Quotas Can Help Fix the Glaring Whiteness of America’s C-Suites

(Bloomberg Businessweek) -- At a virtual panel moderated by Goldman Sachs Group Inc. Chief Executive Officer David Solomon on the evening of June 9, Jide Zeitlin made a simple but pointed comment. “We better have more than four Black CEOs of Fortune 500 companies,” said the boss of Tapestry Inc., which owns Coach, Kate Spade, and Stuart Weitzman. “And not in 10 years. Not in 15 years. But in the next year or two or three.”

The Whiteness of America’s C-suites has always been glaring, but this call by Zeitlin—one of the four current African American corporate leaders and just 17 over the last two decades—is even more urgent against the backdrop of massive protests over police brutality and entrenched racism.

His plea isn’t likely to be heeded, however, unless companies decide to radically revamp their diversity playbooks. Over the past decade, organizations of all stripes have spent billions of dollars trying to get more members of underrepresented groups to the top, highest-paying jobs. They have poured resources into hiring, retaining, and promoting minorities and women. But for African Americans in particular, these efforts have been futile. There are fewer Black CEOs than five years ago, fewer Black executives at some of the biggest banks, and even fewer Black coaches in the NFL. The racial disparities are starkest at the top, but it doesn’t get much better further down the hierarchy. “The organizational chart at most mainstream organizations looks very similar to the organizational charts of plantations,” says Victor Ray, a sociologist of race theory at the University of Iowa. “Black folks are at the bottom.”

It takes an almost utopian commitment to achieve fair representation: The C-suite and top management must be dedicated to the issue—and it helps if many of those people are already non-White. Most companies are nowhere near that.

What’s the next best thing? How about coercion—or, to be more specific, quotas? The word immediately raises eyebrows and hackles. For some it evokes a time when quotas were used to limit non-White and Jewish employment. Business leaders who thrive on metrics to measure success become allergic to them once they involve race. But it’s worth bringing up as the Black Lives Matter protests get companies to reframe their thinking. Almost every major company has put out a statement condemning racism or racial inequality. Some have even made policy changes. Sephora signed a pledge to dedicate 15% of its shelf space to products from Black-owned businesses. On June 9, Adidas announced at least 30% of new hires would be Black or Latino. (A good-faith target, not a quota.) But that thinking needs to permeate entire organizations to result in more Black CEOs, or even more Black managers, says Robert Lieberman, a professor of political science at Johns Hopkins University. “Right now companies have these pretty deeply embedded structures that are geared toward diversity,” says Lieberman, who studies race-based discrimination and policy. If a diversity program is to become “an instrument of racial equity, rather than an instrument of creating and sustaining diversity, they’re going to have to do something different.”

So why not consider the coercive powers of quotas? In perhaps the most successful diversity push in recent years, California passed a law in 2018 requiring all public companies based in the state to have at least one female director by the end of 2019. At the close of 2021, boards with five directors must have at least two women, and those with six or more have at least three. Failure to comply costs $100,000 the first year and three times as much after that. The move was unpopular, even with women, because it suggested hiring committees would have to lower their standards. A year after compliance began, that’s not what happened. Instead, opportunities opened for overlooked executives. “There was a perception when the law passed that there was a limited pool of qualified candidates,” Annalisa Barrett, a governance expert at KPMG LLP’s Board Leadership Center, told Bloomberg News. “It doesn’t seem to have been the case.” Women accounted for almost half of new board seats in the state last year, outpacing female hires for similar positions in the rest of the country.

There are judicial roadblocks, of course. Since the Supreme Court weighed in on its first affirmative-action case in 1978, it’s limited government use of numerical targets. In the ruling, a university admissions case, the court said an institution could use race as a factor in its decisions, but that quotas went too far. Meanwhile, California’s law has faced multiple legal challenges. Judicial Watch, a conservative activist group, called the requirement unconstitutional in a lawsuit filed on behalf of taxpayers, and a shareholder of a California-based company with an all-male board argued in a federal complaint that it’s discriminatory. The first case is ongoing; the second was dismissed in April. While lawyers duke it out, California companies are moving ahead with meeting their quotas. Even if the law is struck down, the gains women have made will be in place.

Boards are just about as White as they are male—as of 2019, 37% don’t have a single Black director. Still, a law similar to California’s that would address racial inequities is highly unlikely and would face “much stronger” opposition than the gender quota law, says Michael Hyter, chief diversity officer at Korn Ferry. “There is an apprehension among companies that if they are perceived as setting a target for hiring for people of color, that the focus will mean hiring less qualified candidates,” Hyter says. It’s a familiar yet unfounded fear “that is hilarious on so many levels,” says Kimberly Reyes, who spent years working as one of a few Black copywriters at various companies. “Even without quotas, people assume you were hired because you were Black.” And, once again, cf. California.

