Robert Johnson, founder of BET, told CNBC on Monday that he believes that once it doesn’t affect their share price, companies will be more serious about addressing racial inequality within their workforce.
“Companies understand return on capital. They understand return on equity. They understand total return on shareholders,” Johnson told Closing Bell. “Link all of these factors to achieving employment opportunities for Black Americans at all levels. I think then you will see results because companies understand that. 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 US private sector by consulting giant McKinsey & Company. The McKinsey report, based on data from 24 companies, which together have 3.7 million employees, found remarkable differences in the representation of blacks in management positions.
Black Americans make up 12% of the total private sector workforce, but for the companies that participated in the McKinsey report, it was only 7% of executive employees. According to the report, black representation at the senior manager, vice president, and senior VP level drops to 4% to 5%.
“It will take approximately 95 years, as we go now, for black workers to achieve talent parity (or 12 percent representation) at all levels of the private sector,” the report said.
Johnson said, in his opinion, the only way for companies to work seriously to fill the employment gaps, especially in senior positions, is to “hold companies accountable for not making a commitment to address the gaps” .
“I think there are ways to do this,” 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 BET’s holding company. He now sits on the board of Discovery and is the founder and chairman of RLJ Companies.
Johnson said one way to be accountable in eliminating racial differences in employment is to set it as a target in corporate deeds.
“Shareholders should hold them accountable as soon as they are in their articles of association,” said Johnson, adding that proxy advisory firms like Institutional Shareholder Services and Glass Lewis “could explore the whole concept of no to companies that do not commit this kind of racial parity or basically closing the employment gap. ”
Johnson said companies of all sizes should also commit to something similar to the NFL’s Rooney Rule, which the league expanded last year to add diversity to their coaching ranks.
Teams are now required to interview at least two outside minority candidates for head coaching jobs, up from at least one since its inception in 2003. Also, the rule has been expanded to require teams to interview at least one outside minority candidate for an open coordinator positions; So far there has been no diversity mandate for these roles.
NFL franchises could be fined for not complying with the Rooney Rule, Johnson noted. “I’m not sure we want to punish companies because they can easily pay the fine,” he warned. “I think there should be some kind of moral equivalent that if you don’t, you will be singled out and your inventory will be reported as a failure, causing certain people to become involved in this form of racial justice and equality believe their take investments in other places. ”
Last year, Nasdaq made a proposal to the Securities and Exchange Commission to improve diversity among company boards. The exchange operator’s proposal would require the majority of companies to have at least two different board members: a woman and a person who is LGBTQ or an under-represented minority.
According to the proposal, companies could ultimately be removed from the stock market if they do not publish board data. In December, when the proposal was published, over 75% of the roughly 3,200 companies listed on the Nasdaq failed to meet the requirement, according to the New York Times.
Johnson previously made proposals on how to close the racial wealth gap in the US. In a CNBC interview earlier this month, Johnson stressed the need to nurture black entrepreneurship in America through capital allocation programs.
“Black companies tend to hire black people as a whole, so if you create more black companies, more black jobs will be created,” Johnson said. “More black jobs mean more black people are paying to buy their homes, black people … are saving for retirement, black people are investing. In the end, we’re taking a big step towards closing the huge wealth gap.”
A Citigroup report last year found that racial inequality has cost the US economy $ 16 trillion over the past two decades.