Don’t be fooled by corporate commitments to racial equity.
$43 billion in commitments and nothing to show for it. We're publishing our data to hold them accountable.
Hey folks. This is the 8th edition of The Great Near. This month marks 100 years since the Tulsa Massacre and one year since George Floyd’s murder. In light of this, I’ve been thinking about the authenticity of all the corporate commitments to racial equity—pledges that seemingly atone for past transgressions. Businesses are finally reckoning with their responsibility, yet there has been little to no accountability. We tracked every commitment from the past year and today I’m sharing what we learned in the process. (The better business series will be back next week!)
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Our Slack channel at Common Future is always buzzing with news of this company’s racial equity commitment or that company’s pledge to “stand with the Black community.” The anniversary of George Floyd’s death came and went, and too many companies are falling short of their promises. I’ve been planning this piece as an attempt to answer the question that others keep asking: “are CEOs living up to the pledges they made after George Floyd’s murder?”
The tl;dr answer: we can’t possibly know. Companies are not required to report the status or outcomes of their pledges. I’ve read dozens of articles concerning these racial equity initiatives, yet no one knows where this money is going, what effect it has had, or whether it is reaching the right people.
In an effort to hold companies accountable, my team took stock of every racial equity commitment made by companies in the past year—313 commitments at 191 companies, including donations, internal initiatives, purchasing commitments, investments in MDIs (banks or credit unions that are majority-owned or governed by people of color), in-kind donations, and employee match programs.
We accounted for $43 billion pledged towards racial equity initiatives in the time after George Floyd’s death.
I wish this was breaking news, but this hasn’t been a unique endeavor. McKinsey has estimated that $200 billion has been committed to racial equity and Creative Investment Research has tracked $50 billion. (The discrepancy likely stems from more lenient definitions of “racial equity commitment.”)
None of this research is public, so I’m sharing Common Future’s data in hopes that it will help others hold companies accountable to pledges that live in the depths of fluffy press releases and social media. You can browse our corporate pledge data by company or pledge type here.
Some have started to develop tools for tracking outcomes, like those behind the Corporate Racial Equity Index. I hope to see more projects like this, as more data will become available if we keep pressing for it. I stopped attempting to track which pledges were actually fulfilled because we found the data to be sparse and unreliable. Many corporations intentionally obfuscate actual donations and outcomes, a dangerous trend that removes a level of responsibility to the cause.
While this data may be a conversation starter, we’ll need standardized reporting, and ultimately regulation, to understand if companies are truly building equitable work environments or helping to change systems at large.
I’ve shared five takeaways from our research below. (It’s not a pretty picture.) For questions or edits to the data, you can reach me at caitlin@commonfuture.co. Big thanks to Ronilsy Diaz for making this research possible.
Five Takeaways from the “Great Corporate Reckoning”
1. Talk is cheap
One-third of Fortune 1000 companies made a statement denouncing racial equity, but only half of those companies put their money where their mouth is. One study found that only $250 million of all corporate pledges (at least $40B) have actually been spent or committed to a specific initiative as of this May.
No one expects every dollar to be deployed immediately, but the urgency of corporate tweets suggested they’d move a bit faster. In absence of real accountability, companies have made fickle promises to self-audit and issued a few press releases announcing grants made to nonprofits.
As every nonprofit fundraiser will point out: spending is an output, not an outcome. In other words, it’s nice that you spent $1M designing a new recruitment strategy, but I want to know if you actually hired more people of color.
If you’re thinking, “well Caitlin, nonprofits are tax-exempt organizations that rely on donor funds. They have a responsibility to report outcomes to the public and to their funders.” Consider that companies like Boeing have received over $8.7B in tax breaks despite cost-cutting safety deficiencies that led to multiple fatal plane crashes. Amazon nearly received $3.4B in public subsidies to open a secondary headquarters in NYC. I think we have a right to know where they’re spending our money if they’re pledging to become the new arbiters of social progress.
Just as companies have a responsibility to safety and the public good, accountability must extend everywhere that public money is being spent to fix systemic racism. For the amount of impact reporting that the nonprofit sector is expected to deliver, it’s not unreasonable to demand a bar of accountability slightly higher than a press release.
Are companies tracking the outcomes of initiatives to source from diverse suppliers? Implementing the recommendations of equity audits? Taking the burden off of junior staffers to educate their superiors or carry out initiatives without positional power? These are the answers we should be pressing for.
2. Money is not equivalent to racial justice
The language in most pledges suggests that companies believe racial equity can be achieved with a one-time gift or a five-point plan.
