Corporate America Wakes Up to Systemic Racism. But What Happens Next?

BY Stephen Koepp | June 18, 2020

The NFL takes a knee. Juneteenth becomes a corporate holiday. NASCAR bans the confederate flag. The stereotypical product mascots Aunt Jemima, Uncle Ben and Mrs. Butterworth are suddenly retired. The Oscars promise to be not-so-white anymore. Band-Aid says it will start making bandages in darker shades. A parade of corporate press releases announces that companies will spend hundreds of millions of dollars to fight racial injustice and inequality. And at companies with widespread complaints about toxic workplaces for people of color, heads roll.

All of these things could have happened over the course of decades, but they unfolded in a matter of days. Suddenly, Corporate America was promising to make the well-being of Black America a top priority. It was not necessarily a matter of courage. After the horrific police killing of George Floyd and the waves of protest that circled the globe, corporations could see which way the wind was blowing. According to many recent polls, a two-thirds majority of Americans support the protests against policy brutality and racial discrimination. Almost overnight, Black Lives Matter has gone from marginal to mainstream, from argument to consensus.

The corporate turnabout began earlier this month with a flurry of statements offering contrition about past neglect and support for the BLM movement. Many were filled with promises to “do better” and “do more,” with some offering pledges of money and proposing changes in corporate and public policy. Adidas, under pressure from employees of color and their allies, committed $120 million to programs that support Black communities. As the company announced on Twitter, “First, we need to give credit where it’s long overdue: The success of Adidas would be nothing without Black athletes, Black artists, Black employees, and Black customers. Period.”

Johnson & Johnson CEO Alex Gorsky, whose company pledged $10 million to fight racism, wrote in a LinkedIn post: “As the CEO of the world’s largest health-care company, I must state unequivocally that racism in any form is unacceptable, and that Black lives matter. And as a white man, I also need to acknowledge the limits of my own life experience and listen to those who have faced systemic injustice since the day they were born.”

From IBM came a letter to Congress by CEO Arvind Krishna, who said the company would like to work with lawmakers “in pursuit of justice and racial equity, focused in police reform, responsible use of technology, and broadening skills and educational opportunities.” IBM, as well as Amazon and Microsoft, said they would back away from selling facial-recognition technology, at least for now, bowing to concerns about its misuse or abuse by law-enforcement authorities.

While some of the declarations took flak for being disingenuous or too-little-too-late, they were generally welcomed as a potential turning point. “I think the statements and the additional efforts are extremely valuable,” Marion Brooks, VP of diversity and inclusion at Novartis Corp., told From Day One. Yet as dramatic as it all was, skepticism abounded too, given that “many of the same companies expressing solidarity have contributed to systemic inequality, targeted the black community with unhealthy products and services, and failed to hire, promote and fairly compensate Black men and women,” wrote David Gelles in the New York Times. “Corporate America has failed Black America,” said Darren Walker, the president of the Ford Foundation and a member of the board of PepsiCo, and who is Black. “Even after a generation of Ivy League educations and extraordinary talented African-Americans going into corporate America, we seem to have hit a wall.”

Indeed, while African-Americans constitute about 13% of the U.S. population, their representation tends to be in the low single digits on corporate boards, at the C-Suite executive level, and in technical roles. Facebook has just a 1.5% black tech force, compared with Apple at 6%. Yet this inequality represents just the top of the income pyramid. Overall, since 2000, the wage gap between Blacks and whites has grown significantly. That feeds the huge wealth gap. On average, white households have nearly 6.5 times the wealth of black households, reports Bloomberg. Inequalities in wealth and access to health care have contributed to the vastly disproportionate impact of COVID-19 on people of color.

As Corporate America began to reckon with these realities, here’s how the responses unfolded:

Statements and Gestures

One of the earliest statements, on May 29, came from Nike, which posted on social media a simple black square with a saying in white letters protesting police brutality and racial injustice: “For Once, Don’t Do It.” Alluding to its trademark motto, the statement was in keeping with the company’s voice on social issues, including its ad campaign in support of Colin Kaepernick with the line, “Believe in something, even if it means sacrificing everything.”

Before long Nike’s white-on-black design became the default format for corporate statements, as dozens followed the template, diluting the impact. It became an exercise applying corporate branding to popular sentiment. “Unfortunately, the reality of the groupthink, even if backed by the best of intentions, transformed these messages into homogenous–and largely meaningless–wallpaper,” opined Jeff Beers in Fast Company. (Nike, for its part, followed through by committing $40 million to social-justice organizations.)

