BET founder Robert Johnson told CNBC on Monday that he believes companies will more seriously address racial inequality within their workforce once failure to do so begins to affect their stock prices.
“Companies understand return on investment capital. They understand return on equity. They understand total return on shareholders,” Johnson said on “Closing Bell.” “Tie all those factors together to achieve employment opportunities at all levels for African Americans, I think then you will see results because that is 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. Drawing on data from 24 companies that together represent 3.7 million workers, the McKinsey report found stark disparities in the representation of blacks in management positions.
African Americans make up 12% of the overall private-sector workforce, but in the companies participating in the McKinsey report, they were only 7% of managerial-level employees. Black representation drops from 4% to 5% at the senior manager, vice president and senior vice president 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) at all levels of the private sector,” the report states.
Johnson said that, in his view, the only way companies will seriously work to address employment gaps, particularly for managerial positions, is to have “corporate responsibility for not committing to ending” the disparities.
“I think there are ways to do it,” said Johnson, who founded Black Entertainment Television in 1980. A little over two decades later, in 2001, he became America’s first black billionaire when Viacom acquired the BET holding company. He is now on the board of Discovery and is the founder and president of RLJ Companies.
Johnson said one way to be accountable for solving racial disparities in employment is to establish it as a goal in corporate bylaws.
“Shareholders should hold them accountable for it once it’s in their bylaws,” 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. They don’t commit to this kind of racial parity or basically close the job gap. ”
Johnson said companies of all sizes should also 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 outside minority candidates for head coaching positions, up from at least one since it was first adopted in 2003. Additionally, the rule was expanded to require teams to interview the least one external minority candidate for open coordinator positions; previously, there was no diversity mandate covering these functions.
NFL franchises could be fined for not complying with the Rooney Rule, Johnson said. “I’m not sure we want to fine companies because they could easily pay the fine,” he warned. “I think there should be some kind of moral equivalent in the sense that if you don’t, you are pointed out and reported that your actions fail in that, which makes certain people who believe in this form of racial equity and racial equality make your decisions. investments elsewhere. ”
Last year, Nasdaq submitted a proposal to the Securities and Exchange Commission focused on improving diversity among corporate boards. The currency trader’s proposal would require most companies to have at least two directors who are diverse: a woman and an LGBTQ person or an underrepresented minority.
Under the proposal, companies could eventually be delisted from the stock market if they do not release the board’s data. In December, at the time the proposal was made public, more than 75% of the roughly 3,200 companies listed on the Nasdaq 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 United States. In a CNBC interview earlier this month, Johnson emphasized the need to foster black entrepreneurship in America through capital allocation programs.
“Black companies tend to hire black people as a whole, so more black companies are created, the recovery goes to more black jobs,” Johnson said. “More black jobs mean more blacks paying for home ownership, blacks … saving for retirement, blacks investing. In the end, we take a giant step toward closing the huge wealth gap.”
A Citigroup report last year found that racial inequality cost the US economy $ 16 trillion in the past two decades.