America’s C-Suites Keep Getting Whiter (and More Male, Too)

(Bloomberg Businessweek) -- When Ursula Burns, Indra Nooyi, and Ken Chenault took over as the chief executive officers of Xerox, PepsiCo, and American Express, respectively, they also set new expectations for what women and people of color could achieve in 21st century corporate America. Their departures show how fickle progress can be.

The occupants of corner offices are a stunningly homogeneous bunch. There are now just three black CEOs running Fortune 500 companies, down from a height of eight three years ago. The number of women serving as CEOs was down to 24 as of May, a 25 percent drop since June 2017.

It’s not for a lack of promises from the corporations themselves. Nearly every large U.S. company has publicly stated its commitment to diversity. Hundreds have signed pledges to achieve gender parity, close the gender pay gap, and make a larger effort to hire black and Latino workers. Big tech companies have touted their on-campus recruiting programs at historically black colleges and universities. Wall Street’s biggest banks—Goldman Sachs, Bank of America, Wells Fargo, Morgan Stanley—increasingly boast about the diversity in their summer intern classes. It’s not unusual to see people of color make up a little more than half of those groups and women more than 40 percent.

And still, executive ranks and upper management remain persistently, stubbornly white and male—even more so than they were a few years ago. What gives?

“Lots of companies are making genuine, serious efforts to increase diversity,” says Kabrina Chang, an associate professor at the Questrom School of Business at Boston University. “But I wonder how many of them understand it’s an ongoing thing. It’s not just, ‘we hired two women,’ or ‘we have a black president, so we’re done.’ ”

If companies are getting better at hiring underrepresented groups, they haven’t made commensurate strides in keeping them. In fact, the opposite is true: Women and black and Latino people are more likely to quit their jobs than white men. In addition, the longer you’ve worked at a job, the less likely you are to quit. Taken together, that doesn’t bode well for companies pinning their diversity efforts on interns and new hires.

People leave jobs for an array of reasons. But researchers find some broad trends. One Cornell University study of 25,000 workers in the hospitality industry found that hourly workers and poor performers were likely to quit for better pay and benefits. Professional employees and high performers were likely to quit for what academics call “relational reasons”—they didn’t feel fairly treated or see opportunities to advance.

Layer race and gender on top of that, and it’s easy to imagine why women and black and Latino people quit at higher rates. Treated fairly? Not really. The persistent gender and racial pay gaps reflect some outright discrimination—yes, it’s illegal, but yes, it still happens—as well as a lack of advancement into better-paying roles. In a wide-ranging study from Arizona State and Columbia on who quits and why, researchers report that “successful minority male executives experienced slower career progress than did white male executives during their early years in a corporation, such that two groups tend to follow different career trajectories.”

It’s a vicious cycle: Companies may succeed in hiring women and people of color, but once those employees get to work, they don’t see a path to advancement. So they look elsewhere for those opportunities, and the company that hired them in the first place becomes more homogeneous.

“Middle management is where diversity goes to die,” Sallie Krawcheck said on a recent episode of Bloomberg’s The Pay Check podcast. Krawcheck was once one of Wall Street’s highest-ranking female executives. Now she runs Ellevest, which focuses on financial services for women, and she’s been outspoken about the importance of diversity in her own shop. “We’re all about women, and we’re all about diversity, and I still find that members of the team come back and say, ‘I’m going to hire this person like myself,’ ” she says. “And I say, ‘No, you’re not.’ … I will not let us talk ourselves into becoming a homogeneous company.”

Bigger companies than Krawcheck’s also seem increasingly willing to take those kinds of explicit measures. After seeing black diversity backslide for eight straight years, Citigroup Inc. in August sent an internal memo describing new targets designed to reverse the trend. Over the next three years, the bank says, it will increase the presence of black people in management to 8 percent from 6 percent. Over the same period, the percentage of women in management will grow to 40 percent from 37 percent. Those small percentage-point increases mask big changes in a workforce that includes 209,000 people around the world. If Citigroup hits its goals, it will propel thousands of women around the world and African Americans in the U.S. into management. Progress on reaching those numbers will be part of the performance scorecards of the bank’s senior leaders.