The Walt Disney Company, for example, pledged $5M to advance social justice including a $2M gift to the NAACP. They also used their platform to air programming that addresses racism and oppression in America. 👏 As the hosts of Still Processing have suggested, a more effective, long-term approach to addressing racial discrimination within Disney might be to investigate racist tropes in Disney’s past, hire more BIPOC executives, and create more content that centers non-white faces.
Before donating to the NAACP, businesses that proclaim support for the Black community must hold up the mirror and address areas of their business that negatively affect employees, customers, and communities. Others have said this better, including Arisha Hatch, vice president of campaigns at Color Of Change, who pointed out the contradictions in these pledges:
“Nearly every industry’s statements in support of racial justice directly contradicts the role they’ve played in upholding systemic racism. Wall Street should not be comfortable writing a check to racial justice organizations without taking accountability for centuries of racist banking policies that have built systems of economic injustice. If Big Oil corporations claim to live their values of diversity and inclusion, they must acknowledge accountability for their role in the decades-long damages of environmental racism. After dedications to support Black workers and even adopting Black aesthetics for their own profit, the bare minimum Nike can do is provide their Black workers with an actual living wage. Retail companies cannot simultaneously support the fight against injustice while prioritizing their profits over their workers. These empty promises are a public relations stunt, and we refuse to stand by while these companies make a profit off of performative activism.”
3. Perspective matters
One billion dollars pledged to racial equity might sound impressive until you lift up the hood of the shiny new car to find parts that amount to little more than junk. Here are some examples of this:
Johnson & Johnson is committing $10M to “fighting racism and injustice in America.” It is also fighting tooth and nail against reporting internal diversity numbers. Executives have asked shareholders to vote against the audit because they say they’re already doing what is required. 🤔
As reported by Popular.info, Citigroup tweeted “I can’t breathe,” after donating $180,000 to 53 members of the House rated "F" by the NAACP in the 2020 election cycle. They are also fighting shareholder requests for racial audits and even asked regulators to block the proposals.
Amazon also donated $389,500 to 37 members of Congress rated "F" by the NAACP, despite pledging $27M to racial justice organizations… like the NAACP.
Phillips 66, an American energy company that earned $64B in 2020 revenue, donated a mere $50,000 to recruit Black STEM talent. That’s .00008%. They are one of six companies in the Fortune 100 that made no statement at all.
SoftBank launched a $100M Opportunity Fund to invest in companies led by people of color. This fund pales in comparison to their $100B Vision Fund that invests $100M at minimum in high-growth startups. Creating a fund that is .1% of your flagship fund to invest in people of color is an unequivocal flag in the sand for SoftBank’s values. If I told you I reaaaaally value fiscal responsibility and then spent all of my money on fiddle leaf fig trees, you should question that claim.
Bank of America made an impressive $1.25B commitment over four years to “advance racial equity and economic opportunity.” In their Q1 2021 earnings call, They reported delivering $300M of that commitment while returning $5B to shareholders in the first quarter alone. I don’t mean to suggest all income should be devoted to racial equity, but this pledge takes on new meaning when you realize what shareholders are earning in a single quarter or that Bank of America’s total assets equal $2.8 trillion.
Bank of America has pledged to focus on employee recruitment in disadvantaged communities and partnerships with historically Black universities. Studies have found that 90% of all corporate pledges have come from financial institutions taking similar actions: funding affordable housing, lending in low-income and minority communities, etc. To me, these all sound like the things they should have been doing in the first place.
Financial institutions have paid lip service in other ways. From six major banks, we tracked $280M of investments in MDIs: banks that are owned or directed by members of minority groups. Sounds impressive right? Many of these pledges are not actually equity investments, but deposits in MDIs. (Oscar Perry Abello has a great explanation on why this does not always help to scale minority-owned banks.) These investments are also a common strategy that banks use to fulfill their obligations to low-income communities under the Community Reinvestment Act. While it isn’t mandatory to do this, the CRA strongly encourages it by offering banks favorable treatment in future mergers, acquisitions, or branch openings. It’s always about the bottom line.
Across the board, many companies are touting very serious “anti-discrimination policies.” In fact, Just Capital reports that 100% of the 100 largest employers already have one in place. By law, employers with 100+ employees must submit an EEO (equal employment) policy, so this is literally the bare minimum.
In addition to calling out the bad deeds, celebrating routine measures is giving corporate leaders the false impression that they have checked their equity box.
