BET founder Robert Johnson told CNBC on Monday that he believes companies will address racial inequality in their workforce more seriously once the failure to do so affects their share price.
“Companies understand the return on investment capital. They understand the return on equity. They understand the total return on shareholders,” Johnson said of “Closing Bell.” “Bind all the factors to achieving opportunities for all Americans at all levels. I think then you will see results, because that’s what companies understand. They respond to financial factors and market conditions.”
Johnson’s comments follow the release of a new report on black employment in the US private sector from consulting giant McKinsey & Company. Based on data from 24 companies that together make up 3.7 million employees, the McKinsey report found striking differences in black representation in management roles.
Black Americans make up 12% of the total labor market in the private sector, but among the firms participating in the McKinsey report, they accounted for only 7% of employees at management level. The black representation, according to the report, drops to 4% to 5% at the senior manager, vice president and senior VP level.
“On the current trajectory, it will take about 95 years for black employees to achieve talent parity (or 12 percent representation) at all levels in the private sector,” the report said.
Johnson said the only way companies will work seriously to address job gaps, especially for senior roles, is to hold companies accountable for failing to end the gap.
“I think there are ways to do that,” said Johnson, who founded Black Entertainment Television in 1980. Just over two decades later, in 2001, he became America’s first black billionaire when BET’s holding company was acquired by Viacom. He now sits on the board of Discovery and is founder and chairman of RLJ Companies.
Johnson said one way to hold accountable for correcting racial differences in employment is to set it as a goal in corporate charter.
“Shareholders should hold themselves accountable for it as soon as it’s in their charter,” Johnson said, adding that proxy firms such as Institutional Shareholder Services and Glass Lewis can see the whole concept of ‘no-vote’ against companies they do not commit to. reduce this kind of racial parity or basically the employment gap. ”
Johnson said companies of all sizes should also commit to something similar to the NFL’s Rooney Rule, which expanded the league last year in an effort to improve diversity in its coaching ranks.
Teams must now interview at least two external minority candidates for head coaches, up from at least one since it was first accepted in 2003. Furthermore, the rule has been extended to require teams to interview at least one external minority candidate for an open coordinator. positions; there was previously no diversity mandate covering these roles.
NFL franchises can be fined for not complying with the Rooney rule, Johnson noted. “I’m not sure if our companies want to be fined because they can easily pay the fine,” he warns. ‘I think there should be a moral equivalent that if you do not, you will be singled out and that your shares will fail, causing some people who believe in this form of racial equality and racial equality to invest elsewhere. . ‘
Last year, Nasdaq submitted a proposal to the Securities and Exchange Commission aimed at improving diversity among corporate boards. The exchange operator’s proposal requires that the majority of companies have at least two management members who are diverse: one woman and one person who is LGBTQ or an underrepresented minority.
Under the proposal, companies could eventually be removed from the stock exchange if they did not publish the board’s data. In December, when the proposal was announced, more than 75% of the approximately 3,200 Nasdaq-listed companies did not meet the requirement, according to the New York Times.
Johnson had earlier made suggestions on how to address the racial wealth gap in the US. In a CNBC interview earlier this month, Johnson stressed the need to promote black entrepreneurship in America through capital allocation programs.
“Black businesses tend to hire black people as a whole, so you create more black businesses, the rebound goes to more black jobs,” Johnson said. “More black jobs means more black people paying for home ownership, black people … saving for retirement, investing in black people. Finally, we are taking a giant step to reduce the huge wealth gap.”
A Citigroup report last year found that racial inequality has cost the US economy $ 16 billion over the past two decades.