WEBVTT - The Case for Quotas 0:00:00.120 --> 0:00:02.720 Hi, I'm Carol Masser and I've Jason Kelly. It's time 0:00:02.720 --> 0:00:05.320 for this week's cover story. Well, Carol, the whiteness of 0:00:05.320 --> 0:00:08.800 America's C suites has always been glaring. That's right, Jason. 0:00:08.880 --> 0:00:11.920 There have been just seventeen black CEOs in the Fortune 0:00:11.960 --> 0:00:15.160 five hundred over the last two decades. Right now there 0:00:15.200 --> 0:00:18.120 are just four. And as for boards, while they are 0:00:18.160 --> 0:00:20.239 just about as white as they are male, as of 0:00:21.760 --> 0:00:25.919 thirty seven percent don't have a single black director. The 0:00:25.960 --> 0:00:30.720 word quote is well, it immediately raises eyebrows and some hackles. 0:00:30.720 --> 0:00:33.559 But is it finally time for corporate America to consider 0:00:33.960 --> 0:00:37.280 a more coercive power? After all, a recent law in 0:00:37.280 --> 0:00:40.920 California that mandates female representation on boards of public companies 0:00:40.960 --> 0:00:45.360 has resulted in meaningful gains, and as Rebecca Greenfield rights 0:00:45.400 --> 0:00:48.400 in remarks, quota as well, they won't solve racism, and 0:00:48.440 --> 0:00:52.120 they definitely invite lawsuits, as they have in California. But maybe, 0:00:52.720 --> 0:00:54.920 as she writes, this is a debate worth having if 0:00:54.920 --> 0:00:59.040 it helps force corporate diversity programs to shape up. The 0:00:59.120 --> 0:01:03.440 case for quote is they've helped women. Can quotas help 0:01:03.560 --> 0:01:06.880 change the racial makeup of C suites? And management by 0:01:06.920 --> 0:01:12.200 Rebecca Greenfield. At a virtual panel moderated by Goldman Sachs 0:01:12.280 --> 0:01:16.160 Chief executive officer David Solomon on the evening of June nine, 0:01:16.440 --> 0:01:19.920 g Day's Island made a simple but pointed comment. We 0:01:20.040 --> 0:01:23.759 better have more than four black CEOs of Fortune five companies, 0:01:24.160 --> 0:01:27.840 said the boss of Tapestry, which owns coach Kate Spade 0:01:27.840 --> 0:01:31.080 and Stuart Weitzman. And not in ten years, not in 0:01:31.160 --> 0:01:34.720 fifteen years, but in the next year or two or three. 0:01:34.959 --> 0:01:38.160 The whiteness of America's C suites has always been glaring, 0:01:38.600 --> 0:01:41.440 but this call by Zeitland, one of the four current 0:01:41.520 --> 0:01:45.119 African American corporate leaders and just seventeen over the last 0:01:45.160 --> 0:01:48.360 two decades, is even more urgent against the backdrop of 0:01:48.400 --> 0:01:54.280 massive protests over police brutality and entrenched racism. His plea 0:01:54.440 --> 0:01:57.760 isn't likely to be heated, however, unless companies decide to 0:01:57.880 --> 0:02:02.800 radically revamp their diversity playbooks. Over the past decade, organizations 0:02:02.800 --> 0:02:05.360 of all stripes have spent billions of dollars trying to 0:02:05.360 --> 0:02:08.560 get more members of underrepresented groups to the top highest 0:02:08.560 --> 0:02:12.640 paying jobs. They have poured resources into hiring, retaining, and 0:02:12.680 --> 0:02:16.720 promoting minorities and women, but for African Americans in particular, 0:02:17.120 --> 0:02:20.520 these efforts have been feudal. There are fewer black CEOs 0:02:20.600 --> 0:02:23.799 than five years ago, fewer black executives at some of 0:02:23.840 --> 0:02:27.320 the biggest banks, and even fewer black coaches in the NFL. 0:02:28.080 --> 0:02:31.040 The racial disparities are starkest at the top, but it 0:02:31.080 --> 0:02:34.800 doesn't get much better further down the hierarchy. The organizational 0:02:34.880 --> 0:02:38.280 chart at most mainstream organizations looks very similar to the 0:02:38.360 --> 0:02:43.120 organizational charts of plantations, says Victor Ray, a sociologist of 0:02:43.200 --> 0:02:46.600 race theory at the University of Iowa. Black folks are 0:02:46.639 --> 0:02:50.920 at the bottom. It takes an almost utopian