If legislators won’t act, shareholders could. State Street Corp., BlackRock Inc., and activist investors already pressure companies to disclose the gender diversity of their boards. Those campaigns have resulted largely in gains for White women. They could shift their focus to Black representation, says Natasha Lamb, a managing partner at Arjuna Capital, which pushes banks and tech companies to disclose gender and racial pay gaps. People bristle at the idea of racial quotas, Lamb says, but they work. “There need to be interventions,” she says. “The protests are an intervention. Shareholders exercising their voice is an intervention. Without intervention, nothing is going to change.” Vanguard says it had already planned a 2020 emphasis on getting boards to disclose their racial and ethnic data. BlackRock says it continues to be committed to pushing for board diversity. State Street says it’s “committed to being part of the solution” and continuously evaluating the issue of racial diversity.

The boardroom is just one of many White corners of the business world. Up and down the corporate ladder, strictly enforced targets could legally be used to fix racial imbalances, says David Oppenheimer, director of the Berkeley Center on Comparative Equality & Anti-Discrimination Law. Quotas can’t be used in perpetuity, he says, but they can be put in place for a short period to correct a “manifest imbalance” in workforce makeup. “It’s sort of like dieting,” says Oppenheimer. “Sometimes you have to go on a severe diet to lose some weight, and then hopefully you can go on a maintenance diet where you can eat a little bit more. That’s the theory. One hopes it works better than dieting.”

Why aren’t more companies wielding the powers of this blunt but useful tool in their commitment to diversity? “Quotas are always a bit of an  issue,” says Pam Jeffords, a diversity and inclusion consultant with PwC. “Our goal is to inspire people vs. shame them.” The consulting firm prefers to look at hiring rates instead. The idea, she says, is to make sure companies aren’t hiring any specific demographic at a greater rate than another. Jeffords concedes that alone won’t change overall representation over time: “What are we really looking for? We don’t want the numbers to go down. There’s been some decreasing in hiring rates for Black employees.”

Half-measures rarely move anyone forward. Take the Rooney Rule—named for Dan Rooney, former chairman of the diversity committee of the NFL, which pioneered it. The 2003 rule, widely adopted by corporate America, requires hiring managers include a diverse slate of candidates for a given role. Since 2003, non-Whites have been considered for open slots in head coaching positions at professional football teams. There are just as few Black coaches now as there were then. In May, the league’s owners all but admitted the failure of the program when they met to consider additional incentives for teams that hire non-White coaches.

To be sure, quotas are limited in what they can achieve. In Norway, where public companies must set aside 40% of board seats for women, they hold 42% of those positions. But even with all those women in charge, men still hold most of the executive power. Only 7.7% of those companies have female chief executives. In Malaysia, government policies giving preferential treatment to the ethnic Malay majority have helped them move up the social and economic ladder, at the expense, critics say, of ethnic Chinese and Indians.

Quotas won’t solve racism. As U.S. Supreme Court Justice John Roberts said in a 2007 ruling, “the way to stop discrimination on the basis of race is to stop discriminating on the basis of race.” Sending Black people into a hostile environment isn’t much better than not hiring them at all. “If you hire a lot of Black people and the culture is such that their jobs are at risk, they will be undermined,” says Nadia Owusu, who does diversity and inclusion work at Living Cities and earlier this year wrote a column for the online magazine Catapult called “Hiring a Chief Diversity Officer Won’t Fix Your Racist Company Culture.” Indeed, the internal dynamics of corporations often end up undermining the executives in charge of diversity, many of whom are women of color, Owusu says.

Quotas also invite lawsuits—as they have in California. Harvard’s use of race as a factor in deciding on admissions has been called an “evil of private prejudice” and discriminatory by Edward Blum, a legal activist who’s brought multiple suits against universities, including Harvard, for what he sees as biased admissions policies. The Supreme Court has allowed institutions to consider race in hiring and admissions, as long as it’s in an organization’s interest.

Affirmative action was originally meant to counteract deeply ingrained prejudices. “It has traveled somewhat of a distance from that idea,” says Johns Hopkins’s Lieberman. It used to be a form of “reparations and compensatory justice”—a form of payback for inequalities that exist because of the U.S. history of slavery. It also counteracts programs like legacy admissions that work as affirmative action for White people. Through the decades, however, it’s become part of a mushier push for diversity. Racial justice has been dropped in favor of a “business case” for diversity of thought and experiences, says Lieberman. Indeed, while research has confirmed the financial benefits of diverse teams, the profit motive hasn’t changed the face of corporate America. Many companies still look for credentials—Ivy League, Fortune 500 internships for example—that perpetuate the status quo.

A debate about quotas may just force corporate diversity programs to shape up. Maybe thinking about the issue as a matter of justice—not just money—will make a difference. “Diversity as the reason for affirmative action is incredibly ahistorical,” says Reyes, a Fulbright scholar who’s written about affirmative action for the Atlantic. “It was initially supposed to be about righting wrongs, or trying to balance something lopsided. Without quotas, how exactly do you change that?” —With Jeff Green, Donald Moore, Kim Bhasin, Saijel Kishan, and Mikael Holter
 
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