BET founder Robert Johnson told CNBC on Monday that he believes companies will take a more serious approach to racial inequality within their workforce once a failure to do so begins to affect their stock price.
“Companies understand return on investment capital. They understand return on equity. They understand total shareholder return,” Johnson said on “Closing Bell.” “Couple all of these factors with achieving job opportunities for black Americans at all levels, I think you will see results because that’s what companies understand. They respond to financial factors and market conditions.”
Johnson’s comments follow the publication of a new report on black employment in the US private sector from consulting giant McKinsey & Company. Based on data from 24 companies that together account for 3.7 million employees, the McKinsey report found notable differences in Black’s representation in management roles.
Black Americans make up 12% of the total private sector workforce, but among the companies participating in the McKinsey report, it was only 7% of employees at management level. Black representation drops to 4% to 5% at the senior manager, vice president, and senior VP levels, according to the report.
“On the current trajectory, it will take about 95 years for black workers to achieve talent equality (or 12 percent representation) at all levels in the private sector,” the report states.
Johnson said in his opinion that the only way companies will seriously work to address employment shortages, especially for senior positions, is that there must be “ accountability for companies that have not committed to an end. make to ‘the differences.
“I think there are ways to do it,” said Johnson, who founded Black Entertainment Television in 1980. Just over two decades later, in 2001, he became America’s first black billionaire when BET’s holding company was acquired by Viacom. He now sits on the board of Discovery and is founder and chairman of RLJ Companies.
Johnson said one way to be accountable for resolving racial inequalities in employment is to establish it as a target in corporate charters.
“Shareholders should hold them accountable for it once it’s in their charter,” Johnson said, adding that proxy consultancies like Institutional Shareholder Services and Glass Lewis could “look at the whole concept of a ‘no’ vote to companies that does not adhere to this kind of racial equality or, in fact, close the employment gap. ”
Johnson said companies of all sizes should also commit to something akin to the NFL’s Rooney rule, which expanded the league last year in an effort to improve diversity within its coaching ranks.
Teams are now required to interview at least two external minority candidates for head coach jobs, up from at least one since its introduction in 2003. In addition, the rule was expanded to require teams to interview at least one external minority candidate for open coordinator positions; there was previously no diversity mandate for these roles.
NFL franchises can be fined for failing to comply with the Rooney rule, Johnson noted. “I’m not sure we want to fine companies because they can easily pay the fine,” he warned. “I think there has to be some kind of moral equivalent that if you don’t, you get picked and your part falls short of it, leaving certain people who are in this form of racial equality and investment elsewhere.”
Last year, Nasdaq filed a proposal with the Securities and Exchange Commission aimed at improving board diversity. The stock market operator’s proposal would require the majority of companies to have at least two board members who are diverse: a woman and a person who is LGBTQ or an under-represented minority.
Under the proposal, companies could eventually be taken off the stock exchange if they did not publish board information. In December, when the proposal went public, more than 75% of the approximately 3,200 Nasdaq-listed companies failed to meet the requirement, according to the New York Times.
Johnson has previously made suggestions to address the racial wealth divide in the US. In a CNBC interview earlier this month, Johnson stressed the need to boost black entrepreneurship in America through capital allocation programs.
“Black companies tend to hire black people in their entirety, so you create more black companies, the recovery goes to more black jobs,” Johnson said. “More black jobs means more black people pay for their own homes, black people … save for retirement, black people invest. Ultimately, we’re taking 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.