commitment to 0:02:50.960 --> 0:02:55.040 achieve fair representation. The c suite and top management must 0:02:55.080 --> 0:02:57.880 be dedicated to the issue, and it helps if many 0:02:57.919 --> 0:03:01.480 of those people are already non white. Most companies are 0:03:01.520 --> 0:03:06.799 nowhere near that. What's the next best thing? How about coercion, or, 0:03:06.840 --> 0:03:11.840 to be more specific, quotas. The word immediately raises eyebrows 0:03:11.919 --> 0:03:15.040 and hackles for some. It evokes a time when quotas 0:03:15.040 --> 0:03:18.640 were used to limit non white and Jewish employment. Business 0:03:18.720 --> 0:03:22.200 leaders who thrive on metrics to measure success become allergic 0:03:22.240 --> 0:03:25.240 to them once they involve race. But it's worth bringing up. 0:03:25.240 --> 0:03:28.200 As the Black Lives Matter protests get companies to reframe 0:03:28.240 --> 0:03:31.440 their thinking. Almost every major company has put out a 0:03:31.480 --> 0:03:35.800 statement condemning racism or racial inequality. Some have even made 0:03:35.880 --> 0:03:39.800 policy changes. Cephoras signed a pledge to dedicate fifteen percent 0:03:39.840 --> 0:03:42.520 of its shelf space to products from black owned businesses. 0:03:43.120 --> 0:03:46.040 On June ninth, Adidas announced at least thirty percent of 0:03:46.040 --> 0:03:49.400 new hires would be black or Latino. A good faith target, 0:03:49.680 --> 0:03:53.160 not a quota, but that thinking needs to permeate entire 0:03:53.280 --> 0:03:56.600 organizations to result in more black c e os or 0:03:56.640 --> 0:03:59.960 even more black managers, says Robert Lieberman, a professor of 0:04:00.000 --> 0:04:03.920 political science at Johns Hopkins University. Right now, companies have 0:04:04.000 --> 0:04:07.280 these pretty deeply embedded structures that are geared toward diversity, 0:04:07.400 --> 0:04:11.680 says Lieberman, who studies race based discrimination and policy. If 0:04:11.680 --> 0:04:14.800 a diversity program is to become an instrument of racial 0:04:14.800 --> 0:04:18.120 equity rather than an instrument of creating and sustaining diversity, 0:04:18.440 --> 0:04:21.440 they're going to have to do something different. So why 0:04:21.480 --> 0:04:25.039 not consider the coercive powers of quotas and perhaps the 0:04:25.080 --> 0:04:28.920 most successful diversity push in recent years, California, passed a 0:04:28.960 --> 0:04:32.080 law in twenty eighteen, requiring all public companies based in 0:04:32.120 --> 0:04:34.840 the state to have at least one female director by 0:04:34.839 --> 0:04:39.160 the end of At the close of one boards with 0:04:39.240 --> 0:04:42.119 five directors must have at least two women, and those 0:04:42.120 --> 0:04:45.279 with six or more have at least three. Failure to 0:04:45.320 --> 0:04:48.400 comply costs a hundred thousand dollars the first year and 0:04:48.440 --> 0:04:51.880 three times as much after that. The move was unpopular, 0:04:51.960 --> 0:04:55.080 even with women, because it suggested hiring committees would have 0:04:55.120 --> 0:04:58.880 to lower their standards a year after compliance began. That's 0:04:58.920 --> 0:05:04.320 not what happened. Instead, opportunities opened for overlooked executives. There 0:05:04.440 --> 0:05:06.440 was a perception when the law passed that there was 0:05:06.480 --> 0:05:10.159 a limited pool of qualified candidates. Ane Lisa Barrett, a 0:05:10.240 --> 0:05:14.240 governance expert at KPMG's Board Leadership Center, told Bloomberg News 0:05:14.320 --> 0:05:16.799 in March it doesn't seem to have been the case. 0:05:17.720 --> 0:05:20.560 Women accounted for almost half of new board seats in 0:05:20.600 --> 0:05:24.440 the state last year, outpacing female hires for similar positions 0:05:24.440 --> 0:05:28.080 in the rest of the country. There are judicial roadblocks, 0:05:28.120 --> 0:05:31.160 of course, Since the Supreme Court weighed in on its 0:05:31.160 --> 0:05:34.760 first affirmative action case in nineteen seventy eight, its limited 0:05:34.760 --> 0:05:38.799 government use of numerical targets. In the ruling a university 0:05:38.800 --> 0:05:42.080 admissions case, the court said an institution could use race 0:05:42.120 --> 0:05:44.960 as a factor in its decisions, but that quotas went 0:05:45.000 --> 0:05:50.200 too far. Meanwhile, California's law has faced multiple legal challenges. 