas get accepted and who gets credit.

“Who gets to contribute sometimes in a hierarchical work team? The people who’ve been around the longest … who are the most seasoned. They are the de facto bearers of credit.”

Part of JPMorgan’s new approach has been to widen the funnel of people coming through the door by reaching out to Black students in their first two years of college, including at historically Black universities. This increases students’ chances of landing an internship or job at the bank or another company.

Kaalund said the company is tracking its progress. It has hired more than 1,000 Black students so far. About 4% of its executive and senior level jobs are made up of Black professionals, as of 2019, but he said the number of Black managing directors and executive directors has grown by more than 50% since it launched a Black leadership initiative four years ago. It created and filled a new position in April — global head of diversity and inclusion – to step up policies that prevent discrimination within the company and beyond it.

For Ben & Jerry’s, activism has been a part of its brand along with tie-dye T-shirts and creative ice cream flavor names. It was founded in 1978 by Ben Cohen and Jerry Greenfield, who have been unabashed in advocating for progressive policies. It’s now owned by Unilever.

The company’s statement after the death of George Floyd stood out as one of the most forceful and specific. It called on the country to “take concrete steps to dismantle white supremacy in all its forms.” It laid out four major policy proposals, including the drafting of bipartisan legislation to hold police accountable and strengthening of the Department of Justice’s Civil Rights Division.

The company has a 10-person team of activists. It’s led by Miller, who previously worked with Greenpeace and Sen. Bernie Sanders. In St. Louis, the company has fought alongside a nonprofit for the closure of an old, outdated prison and in Miami, it’s worked with another organization to decrease the number of police officers in schools and increase funding for guidance counselors.

The company typically spends 10% to 20% of its annual discretionary marketing budget on social causes.

It has a program that turns some ice cream shop employees into “changemakers” that organize grassroots events, such as hosting a free ice cream social with a local nonprofit. And while most of its 245 U.S. shops are franchises, employees at company-owned shops and manufacturing jobs make a minimum wage of $18 an hour.

But Miller said the Vermont-based company still has plenty to do, especially when it comes to recruiting beyond its predominately white community.

“We’re in one of the whitest states in the country and I think we’ve used that as a bit of a crutch or an excuse,” he said.

Miller said Ben & Jerry’s recently began a new effort to track and increase the diversity of its suppliers, its workforce and its franchisees. That effort predated the protests. 

“This is forever work,” he said.