Other companies attempted more original statements. Jamie Dimon, the CEO of JPMorgan Chase, the largest U.S. bank, knelt with staffers in a branch office, wearing shorts, sneakers and a mask. Chase says that it’s making multibillion-dollar investments to address racial and economic inequality, “particularly for the Black community.” Even so, advocates of social equity want to see results more than symbols. “There’s a lot of performative allyship going around,” Y-Vonne Hutchinson, CEO and founder of diversity consulting firm ReadySet told the Washington Post. “Nobody’s asking for a CEO to take a knee. You take a knee after you change your policies.”

Well then, at historic moments like these, what are the most important words and deeds for companies to get across? Business Insider, with the help of a PR veteran, analyzed 27 memos from business leaders responding to George Floyd’s death. The conclusions: “The strongest memos acknowledged where leaders and their organizations had fallen short. They confronted discomfort head on, and invited difficult conversations. And they outlined concrete plans for cultivating diversity and inclusion, both in the workplace and in the U.S. more generally.”

Many companies hurried to embrace a prospectively more durable gesture by recognizing Juneteenth, the day commemorating the end of slavery in the U.S. Nike, Twitter, Target and Spotify were among the small but growing number of companies designating June 19 as a paid company holiday.

Changing Positions and Products

The NFL, which has fought with its players for years over their rights to protest police brutality by taking a knee during the national anthem, did a complete 180-degree turn. “We, the NFL, admit we were wrong,” the league tweeted in an official statement. In a video accompanying the tweet, NFL Commissioner Roger Goodell said, “Without Black players, there would be no National Football League. And the protests around the country are emblematic of the centuries of silence, inequality and oppression of black players, coaches, fans and staff.” The turnabout had resonance far beyond sports, given how President Trump had exploited the controversy as a wedge issue, painting Kaepernick and fellow protesters as unpatriotic. Shunned by teams as too controversial, Kaepernick has not played professional football since 2016.

Other organizations decided quickly to change policies that seemed discriminatory, culturally unaware, or dismissive of the different needs of diverse customers. Walmart said it would no longer place “multicultural hair and beauty products” in locked cases, which it had been doing in about a dozen stores. “Predominantly African-American people are buying those products, so the assumption is we’re thieves,” a customer told NBC News. NASCAR, a bastion of the white working class, said it will no longer allow the Confederate flag to be displayed at events and properties, while driver Bubba Wallace, the first full-time African-American NASCAR driver in decades, earlier this month raced in a car with a Black Lives Matter paint scheme.

The moment proved a catalyst for change in products that for more than a century had continued to display mascots that seemed to endure from the plantation era, despite complaints over the years. Aunt Jemima, Mrs. Butterworth, Uncle Ben and the Cream of Wheat chef were all retired or placed under review by the companies that produce them. Where did these stereotypical characters come from? “The images of placid, smiling Black Americans on commercial products were often created during times of racial upheaval. Characters like Aunt Jemima, who was first depicted as a mammy, followed Reconstruction when white people were scared of what it meant to live alongside newly freed slaves,” reported the New York Times, citing an interview with Kevin D. Thomas, a professor of multicultural branding in the Race, Ethnic and Indigenous Studies Program at Marquette University. (The Frito Bandito, by the way, made his exit in 1971.)

Band-Aids, a Johnson & Johnson product, have been made since 1920 in flesh color, which was fine as long as your color was a kind of soft pink. Earlier this month, the company announced that it will start offering “a range of bandages in light, medium and deep shades of Brown and Black skin tones that embrace the beauty of diverse skin.” Commented Ishena Robinson in The Root: “A whole damn century from the time it was first introduced, Band-Aid brand has finally come to the realization that Black people exist, have skin, get boo-boos, and need bandages.”

Some companies started out on the wrong foot in their policy declarations. Starbucks, which in 2018 had closed its 8,000 U.S. stores for a day of anti-bias training after the misguided arrest of two Black men, responded to the current upsurge in protests by stating in a memo that their baristas and other employees were forbidden to wear shirts or accessories declaring support for Black Lives Matter. When a backlash ensued, the company not only reversed itself, but for good measure said it will produce 250,000 corporate T-shirts promoting Black Lives Matter to be given to employees and sold to customers. That may have been a well-meaning gesture, but this company too was criticized for engaging in performative allyship rather than concrete measures to boost employees and community members.

