BET founder Robert Johnson told CNBC on Monday he believes companies will more seriously address racial inequality within their workforces once a failure to do so starts impacting their stock price.
“Companies understand return on investment capital. They understand return on equity. They understand total shareholder return,” Johnson said on “Closing Bell.” “Tie all of those factors to achieving opportunities in employment at all levels for Black Americans, I think then you’ll 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 U.S. private sector from consulting giant McKinsey & Company. Drawing on data from 24 companies that together account for 3.7 million workers, the McKinsey report found notable disparities in Black representation in management roles.
Black Americans are 12% of the overall private-sector workforce, but at the companies participating in the McKinsey report, they were only 7% of employees at the managerial level. Black representation dips to 4% to 5% at the senior manager, vice president and senior VP levels, according to the report.
“On the current trajectory, it will take about 95 years for Black employees to reach talent parity (or 12 percent representation) across all levels in the private sector,” the report states.
Johnson said in his opinion, the only way firms will seriously work to address employment gaps, particularly for senior roles, is for there to be “accountability for companies for failure to commit to end” the disparities.
“I think there are ways to do it,” said Johnson, who founded Black Entertainment Television in 1980. A little more than 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 deliver accountability on fixing racial disparities in employment is by establishing it as a goal in corporate charters.
“Shareholders should hold them accountable for it once it’s in their charter,” Johnson said, adding that proxy advisory firms like Institutional Shareholder Services and Glass Lewis could “look at the whole concept of a ‘no’ vote against companies that fail to commit to this kind of racial parity or basically closing the employment gap.”
Johnson said companies of all sizes also should commit to something akin to the NFL’s Rooney Rule, which the league expanded last year in a bid to improve diversity within its coaching ranks.
Teams now have to interview at least two external minority candidates for head-coaching jobs, up from at least one since it was first adopted in 2003. Additionally, the rule was broadened to require teams to interview at least one external minority candidate for open coordinator positions; there had been no diversity mandate covering those roles previously.
NFL franchises could be fined for failing to comply with the Rooney Rule, Johnson noted. “I’m not sure we want to fine corporations because they could easily be able to pay the fine,” he cautioned. “I think there should be some sort of moral equivalent that if you fail to do it, you are singled out and your stock is reported as failing in that, causing certain people who believe in this form of racial equity and racial equality to take their investments other places.”
Last year, Nasdaq submitted a proposal to the Securities and Exchange Commission focused on improving diversity among corporate boards. The proposal from the exchange operator would require the majority of companies to have at least two board members who are diverse: one woman and one person who is LGBTQ or an underrepresented minority.
Under the proposal, companies could ultimately be delisted from the stock exchange if they failed to publish board data. In December, at the time the proposal was made public, over 75% of the roughly 3,200 Nasdaq-listed companies failed to meet the requirement, according to the New York Times.
Johnson has previously offered suggestions on how to address the racial wealth gap in the U.S. In a CNBC interview earlier this month, Johnson stressed the need to foster 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 bounce back is going to more Black jobs,” Johnson said. “More Black jobs mean more Black people paying for home ownership, Black people … saving for retirement, Black people investing. In the end result, we make a giant step toward closing the huge wealth gap.”
A report from Citigroup last year found racial inequality cost the U.S. economy $16 trillion over the last two decades.