Another company with a stated public commitment to diversity and a massive global workforce, Ernst & Young, is also tackling racial attrition head-on. Every year since 2011, the company has convened its new black and Latino employees for a two-day, off-site retreat with networking and coaching led by the company’s more senior people of color. The advice isn’t groundbreaking—“everyone struggles,” “go to the Christmas party,” “get a mentor”—but it’s designed to improve those “relational” factors that encourage high performers to stick around.

The program was so well received that EY quickly followed up with a separate version designed for its Asian American new hires. Asian Americans confound the typical corporate storyline on diversity. There’s no “pipeline problem.” A broad demographic group that includes people whose origins stretch from Pakistan to the Pacific Islands, they’re the best-educated racial group in the U.S. They’re overrepresented, relative to the population, in entry-level and middle-management jobs. They’re less likely to quit and more likely, according to the Pew Research Center, to say they’re doing well financially.

With that profile, it would seem that Asian Americans should have been able to change the demographics of the C-suite by now. Yet fewer than a dozen Asian CEOs are in the Fortune 500, which suggests that retention, like hiring, accounts for only part of the whiteness and maleness of America’s corporate leadership.

What’s left? Stereotypes and confirmation bias, mostly. You’ve heard the riddle about the man and his son who are rushed to the emergency room after a car crash, and the surgeon on duty says, “I can’t operate on this boy: He’s my son.” When we hear “surgeon,” we assume he’s a man, just as when we picture an executive (typically a white one).

In one experiment, researchers from the University of Arizona asked audiences to evaluate recorded speeches from both men and women who had suggestions about the company’s future. Male speakers were more highly respected, and their ideas were considered better (and more likely to get them promoted) than the women’s—even though the researchers had given the speakers the exact same script. “Women don’t get the same benefit for speaking up with ideas for change,” says Elizabeth McClean, one of the researchers who ran the experiment. “People have different expectations for men and women in the workplace. Speaking up is more in line with what you expect of men.”

One of the best ways to undo the biases baked into those expectations, McClean says, is to expose employees to a wider range of people in positions of authority, reinforcing a reality that leadership can be manifest in myriad styles and people. But that doesn’t solve the immediate problem of getting different kinds of folks into those positions in the first place.

“Part of it is, just frigging do it,” Krawcheck says. “Quit with all these ways to glance off the problem. Just say, it is important enough for us to have a diverse company, we’re just going to do it. Now.”

The “business case” for diversity isn’t a new idea. Nor is Krawcheck’s position that elevating women and underrepresented minorities into leadership takes willful effort. We’re more than 75 years into an evolving national commitment to what John F. Kennedy called “affirmative action,” the idea that deeply ingrained prejudices, stereotypes, and discrimination don’t go away by themselves.

For most of our history, this effort has had bipartisan support. The Nixon administration created the requirement for federal contractors to have an affirmative-action plan—a timetable for making sure the demographics of the workforce mirrored the surrounding area. Eventually, the private sector also came around. In 2003, 65 companies, from 3M and Abbott Laboratories to Whirlpool and Xerox, encouraged the U.S. Supreme Court to uphold the affirmative-action policy at the University of Michigan Law School. (It did.)

“The skills and training needed to succeed in business today demand exposure to widely diverse people, cultures, ideas and viewpoints,” the companies wrote in an amicus—friend-of-the-court—brief. “For each of the amici, diversity is an increasingly critical component of their business, culture and planning.”

That was 15 years ago. And here we still are. “The most diplomatic description of the obstacle could be described as inertia,” says Cameron Snaith, whose company, Bleeker, helps employers link promising executives from underrepresented groups with outside mentors. In some cases, he adds, there’s also a reflexive protection of the way things are.

Companies so often want it both ways. They want a newly diverse workforce to appear as if by magic, bringing with it the documented business benefits, but in action, they’re less courageous than Kennedy or Nixon. So we see baby steps, a tinkering around the edges. The number of “diversity and inclusion” postings on Indeed, a job search site, rose 35 percent from February 2016 to February 2018. Training designed to raise awareness of the stereotypes we use to reinforce the status quo—what’s called implicit bias—has become all the rage. Academics are mixed on whether those programs work, and it’s probably too soon to tell anyway.

We’ll just have to check back with those interns.

To contact the editor responsible for this story: Howard Chua-Eoan at hchuaeoan@bloomberg.net

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