December 02, 2020

Racial Justice and Equality: Commit to Action

Alan S. Gutterman

A few weeks ago we called out the importance of companies needing to provide their stakeholders with a clear public statement on their values and overriding commitment to diversity, equity, and inclusion. While speaking out is essential, words alone are not enough, and business leaders need to settle on the specific actions that the company will be taking to contribute to the cause. Planning for action begins with the internal and external engagement processes that the company should have used to craft its public position on racial justice reforms. All of the information collected during those exchanges should be carefully cataloged and analyzed by the company’s leaders and the members of the working group formed by the chief executive officer (CEO). The group should prepare a report on the information collected during the engagement process, giving due respect to requests for anonymity. The report should be released to all relevant stakeholders, along with an explanation of how the group weighed the information, and should use it to make decisions on the steps that will be taken to address and remediate problems of racial injustice in the company’s operations. Transparency is essential to building and maintaining the trust needed to make meaningful changes. It should be recognized that in some cases the disclosures will be painful, documenting acts or ongoing practices that fall short of the company’s aspirations with respect to racial justice. However, it is important for the company to acknowledge its past failures and for leaders to demonstrate that they understand the need to change and explain exactly what they intend to do in order to make those changes.

The engagement process and the organization of the information collected during that process should allow the leaders of the business to identify the problems that are most material to their own situation. The leaders should also generate ideas on how the company might be able to contribute its resources to addressing issues that require a collective response involving governmental bodies, other businesses, nonprofits, and civil society groups.  For example, the engagement process, as well as reviews of relevant data already compiled by the company, may clearly identify shortcomings in the company’s willingness and ability to recruit and retain people of color. A large number of complaints regarding discrimination and harassment against are also a “red flag” that should have been noticed and addressed earlier. All this means that the company’s action plan must address diversity and inclusion issues in the hiring process and provide training and take other steps to embed “zero tolerance” of discrimination into the company’s organizational culture. At the same time, most companies can identify a number of ways to help improve conditions for people of color in the communities in which they are operating. The action plan should also include initiatives that are feasible given the company’s resources, including investments, and should support volunteering by the company’s employees as well as advocacy for governmental policies and public programs that will lead to meaningful social changes.

Commitments to action regarding racial equality and justice are specific to each organization and must take into account stakeholder feedback and available resources, together with the issues and problems that are most salient and immediate for the company.  The menu of commitments presented below is based on suggestions made by Kramer and others and touches on wide swaths of a company’s activities internally and in the communities and stakeholder relationships in which they are involved. Some steps appear to be surprisingly simple and quick to initiate, but others will take time and will be accompanied by increases in short-term costs. These costs will need to be explained to investors as being necessary and prudent to create long-term shared value and further the social purpose of the enterprise. For example, it is important to emphasize that studies have shown that closing the racial pay gap would lead to significant improvements in overall economic performance as measured by gross domestic product and that raising entry-level wages would improve financial performance by increasing productivity and reducing turnover. In some cases the suggested actions are specific to workers; however, companies should be attentive to opportunities that would extend commitments to assist members of the communities in which they are operating as part of an effort to be “good citizens.”

EMBEDDING DIVERSITY, EQUITY, AND INCLUSION

  • Commit to supporting racial equality in the business by implementing organizational structures and expectations of accountability that embed diversity, equity, and inclusion into operations such as forming a permanent full-time team, with relevant experience and expertise drawn from throughout the company (e.g., engineers, data scientists, researchers, designers) in order to focus exclusively on advancing inclusion and rooting out bias in key activities such as product design, marketing, and customer service
  • Commit to antiracist personnel policies which make it clear that the company will have “zero tolerance” for racism and will act swiftly to discipline workers who engage in actions that discriminate against co-workers, customers, and community members on the basis of race
  • Commit to racial-equity training to support the success of the policies mentioned above and further understanding of the underlying causes of the problems, making sure that training is required for everyone in the organization, ranging from the directors and members of the executive team to the hourly workers
  • Commit to giving employees a voice by creating and respecting processes for ensuring that hourly employees, women, and people of color are represented in all employment decisions and are either represented on, or have full access to, the board of directors

