BET founder Robert Johnson told CNBC on Monday that he believed companies would take racial inequality within their workforce more seriously once they don’t, it will affect their share price.
“Companies understand the return on investment capital. They understand the return on equity. They understand the total return on shareholders,” Johnson told Closing Bell. “Link all of these factors to achieving employment opportunities 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 the employment of blacks in the U.S. private sector by consulting firm McKinsey & Company. Based on data from 24 companies that together represent 3.7 million workers, the McKinsey report found notable disparities in the representation of blacks in management roles.
Black Americans make up 12% of the total private sector workforce, but in the companies that participated in the McKinsey report they were only 7% of employees at the managerial level. According to the report, the representation of blacks falls from 4% to 5% at the levels of manager, vice president and senior vice president.
“In the current trajectory, black employees will take about 95 years to achieve talent parity (or 12% representation) at all levels of the private sector,” the report states.
Johnson said, in his view, the only way companies will work seriously to address job shortages, especially for senior positions, is to have “responsibility for companies not to commit to ending” the disparities.
“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 the first American black billionaire when Viacom acquired the BET holding company. He is now a board member of Discovery and is the founder and president of RLJ Companies.
Johnson said one way to account for resolving racial disparities in employment is to set it as a goal in business charters.
“Shareholders should hold them accountable once they are on their letter,” Johnson said, adding that representative advisory firms such as Institutional Shareholder Services and Glass Lewis could “examine the whole concept of“ no ”vote against. companies that do not commit to this type of racial parity or basically reduce the labor gap. ”
Johnson said companies of all sizes should also commit to something similar to the NFL standard, Rooney Rule, which the league expanded last year with the goal of improving diversity within its ranks. of coach.
Teams must now interview at least two external minority candidates for head coaching jobs, more than at least one since it was first adopted in 2003. In addition, the standard was expanded to require teams interviewing at least one external minority candidate for open coordinator positions; there had been no diversity mandate covering these roles previously.
NFL franchises could be fined for violating the Rooney standard, Johnson noted. “I’m not sure we want to fine the companies because they could pay the fine easily,” he warned. “I think there should be some kind of moral equivalent that if you don’t, you stand out and are informed that your stock is failing, which causes certain people who believe in this form of racial equity and racial equality take their investments elsewhere. ”
Last year, Nasdaq presented a proposal to the Securities and Exchange Commission focused on improving diversity among company boards. The exchange operator’s proposal would require that most companies have at least two diverse board members: a woman and an LGBTQ person or an under-represented minority.
Under the proposal, ultimately, companies could be withdrawn from the stock market if they do not publish board data. In December, at the time the proposal was made public, more than 75% of the approximately 3,200 companies listed on the Nasdaq did not 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 highlighted the need to encourage black entrepreneurship in the United States through capital allocation programs.
“Black companies tend to hire black people as a whole, so the more black companies you create, the recovery will go to more black jobs,” Johnson said. “More black jobs mean more blacks paying 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 has cost the U.S. economy $ 16 trillion over the past two decades.