0:05:50.880 --> 0:05:55.680 Judicial Watch, a conservative activist group, called the requirement unconstitutional 0:05:55.720 --> 0:05:58.599 in a lawsuit filed on behalf of taxpayers and a 0:05:58.600 --> 0:06:01.320 shareholder of a California based company with an all male 0:06:01.360 --> 0:06:05.240 board argued in a federal complaint that it's discriminatory. The 0:06:05.279 --> 0:06:08.839 first case is ongoing, the second was dismissed in April. 0:06:09.440 --> 0:06:12.920 While lawyers duke it out, California companies are moving ahead 0:06:12.960 --> 0:06:16.000 with meeting their quotas. Even if the law is struck down, 0:06:16.200 --> 0:06:19.800 the gains women have made will be in place. Boards 0:06:19.800 --> 0:06:22.440 are just about as white as they are male. As 0:06:22.480 --> 0:06:25.359 of twenty nineteen, thirty seven percent don't have a single 0:06:25.440 --> 0:06:29.279 black director. Still, a law similar to Californias that would 0:06:29.320 --> 0:06:32.920 address racial inequities is highly unlikely and would face much 0:06:32.960 --> 0:06:36.400 stronger opposition than the gender quota law, says Michael Hyder, 0:06:36.720 --> 0:06:40.440 chief diversity officer at Corn Ferry. There is an apprehension 0:06:40.440 --> 0:06:43.039 among companies that if they are perceived as setting a 0:06:43.080 --> 0:06:46.080 target for hiring for people of color, that the focus 0:06:46.080 --> 0:06:50.720 will mean hiring less qualified candidates. Hyder says it's a familiar, 0:06:50.800 --> 0:06:54.239 yet unfounded fear that is hilarious on so many levels, 0:06:54.440 --> 0:06:57.320 says Kimberly Reyes, who spent years working as one of 0:06:57.320 --> 0:07:01.600 a few black copywriters at various companies. Even without quotas, 0:07:01.640 --> 0:07:04.640 people assume you were hired because you were black, and 0:07:04.720 --> 0:07:10.440 once again see Reverence, California. If legislators won't act, shareholders 0:07:10.440 --> 0:07:15.080 could State Street, Black rock and activist investors already pressure 0:07:15.080 --> 0:07:18.559 companies to disclose the gender diversity of their boards. Those 0:07:18.600 --> 0:07:22.400 campaigns have resulted largely in gains for white women. They 0:07:22.400 --> 0:07:25.800 could shift their focus to black representations, says Natasha Lamb, 0:07:26.120 --> 0:07:29.239 a managing partner at our Juna Capital, which pushes banks 0:07:29.240 --> 0:07:32.560 and tech companies to disclose gender and racial pay gaps. 0:07:32.800 --> 0:07:35.880 People bristle at the idea of racial quotas, Lamb says, 0:07:35.880 --> 0:07:39.040 but they work. There need to be interventions, She says. 0:07:39.440 --> 0:07:43.360 The protests are an intervention. Shareholders exercising their voice is 0:07:43.400 --> 0:07:48.400 an intervention. Without intervention, nothing is going to change. Vanguard 0:07:48.480 --> 0:07:51.360 says it had already planned a twenty twenty emphasis on 0:07:51.440 --> 0:07:55.000 getting boards to disclose their racial and ethnic data. Black 0:07:55.120 --> 0:07:57.480 Rock says it continues to be committed to pushing for 0:07:57.520 --> 0:08:01.160 board diversity. State Street says it's committed to being part 0:08:01.160 --> 0:08:04.760 of the solution. The boardroom is just one of many 0:08:04.880 --> 0:08:07.960 white corners of the business world up and down the 0:08:08.000 --> 0:08:11.560 corporate ladder. Strictly enforced targets could legally be used to 0:08:11.600 --> 0:08:15.600 fix racial imbalances, says David Obenheimer, director of the Berkeley 0:08:15.600 --> 0:08:20.040 Center on Comparative Equality and Anti Discrimination Law. Quotas