FINANCIAL EQUITY AND SECURITY

  • Commit to pay equity in order to eliminate shocking disparities in wages paid to people of color (especially women of color), a process that should begin with a wage equity audit and then continue with appropriate adjustments, reviewed and updated on a regular basis, to achieve and maintain fair and equitable pay throughout the organization
  • Commit to paying a living wage and offering all workers competitive benefits and stable scheduling to avoid disruptions to their incomes and lives
  • Commit to an employee emergency relief fund or low-cost loan program that workers can access to cover emergency expenses, realizing that a significant percentage of Americans, particularly people of color, do not have sufficient savings to cope with the unexpected and are often forced to deal with payday lenders that charge outrageous fees or run up high-interest credit card debt
  • Commit to paid parental and sick leave through direct company financial support and/or advocacy for governmental funding, recognizing that people of color face disproportionate challenges in affording unpaid time off from work to care for children and other family members
  • Commit to full health care coverage for all workers and support efforts to improve public health and achieve equity and universal coverage in health care in order to ensure that workers keep more of their paychecks and that people of color are better protected against the tragic impacts of health-related challenges such as the Covid-19 pandemic
  • Commit to programs to assist workers with caregiving responsibilities by implementing flexible work schedules and allowing for telecommuting, thus making it easier for workers to care for children and other family members, and providing on-site child care, all of which can ease stress on workers and help attract a broader and diverse pool of candidates

DIVERSITY AND INCLUSION IN THE WORKFORCE

  • Commit to democratize recruitment processes by eliminating questions on employment applications and testing that disproportionately exclude people of color (e.g., “felony convictions” and testing for use of marijuana and other drugs not required by law or the nature of the job), eliminating college degree requirements for jobs that do not actually require higher education, and developing hiring, mentoring, and training programs for young people of color without high school degrees and thus at higher risk for unemployment
  • Commit to transparency in disclosing strategies and results relating to diversity and inclusion initiatives beginning with the collection, analysis, and reporting of data relating to recruiting, promotion, wages, and other issues as to which bias is likely to arise
  • Commit to expanding diversity in the recruitment pool by focusing on local communities, dramatically expanding the size of internship programs for people who do not meet traditional educational requirements, committing to setting aside a significant portion of the slots to young people of color, and increasing recruiting at historically black colleges and universities
  • Commit to having a diverse workforce that mirrors the customer base, which means ensuring that core business units such as product development, marketing, sales, and customer service include employees who can raise concerns about discriminatory, exclusionary or insensitive actions in their areas and in the company’s training and external messaging

DIVERSITY IN THE BOARDROOM AND C-SUITE

  • Commit to diversity in the boardroom through purposeful inclusion of women and people of color as members of the board of directors and on advisory boards created to focus on the company’s environmental and social responsibilities and commitments and by requiring that directors hold themselves and management accountable for specific objectives around recruitment, retention, and promotion of people of color
  • Commit to tying compensation for the CEO and other members of the executive team to diversity and inclusion metrics and ensuring that contributing to economic justice is part of the CEO’s formal duties and responsibilities

COMMUNITY INVESTMENT AND ENGAGEMENT

  • Commit to advocating for good by earmarking a significant amount of your company’s lobbying and advocacy budget and related resources to supporting measures that would have a material impact on improving conditions for communities of color (e.g., increasing access to quality education and training, rebuilding infrastructure, ending racial oppression, reforming criminal justice systems and public and mental health systems and rebuilding the safety net) and working to identify and support local leaders who are committed to racial and social justice
  • Commit to supporting employees in their interests in getting involved in community-based programming focusing on racial and economic justice by implementing programs that allow employees to volunteer for these programs while being paid by the company and contributing cash and other resources to such programs
  • Commit to supporting full participation by workers and community members in democracy by making Election Day a paid holiday, supporting registration of workers and community members for voting (e.g., setting up tables for voter registration at the workplace), providing assistance to ensure that workers and community members are actually able to vote, and hosting forums for candidates to speak to workers and community members and provide their views on economic and social justice issues
  • Commit to rebuilding trust between businesses and communities of color that has often been breached by past discriminatory practices, including intentional failures to provide people of color with access to products and services on the same terms offered to white customers
  • Commit to supporting minority businesses through investments and preferences in procurement practices starting with localizing purchasing commitments, developing and using lists of contractors led by people of color, and requiring that professional services providers (e.g., lawyers, accountants, and bankers) have at least one person of color in a meaningful role on the team working for the company

PRODUCTS AND SERVICES

  • Commit to offering products and services that effectively meet the distinctive needs of markets of color by authentically understanding the needs of those markets and the root causes for the failure of those markets to be effectively and fairly served in the past and investing in designing and redesigning products and services to meet the discrete needs of customers in those markets 

It should not be overlooked that while many of the commitments mentioned above are framed in terms of steps to be taken to promote racial justice and equitable treatment for people of color, the goals have a broader resonance and imagine a workplace and broader community in which everyone has more opportunities and a higher quality of life. For example, discrimination and harassment are problems that extend beyond people of color, and no business can be as productive and impactful as it could be if workers are struggling because they are not being paid a living wage and are unable to take the time that is necessary for them to care for their own health and the needs of their families without fear of losing their income. Diversity and inclusion in the boardroom and in the workplace promote innovation, which leads to new products and services that create jobs for people from all racial and ethnic backgrounds.

