The writer is an FT contributing columnist based in the Midwest
“A journey of a thousand miles begins with a single step” sounds like something Confucius said (he didn’t). But many US corporations are scrambling now to do just that: figure out what small steps will put them on the road to tackling racial inequality in a post-George Floyd America — or be seen to be doing so.
Western capitalism is on a quest to prove it can deliver not just profits but social change, hence the corporate cacophony of worthy sentiments after Mr Floyd died last May at the hands of police. But now it’s time to move beyond the jaw-jaw. That’s why Emory University’s Goizueta Business School recently paired up teams of MBA students with some top US corporations, to brainstorm on how to walk the talk towards racial justice.
Walmart, Salesforce, Johnson & Johnson, HP, Truist (formerly BB & T and SunTrust banks) and utility Southern Company gave rival US business school teams diversity goals to meet, and asked them to come up with innovative but practical solutions for how.
A semi-finalist team from Yale School of Management made recommendations for Walmart, which had already pledged $100m to combat systemic racism only days after Mr Floyd died. The company said one of its racial equity goals was to boost hiring of “non-violent, formerly incarcerated” people.
So one of the Yale team’s proposals was for free rides to work for formerly incarcerated new Walmart recruits for a year: a free public transport card, or free Lyft rides. (Workplace mentors would also help them succeed at work, and be paid for doing so). Evan Okun, a team member with experience working with the formerly incarcerated, put it thus: “How can you earn the money to get to work without the money to get to work?”
The team says they rejected some other proposals because they couldn’t make a strong enough case for Walmart to adopt them. “Walmart made clear it’s not like they were going to change who they are: they penny pinch,” says Mr Okun. But the free transport plan, and a proposal for the company to provide low cost pop-up health clinics at community churches (closing inequalities in healthcare is another Walmart priority) would only cost about 1 per cent of that $100m fund, for 300 participants a year, the team said. Walmart told the Financial Times it was “impressed” by the recommendations, which it called “innovative and actionable”.
A team from Harvard Business School won the “audience choice” award, when it presented its equity plans for Truist bank in the finals of Emory’s John R Lewis Racial Justice Case Competition. Their plan to help the bank do its bit involved fee-free banking products in underserved communities.
The team produced research showing black and Hispanic families buy homes, and start building equity, on average eight years after white peers, and $1 of extra income generates additional wealth of nearly $20 for white households but less than $5 for black ones. Banks have a big role to play in closing the racial wealth gap, it argued. But US black and Hispanic communities are five times more likely to be unbanked than white or Asian ones, with high or unpredictable bank fees one reason, their focus groups showed.
The team argued that Truist can do without fees from low income customers, because most banks earn 82 per cent of profits from only 20 per cent of clients. Since fees have a disproportionately dissuasive effect on minority communities, they should be scrapped. Truist told the Financial Times it is “reviewing” the proposal along with “financial education” tools for some segments of the market, but added: “we know that removing the fees alone will not lead to sustainable wealth building for the unbanked and underbanked”.
Beverly Tatum, one of the competition’s judges and former president of Spelman College, a historically black US women’s college, says some US companies are “walking the talk”. So will the corporate awakening last? “After every period of progress, there is pushback, and then we move forward again,” she says, adding that the recent US Capitol attack was a sign of pushback. “Now many companies are trying to figure out how to push forward,” she says. It’s time to take those small steps to move corporate America beyond just jaw-jaw.