can't 0:08:20.040 --> 0:08:22.920 be used in perpetuity, he says, but they can be 0:08:22.960 --> 0:08:25.200 put in place for a short period to correct a 0:08:25.240 --> 0:08:29.160 manifest imbalance in workforce makeup. It's sort of like dieting, 0:08:29.280 --> 0:08:32.199 says Oppenheimer. Sometimes you have to go on a severe 0:08:32.240 --> 0:08:34.760 diet to lose some weight, and then hopefully you can 0:08:34.800 --> 0:08:36.559 go on a maintenance diet where you can eat a 0:08:36.559 --> 0:08:40.160 little bit more. That's the theory. One hopes it works 0:08:40.200 --> 0:08:44.640 better than dieting. Why aren't more companies wielding the powers 0:08:44.679 --> 0:08:48.040 of this blunt but useful tool in their commitment to diversity. 0:08:48.280 --> 0:08:51.640 Quotas are always a bit of an issue, says Pam Jeffords, 0:08:51.679 --> 0:08:55.760 A diversity and Inclusion consultant with p WC. Our goal 0:08:55.880 --> 0:08:59.680 is to inspire people versus shame them. The consulting firm 0:08:59.720 --> 0:09:02.920 for is to look at hiring rates instead. The idea, 0:09:03.000 --> 0:09:05.600 she says, is to make sure companies aren't hiring any 0:09:05.640 --> 0:09:09.760 specific demographic at a greater rate than another. Jeffords concedes 0:09:09.800 --> 0:09:13.679 that alone won't change overall representation over time. What are 0:09:13.720 --> 0:09:16.280 we really looking for. We don't want the numbers to 0:09:16.320 --> 0:09:19.360 go down. There's been some decreasing in hiring rates for 0:09:19.400 --> 0:09:25.000 black employees. Half measures rarely move anyone forward. Take the 0:09:25.080 --> 0:09:28.280 Rooney Rule, named for Dan Rooney, former chairman of the 0:09:28.280 --> 0:09:32.040 Diversity Committee of the NFL, which pioneered it. The two 0:09:32.120 --> 0:09:36.439 thousand and three rule, widely adopted by Corporate America, requires 0:09:36.520 --> 0:09:39.560 hiring managers include a diverse slate of candidates for a 0:09:39.559 --> 0:09:43.240 given role. Since two thousand three, non whites have been 0:09:43.240 --> 0:09:46.480 considered for open slots in head coaching positions at professional 0:09:46.480 --> 0:09:50.199 football teams. There are just as few black coaches now 0:09:50.240 --> 0:09:53.600 as there were then. In May, the league's owners all 0:09:53.600 --> 0:09:56.120 but admitted the failure of the program when they met 0:09:56.120 --> 0:09:59.600 to consider additional incentives for teams that hire non white coaches. 0:10:00.600 --> 0:10:03.480 To be sure, quotas are limited in what they can achieve. 0:10:04.120 --> 0:10:07.360 In Norway, where public companies must set aside forty percent 0:10:07.400 --> 0:10:10.280 of board seats for women, they hold forty two percent 0:10:10.320 --> 0:10:14.480 of those positions. But even with all those women in charge, 0:10:14.559 --> 0:10:18.400 men still hold most of the executive power. Only seven 0:10:18.400 --> 0:10:21.840 point seven percent of those companies have female chief executives. 0:10:22.080 --> 0:10:25.920 In Malaysia, government policies giving preferential treatment to the ethnic 0:10:25.960 --> 0:10:28.520 Malay majority have helped them move up the social and 0:10:28.559 --> 0:10:32.440 economic ladder at the expense critics say of ethnic Chinese 0:10:32.440 --> 0:10:37.440 and Indians. Quotas won't solve racism, As u S Supreme 0:10:37.480 --> 0:10:40.480 Court Justice John Roberts said in a two thousand seven ruling, 0:10:40.840 --> 0:10:43.360 the way to stop discrimination on the basis of race 0:10:43.679 --> 0:10:47.000 is to stop discriminating on the basis of race. Sending 0:10:47.000 --> 0:10:50.000 black people into a hostile environment isn't much better than 0:10:50.080 --> 0:10:52.679 not hiring them at all. If you hire a lot 0:10:52.720 --> 0:10:54.719 of black people and the culture is such that their 0:10:54.800 --> 0:10:58.600 jobs are at risk, they will be undermined, says Nadia Owusu, 0:10:59.040 --> 0:11:02.160 who does diversity and inclusion work at Living Cities, and 