As mentioned above, the company needs to demonstrate to its internal and external stakeholders that the engagement process has been meaningful and has driven the leaders of the business to make formal commitments to actions that they are willing to announce and distribute publicly in order to create accountability. A statement of commitments should be prepared and carefully reviewed by the board of directors, and the directors should take the opportunity to discuss the data and feedback underlying each of the proposed commitments with the members of the working group. Attention to detail is important at this point: The commitments themselves will necessarily be somewhat general and will lack details on specific tactics, timelines, and metrics to track performance; however, the company must already have a good idea of the steps that will be taken.  Proposed commitments should be discussed with legitimate representatives of key stakeholders so that they understand the process that the company has taken in engaging with stakeholders, conducting internal assessments, prioritizing commitments, and customizing commitments to address the company’s specific situation. Stakeholders will inevitably want companies to “do more” in relation to the issues that are of greatest concern to them. The goal at this point is to make stakeholders recognize that the company takes the issues seriously and is prepared to report on and be held accountable for its actions.

An action plan for each of the commitments needs to be prepared by the working group and should identify the leaders within the organization who will have primary responsibility for overseeing the steps to be taken in order to address each of the issues identified in the plan. The plan should also specify the resources that will be allocated to each issue and the specific performance metrics that will be used to track the company’s progress toward fulfilling its commitments. The leaders assigned to each issue need to understand that they will be held accountable for the company’s performance and that the success of the plan will be a material factor in the leader’s compensation and overall progress within the organization. The action plan should also provide for regular and continuous review, including ongoing engagement with relevant stakeholders to gather their input on the effectiveness of the steps taken by the company to address each of the issues. In addition, the company should undertake to issue additional reports to stakeholders that include the updated stakeholder feedback and data on the performance metrics, accompanied by an analysis of how the plan implementation process has worked.

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    Alan S. Gutterman

    Founding Director, Sustainable Entrepreneurship Project

    Alan S. Gutterman is the Founding Director of the Sustainable Entrepreneurship Project (www.seproject.org).  In addition, Alan’s prolific output of practical guidance and tools for legal and financial professionals, managers, entrepreneurs and investors has made him one of the best-selling individual authors in the global legal publishing marketplace.  His cornerstone work, Business Transactions Solution, is on online-only product available and featured on Thomson Reuters’ Westlaw, the world’s largest legal content platform, which includes almost 200 book-length modules covering the entire lifecycle of a business.  Alan has also authored or edited over 70 books on sustainable entrepreneurship, management, business law and transactions, international law business and technology management for a number of publishers including Thomson Reuters, Kluwer, Aspatore, Oxford, Quorum, ABA Press, Aspen, Sweet & Maxwell, Euromoney, Business Expert Press, Harvard Business Publishing, CCH and BNA.  Alan has over three decades of experience as a partner and senior counsel with internationally recognized law firms counseling small and large business enterprises in the areas of general corporate and securities matters, venture capital, mergers and acquisitions, international law and transactions, strategic business alliances, technology transfers and intellectual property, and has also held senior management positions with several technology-based businesses including service as the chief legal officer of a leading international distributor of IT products headquartered in Silicon Valley and as the chief operating officer of an emerging broadband media company.  He has been an adjunct faculty member at several colleges and universities, including Boalt Hall, Golden Gate University, Hastings College of Law, Santa Clara University and the University of San Francisco, teaching classes on a diverse range of topics including corporate finance, venture capital, corporate law, Japanese business law and law and economic development,  He received his A.B., M.B.A., and J.D. from the University of California at Berkeley, a D.B.A. from Golden Gate University, and a Ph. D. from the University of Cambridge.  For more information about Alan and his activities, please contact him directly at alangutterman@gmail.com, follow him on LinkedIn (https://www.linkedin.com/in/alangutterman/) and visit his website at alangutterman.com, which includes an extensive collection of links to his books and other publications and resource materials for students and practitioners of sustainable entrepreneurship.