A number of leading capitalists assert that our economic system is “frayed” (Jamie Dimon, CEO of JPMorgan Chase), “broken” (Ray Dalio, founder of Bridgewater Associates) and even “dead” (Marc Benioff, founder of Salesforce). As a result, there has been a resurgence in corporate focus on “stakeholders” and not just “shareholders” — most notably reflected in the Business Roundtable (BRT) “Statement on the Purpose of the Corporation” released last year. In that statement, the leaders of nearly 200 of the most important U.S. corporations expressed their commitment to communities, as well as other stakeholders.
Then came the horrific death of George Floyd at the hands of Minneapolis. Since then, many companies have joined the chorus supporting Black Lives Matter, some asserting a commitment not just to oppose racism but to be “anti-racist.”
The reaction from activists has generally taken the tone of “actions speak louder than words.” Some responses have been harsher and more cynical in tone. One leading academic recently published a study summarized in The Wall Street Journal with the headline “‘Stakeholder' Capitalism Seems Mostly for Show.” And, if you Google “corporate pronouncements about BLM”, the first related search provided by the search engine is “companies pandering to BLM.” And then a scoffing about “virtue signaling.”
It really is time for corporate America, in my opinion, to take actions that address concerns about our economic system and that will prove the sincerity of its words and prove the skeptics wrong. Despite the lamentations of outliers who say they are offended by a “growing list of companies embracing Black Lives Matter” and a tweet from President Donald Trump that BLM is a “symbol of hate,” actions supporting BLM, like other actions of corporate social responsibility can, enhance long-term shareholder value. And, as evidenced by the pronouncements of some of the largest institutional investors and the appeal of ESG-oriented mutual funds to smaller investors, corporate social responsibility has a following in the stock market. Conversely, failing to follow through or, worse, engaging in hypocritical actions will not escape notice. A recent New York Times piece called out companies that say one thing and provide financial support to politicians on the opposite side of the same issue.
Many companies are taking actions that are supportive of the Black community. That is commendable. But for corporate America to actually get credit for its actions — and frankly to actually protect Black lives and to make them better — companies (either alone or through organizations such as the BRT) should do what they do best when confronting any seemingly intractable business issue. They should develop and embrace a comprehensive, multi-faceted strategy that pulls together many of the separate initiatives already out there. To borrow from the lexicon of the pandemic, corporate America should develop a strategy to “crush the curve” of systemic racism.
Such a strategy could include the following:
Public education. Corporate support for public schools in inner-city neighborhoods is an initiative with a longer-term payback, but there will be an immediate benefit for the communities. That support should stand behind pre-K programs, afterschool programs (including arts and athletics) and meals for students. Many cities have an “adopt-a-school” program and companies that have participated have found that their employee morale and pride benefit along with the students they are helping. Some of this will need to await the end of the pandemic. In the meantime, companies can help address the “digital divide” with philanthropy so that the achievement gap between affluent students and those living in poverty does not get even worse.
Economic opportunity. This is really in the sweet spot of what corporate America can handle. Internship, pipeline, training and retraining, mentoring, and effective diversity and inclusion programs should be part of the human resources functions of every company of size. The purpose of these programs is to help address the wage gap (and the carryover “retirement gap”) by creating opportunities deep into the organization and well above entry level/low wage jobs. Using Black-owned vendors and Black professionals in professional services firms will also advance economic opportunities. Childcare and elder care assistance for employees will also help many single parent Black households. The BRT has advocated for many measures along these lines, including an increase in the federal minimum wage. And consider the commitments to the newly formed New York Jobs CEO Council.
Health care. Black lives are adversely affected by the epidemic of obesity, which leads to diabetes, heart disease and other co-morbidities which have caused a disproportionate impact of COVID-19 on the Black community. The maternal mortality rate in the U.S. among Black women is more than double that of white women. For the benefit of both employees and their communities, corporations can support education, can help address urban food deserts and can help provide wellness checks and prenatal care. Affordable housing away from environmental toxicity is another initiative that companies can help with.
Policing reform. Just as Black lives matter, good police matter. It's unlikely that reform will come in the form of radical defunding. It will likely come from improved selection and training of officers, supplementing police departments with social service professionals who can better deal with things like domestic disputes, mental health issues, the homeless and so on. In many departments, reform will require a culture change from a goal of “dominating” communities to actually living up to the slogan on the squad cars — that is, “to protect and serve.” That culture change will require getting rid of abusive officers and doing background checks on officers transferring from other departments, as well as better hiring and training. One commentator wrote that reform will require a change from a “warrior” mentality, and that change will start by no longer dressing and arming our police like they are patrolling a war zone. In July 2020, the BRT called upon Congress to address policing reform. However, policing is a quintessentially local issue and companies should use their clout in their communities for this purpose.
Gun safety. Recognizing that more Blacks are killed by gun violence than by excessive use of force by police, companies should support measures to reduce gun violence and enhance gun safety. In September 2019 BRT in September 2019 already issued a statement recommending bipartisan legislation along these lines. A small number of companies have already been outspoken along these lines and others have joined the Gun Safety Alliance or provided financial support to existing organizations (such as Brady and Everytown). But there is much more that can and should be done. For example, corporations could provide seed money to be used in developing a new type of membership organization that both gives voice to the majority of Americans who support stricter gun laws and provides services to gun owners who are fed up with the NRA.
In addition to the micro-level benefits of adopting and pursuing such a strategy, there is a macro-level benefit. As Jim Tankersley recently observed, “The economy thrived after World War II in large part because America made it easier for people who had been previously shut out of economic opportunity — women, minority groups, immigrants — to enter the workforce and climb the economic ladder, to make better use of their talent and potential.” He went on to quote a study that found “reducing discrimination … was responsible for more than 40% of the country's per-worker economic growth after 1960,” but that “aggressive expansion of opportunity that had driven economic gains was choked off by a backlash to social progress in the 1970s and 80s.” He cites another study that concluded “In terms of economic mobility … the penalty for being born Black is the same today as it was in the 1870s.”
On both a micro and macro level, the adoption and execution of a comprehensive, multi-faceted strategy by corporate America will save and improve the lives of Black Americans and will be good for all Americans. Actions like these should be undertaken with a sense of urgency, so as not to lose the momentum of the current national discussion and the opportunity it creates to actually achieve something. The time really is now.
Thomas A. Cole is chair emeritus of the executive committee of Sidley Austin LLP. He teaches a seminar on corporate governance at the University of Chicago Law School and is the author of CEO Leadership: Navigating the New Era in Corporate Governance. In recognition of his support of diversity initiatives, he was the inaugural recipient of the Thurgood Marshall Legacy Award presented by the Thurgood Marshall College Fund. The views expressed in this essay are not necessarily the views of his law firm or the university or its law school.