0:11:02.280 --> 0:11:04.840 earlier this year, wrote a column for the online magazine 0:11:04.880 --> 0:11:08.839 Catapult called hiring a chief diversity officer won't fix your 0:11:08.960 --> 0:11:14.200 racist company culture. Indeed, the internal dynamics of corporations often 0:11:14.280 --> 0:11:17.600 end up undermining the executives in charge of diversity, many 0:11:17.679 --> 0:11:21.960 of whom are women of color. OWUSU says. Quotas also 0:11:22.040 --> 0:11:26.000 invite lawsuits, as they have in California. Harvard's use of 0:11:26.120 --> 0:11:29.000 race as a factor in deciding on admissions has been 0:11:29.040 --> 0:11:33.480 called an evil of private prejudice and discriminatory by Edward Blum, 0:11:33.480 --> 0:11:37.800 a legal activist who's brought multiple suits against universities, including Harvard, 0:11:38.000 --> 0:11:41.679 for what he sees as biased admissions policies. The Supreme 0:11:41.720 --> 0:11:44.679 Court has allowed institutions to consider race in hiring and 0:11:44.760 --> 0:11:49.559 admissions as long as it's in an organization's interest. Affirmative 0:11:49.559 --> 0:11:53.960 action was originally meant to counteract deeply ingrained prejudices. It 0:11:54.000 --> 0:11:56.760 has traveled somewhat of a distance from that idea, says 0:11:56.840 --> 0:11:59.680 Johns Hopkins Lieberman. It used to be a form of 0:12:00.000 --> 0:12:04.479 reparations and compensatory justice, a form of payback for inequalities 0:12:04.520 --> 0:12:07.479 that exist because of the u S history of slavery. 0:12:07.920 --> 0:12:11.440 It also counteracts programs like legacy admissions that work as 0:12:11.480 --> 0:12:15.920 affirmative action for white people. Through the decades, However, it's 0:12:15.920 --> 0:12:20.040 become part of a mushier push for diversity. Racial justice 0:12:20.040 --> 0:12:22.440 has been dropped in favor of a business case for 0:12:22.480 --> 0:12:27.000 diversity of thought and experiences, says Lieberman. Indeed, while research 0:12:27.040 --> 0:12:30.559 has confirmed the financial benefits of diverse teams, the profit 0:12:30.600 --> 0:12:34.400 motive hasn't changed the face of corporate America. Many companies 0:12:34.440 --> 0:12:38.920 still look for credentials Ivy League, Fortune Five internships, for example, 0:12:39.280 --> 0:12:43.400 that perpetuate the status quo. A debate about quotas may 0:12:43.480 --> 0:12:47.319 just force corporate diversity programs to shape up. Maybe thinking 0:12:47.360 --> 0:12:50.480 about the issue as a matter of justice, not just money, 0:12:50.840 --> 0:12:54.439 will make a difference. Diversity as the reason for affirmative 0:12:54.480 --> 0:12:58.600 action is incredibly ah historical, says Reyes, a Fulbright scholar 0:12:58.600 --> 0:13:01.760 who's written about Affirmative act and for The Atlantic. It 0:13:01.800 --> 0:13:04.959 was initially supposed to be about writing wrongs or trying 0:13:05.000 --> 0:13:09.200 to balance something lopsided without quotas. How exactly do you 0:13:09.280 --> 0:13:14.120 change that? With Jeff Green, Donald Moore, Kim Boston, and 0:13:14.200 --> 0:13:18.280 Michael Holter. And that's this week's remarks and the cover story. 0:13:18.360 --> 0:13:20.960 Check out more stories in the magazine this week. It 0:13:21.040 --> 0:13:23.560 is now on newsstands. It's on the Bloomberg and online 0:13:23.600 --> 0:13:26.440 at Bloomberg dot com. I'm Carol Masser and I'm Jason Kelly. 0:13:26.480 --> 0:13:28.679 Check out our daily Bloomberg Business Week show on the 0:13:28.760 --> 0:13:31.439 radio two pm to six pm Wall Street Time, or 0:13:31.520 --> 0:13:36.240 check us out via podcast This is Bloomberg. Bloomberg invest Global. 0:13:36.320 --> 0:13:40.160 June through four, the biggest names in finance and investing 0:13:40.200 --> 0:13:43.080 from Asia, the Middle East, Europe, Africa and the US 0:13:43.120 --> 0:13:45.480 will convene in a live streaming event over the course 0:13:45.480 --> 0:13:49.440 of three days. 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