Going Beyond Words

Investing large amounts of money to create equity and new opportunity for Black Americans is a welcome measure. Apple pledged $100 million, while companies including Walmart, Target, Home Depot and Levi’s were among the name brands promising financial support. Less recognized were employees taking advantage of already-established corporate matching-fund programs to help maximize their donating power. In the week following George Floyd’s killing, the matching-fund management company Benevity saw more than $100 million donated through such programs to civil-rights and related causes.

Even more direct efforts were shown by companies launching programs to train more young people of color for the skilled jobs of the future. Techtonic Group, a Boulder-based software developer, plans to add 100 black and Hispanic apprentices to its Techtonic Academy program, a paid, 14-week course sanctioned by the U.S. Department of Labor, the Denver Business Journal reported. “We came to the conclusion that everybody’s putting up platitudes on social media and that doesn’t really do anything for anybody,” said CEO Heather Terenzio. “So we starting talking about our apprenticeship program and what we could do to help.”

What other measures should companies pursue, beyond words of good intent? "Social statements mean nothing without real actions and investments," Elizabeth A. Morrison, VP of diversity & belonging for Live Nation, told From Day One. "I’m speaking specifically of commitments to increasing workforce diversity, tactics to drive equality and inclusion with clients (like diversity riders in contracts and supplier diversity), donations to social-justice organizations, and supporting legislation for equal justice. Ideally companies are doing many of these, and/or taking other action that is equally powerful and sustainable. Long-term commitment and partnerships are needed for this not to become the flavor of the month."

Indeed, the Black Lives Matter movement strongly suggests that corporations need to get used to a new dynamic of social activism. Jim VandeHei, co-founder and CEO of the news organization Axios, calls it a "bottom-up revolution" that presents a stark new reality for American CEOs. "Doing good is no longer a niche. It's a necessity," he wrote on Axios. "The judgment CEOs feared most in the past was pesky reporters or regulators. The judgment they should fear the most now is idealistic employees on the inside and the social media warriors on the outside." While this presents a new peril, there is a potential upside to embracing this change: "We have found the new generation will work as hard or harder than we did if we provide this clarity of purpose and rolling, unvarnished dialogue."

Steve Koepp is a co-founder of From Day One. Previously, he was editorial director of Time Inc. Books, executive editor of Fortune and deputy managing editor of Time

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Turns out, CEOs are far more proficient in CHRO selection today than they were a decade ago, says John Bremen, a managing director at consultancy WTW, where his job is to imagine the future of the C-suite. “People issues today are so much more pronounced and so much more prominent than previously.”From Day One spoke with CHROs in the Fortune 1000 and the consultants who recruit them to find out what it takes to be a CHRO at the world’s biggest companies. What do CEOs look for in an HR chief? And who’s next in line for the job? No one single formula emerges, but several key attributes emerge, including previous experience as a CHRO, demonstrated HR savvy plus a law degree, or a proven track record of adaptability across multiple industries.All Eyes on the CHROCHROs are experiencing unprecedented attention, thanks to their inestimable value confirmed by the pandemic, economic swings, social unrest, return to work, and now the global skills shortage. Dan Kaplan has spent 15 years recruiting CHROs at consulting firms like Heidrick & Struggles and Korn Ferry, where he’s currently a senior partner. He told From Day One that private-equity firms, in particular, have homed in on the position as they restructure companies, assessing not just CEOs and CFOs rigorously, but now the CHRO as well. Some PE firms replace the CHRO first, he said, “with a view that that person becomes the catalyst to assess and replace the rest of the leadership team.”Given the scope of the role, executives are appointing fewer first-timers than they have in the past, according to the CHRO Turnover Index by Russell Reynolds Associates. The number of rookie CHROs has been decreasing globally since mid 2022. Among S&P 500 firms, first-time appointments are down 19 percentage points since that year. This is even more true for FTSE 500 companies–the UK’s answer to the S&P 500–where for nearly a year in 2022-23) every incoming CHROs was a veteran of the role.Maral Kazanjian, the CHRO at the credit-rating agency Moody’s (company photo). Featured photo at top: Kate Gebo, CHRO of United Airlines, spoke at From Day One’s Chicago conference this springThere’s also an appetite for highly varied professional experience. The lion’s share of CHROs today are cross-industry hires. Analysts at Heidrick & Struggles examined the 2024 Fortune 1000 companies and found that more than 77% of external CHRO hires were from other industries. With a few exceptions, the CHRO is an “industry agnostic” role, said Kaplan, and HR chiefs tend to glide easily between industries. Among the most coveted qualities in a HR chief is agility, and cross-industry work naturally develops that skill. Now companies recruit CHROs with much of the same criteria they use when recruiting business leaders: experience with mergers and acquisitions and the grunt work of combining workforces, knowledge of a P&L, plus familiarity with thorny issues like labor-union negotiations. “At a company juncture—say, a new CEO comes in and they’re tasked with some turnaround—they often need a different type of CHRO for that phase of the company,” said Jennifer Wilson, co-head of the global HR officers practice at Heidrick & Struggles. “With the amount of M&A and cost-cutting, and then getting back to growth, they want to find somebody who’s been through that cycle.” Why Your Next CHRO May Also Be a JDIf you’re looking for a CHRO with cross-industry experience, plenty of exposure to the C-suite, plus experience with assembling multiple companies and quelling labor disputes, a labor-and-employment lawyer often satisfies the brief. With greater exposure to risk (as a sample: reputational, environmental, technological, privacy, and supply chain) it’s reassuring to know there’s an attorney occupying the seat. “There’s the employee-engagement lens, and there’s the productivity lens, there’s the regulatory lens, and there’s the profitability lens,” said WTW’s Bremen. HR is no longer a static department, now it has to make things happen.Law practice also develops the confrontational confidence CHROs need. “You need to have had the experience of walking into a senior leader’s office, closing the door, giving them feedback, and challenging them on an issue where you think there’s a pretty good chance of getting fired today,” Korn Ferry’s Kaplan said. At times, it’s as diplomatic as managing the CEO’s personality and presenting even the most uncharismatic leaders to the workforce as people who can be trusted, which sounds a lot like what might happen in a courtroom.Before Claudia Toussaint became the chief people officer at the global water-technology company Xylem, she was the company’s general counsel. CHROs can’t afford to be intimidated by hierarchy, she said. They have to be prepared to tell the CEO that they’re out of line, and why it matters. The professional training of an attorney comes in handy too. Lawyers gather evidence, make conclusions, and present a case. “That skillset, I think, is far more valuable today in the HR function than five years ago or ten years ago,” Toussaint said. “I think that’s why people are increasingly saying, ‘These people that have a law degree and have been trained to think systemically, to take data, analyze data, reach conclusions from it, and then drive impact from those conclusions—that’s actually not a bad background for leading HR function.’”HR and the general counsel’s office have a natural relationship. Maral Kazanjian, the CHRO at the credit-rating agency Moody’s, felt she was effectively moonlighting as an HR professional while working as the firm’s attorney, applying the law to all kinds of employment matters. “I was really lucky because Moody’s is a very successful company and also has a really fast-growing information-services business within the traditional ratings agency. Because they were growing so fast, a lot of employment issues arose,” she told From Day One. “We were in different jurisdictions. We had different questions we wanted to answer about ‘How do we do hiring right? How do we handle performance management? How do we maintain a focus on being inclusive? How do we do promotions right?’ There are legal questions, then there are operational and human capital questions.” Kazanjian’s first time leading the people function was at WeWork during the dog days of the pandemic. In February 2022, she returned to Moody’s, where she occupies the chief people officer job today.Jennifer Manchester, the CHRO at Fiserv, is a relatively new arrival to the C-suite, and like Kazanjian, has jumped industries. Manchester first crossed paths with HR at her former employer, the Dow Chemical Co., where she worked in the general counsel’s office on mergers, acquisitions, and other corporate transactions. “I always loved the employment piece and the people side of things the best. That’s where I figured it out: That was really ultimately what I wanted to do.”Manchester moved over to Fiserv in 2015, working closely with HR as a labor attorney, and ascended to the CHRO seat last spring, “I’ve always gravitated toward people issues, trying to solve problems. It’s such a dynamic role.” But about this she was clear: You can’t just pluck any attorney out of the legal department and promote them to the chief position. “You have to have some substantive core expertise in HR or employment. HR is a real science, and I don’t think anyone can just do it.”Deep, Successful Experience in HR Counts TooA background in HR is hardly irrelevant. Among the 10 highest-ranked companies on the Fortune 500, most of their CHROs have spent decades as HR practitioners. Melissa Hagerman, CHRO at insurance firm Genworth, came up through the HR department, and, like many of her peers in the Fortune 500, has worked across industries, including consumer and automotive retail and healthcare. She joined the HR field when it was still known as the personnel department. Being an effective CHRO takes compassion and diplomatic agility, she said. And it can’t be done without a natural curiosity for businesses. “As a CHRO, you have to really genuinely care about what the business is doing and where we’re heading, and you have to care about the people that are on the path to get us there. That is something that I really try to embrace and live by every day.”Hagerman is also a keen scout, continually monitoring what’s going on both inside and outside the organization, “understanding what’s happening politically and socially in the markets so that I can weigh in, whether that’s with our executive team or with our board of directors, or being able to think about how those may impact eventually our workforce.”HR has far more credibility and influence than in the past, Hagerman said, reflecting on her decades in the department. “The world now understands that people resources are really fundamental to the bottom line. Succession planning, development of associates—the focus on those things is far greater now than they ever were. Of course, cybersecurity, protection of data–all of those things–are more in the limelight now than ever.”Yet Your Next CHRO May Not Be Working In HR Right NowA career in HR can win you the seat at the top now, but that may not be true for the next generation of CHROs. Today, businesses seldom want an HR executive who has spent all their time in the department, said Wilson at Heidrick & Struggles. “In the companies we work with, it’s often said that if you can find somebody with a business background who’s either been in management consulting or held either a P&L role or a functional role outside of HR, that’s more interesting to us.”The next crisis is always around the corner, Korn Ferry’s Kaplan told From Day One, and HR has to be there to meet it. He rattled off a list of recent trials, from financial and economic wobbles, political unrest, racial injustice, reproductive rights, return to office, artificial intelligence, and gun crime. “If you are not prepared to put on your dance shoes and figure it out, you can’t do this job. More than academic credentials, intellect, or experience, you have to be able to tap dance.” As a result, people aren’t exactly grappling for the seat, he said. It’s a big job and it’s tough to recruit for. Some people get too close to the sun and opt out; others don’t realize what they’re signing up for before it’s too late.Everyone is looking for agility in the role. Bremen at WTW speculated that consumer-oriented industries–like retail, fast-moving consumer goods, cosmetics, or fashion–may be developing tomorrow’s most coveted CHROs. Tech firms develop great HR talent too because they have to marry operational complexity with consumer demands. Regardless of industry, he believes the most successful future CHROs are schooling themselves in the application of new technologies, particularly artificial intelligence, and have analytical capabilities far superior to their predecessors.In case you were thinking of plucking your next CHRO from the Wharton School, however, Kaplan cast doubt on the wisdom of choosing an MBA for the job simply because they’re a whiz at business. “If someone says to me, ‘I’m not an HR person, I’m a business person,’ that is a sign that I’m wasting time. I’ve never heard a CFO say, ‘I’m not a finance person, I’m a business person.’”Disciplines like finance can be taught in school, Kaplan argued, but HR is learned through apprenticeship. Management consultants who spoke to From Day One predicted that the future chiefs who are coming up through the HR department are leading complex functions at the moment, as heads of talent or directors of compensation and benefits.As today’s CHROs consider their potential successors, what are they looking for? At Moody’s, Kazanjian wants someone who is open-minded, bold, and analytical. She imagines that person might be in law, or they might be in management consulting. Toussaint wants someone who deeply understands the company culture at Xylem as well as how the business makes money, someone who’s good at data analysis, and someone who is a “truth teller,” uncowed by hierarchy. Manchester hopes her Fiserv successor has financial acumen and an always-learning attitude. At Genworth, Hagerman wants a values-driven, business-minded leader with deep knowledge of HR and a knack for diplomacy. Someone who is willing to uphold integrity, “above all else.”“Once upon a time, it was possible to be the most senior HR leader in a company and not have a grounding in the business fundamentals,” Bremen said. “That skillset is a necessary, but not sufficient, condition.” Yet business acumen alone isn’t enough without a deep understanding of the CHRO discipline, though he’s seen it happen. “They struggle. Just as you would struggle if you put someone in a chief marketing officer role who did not have a background in marketing. Sometimes leaders take those HR skills for granted.”Emily McCrary-Ruiz-Esparza is a freelance journalist and From Day One contributing editor who writes about work, the job market, and women’s experiences in the workplace. Her work has appeared in the Economist, the BBC, The Washington Post, Quartz, Business Insider, Fast Company, and Digiday’s Worklife.

Emily McCrary-Ruiz-Esparza | September 24, 2024