4. The answers are right in front of us.
McKinsey, one of the key players tracking corporate racial equity commitments, recently made an announcement that bumped their tally up to $200B. This article struck me for another reason. They posed this question: “Fortune 1000 companies have responded, committing $66 billion to racial-equity initiatives. But how can this potential be tapped in a way that delivers meaningful, systemic change?”
After admitting that they don’t have the answer, they shifted the burden onto civil-society organizations (not exclusively nonprofits) that have contributed to what they call “decades of failures and shortcomings.” McKinsey politely suggests that these organizations should try to secure adequate funding (if only!), build coalitions (harder than it sounds), and implement data and accountability standards like the nonprofits they have founded (with what money?).
They state that “this article is not meant to suggest that McKinsey has an absolute answer to the question of how to do so,” which fails to recognize the strategies called for by many of these struggling (their depiction) nonprofits.
Community organizations’ suggestions to the corporate sector are challenging if uninventive: instead of leveraging a broken system for your own gain and funding nonprofits fighting for equity with a fraction of your budget, could the business community make legitimate efforts to do this themselves? What if corporations instead invested in internal equity audits instead of pushing back on their shareholders? What if they used funds to pay living wages? To lobby for progressive policies?
Nonprofits should be appropriately and adequately funded, but there are more important actors (looking at you Amazon!) who are equally culpable of finding a “new approach to racial equity.”
5. Measure what matters, not only what is measurable
If we want pledges to amount to more than lucrative attempts to drum up press, we’ll need a new approach to measure the actions that matter. Show me an index tracking these actions and I’ll shut up. Here are a few good deeds we could actually celebrate:
Go to the seat of government — Not my idea. Ken Frazier, the outgoing chief executive of Merck has said that businesses need to “go to the seat of government” to create a society that will be good for businesses in the long term. An easy way to start would be to halt donations to state legislators who fund voter suppression. (Since 2015, corporations have contributed $50M to these politicians.) I imagine that toppling our democracy might be bad for business.
Lobby for things that count — Companies are already lobbying for their bottom line; what if they lobbied for their customers and employees too? Businesses could support the For the People Act, The John Lewis Voting Rights Restoration Act, the George Floyd Justice in Policing Act of 2021, and other bills that would make society more equitable for people of color. Again, this is not a crazy idea. In 2006, businesses stepped up big time to renew the Voting Rights Act. Don’t let corporate execs fool you into thinking they’re actually standing up for equal opportunity in Georgia.
Fix what’s broken — The cautionary adage goes something like, “before fixing others, fix yourself.” Uber’s commitment to being an anti-racist company would be a lot more credible if they addressed their declining Black employee base, offered actual benefits to drivers, or even classified them as employees. For banks, it’s great to help low-income individuals open checking accounts, but we already know that these communities are often subject to extractive bank fees. Let’s account for that before making the problem worse. (Citibank actually removed out-of-network ATM fees for customers of participating minority-owned banks and credit unions.)
Reckon with your past — National Geographic was profiled in Vox for their efforts to address a “long history of racism in its coverage of people of color in the US and abroad.” Beyond this A+ reporting is a story of a company getting some things right and other things wrong. While Nat Geo has been criticized for leaving implementation of equity initiatives to under-resourced junior staffers, they seem to be moving in the right direction. Businesses should consider doing this hard, internal work, even if racist behavior isn’t as “in your face” as it was at Nat Geo.
Move past the paralysis — Data suggests that companies are fearful of doing or saying the wrong thing, which has led to a paralysis of action. Diversifying corporate leadership is one clear way to minimize mistakes, says Ben & Jerry’s co-founders. The number of non-white people in these seats is not only essential for a company to meet its equity goals, but it also brings a vital perspective to all company decisions.
Pay your damn taxes — 55 of the largest U.S. companies paid no federal corporate income taxes on 2020 profits. They actually received $3.5 billion in tax rebates. It would be naive to suggest corporations take a stand in paying what they owe (the shareholders wouldn’t have it), so let’s hope the Biden administration really does double down on closing loopholes. You can basically ignore all the news about changing the base corporate tax rate—21% vs. 28% of zero is always zero.
Fund grassroots organizations — The NAACP and Equal Justice Initiative are fantastic organizations, but they seem to be the only trusted nonprofits receiving the bulk of racial equity grants from businesses. (82 pledges of the 290 we tracked referenced one of the two.) While there isn’t data on the number of Black-led organizations in the U.S., nor how much funding they receive, there are organizations that act as intermediaries to deploy capital to community-based groups. Introducing Common Future...
Invest in Black-led financial firms — Stephen DeBerry of Bronze Investments says it best: “We know large corporates and others have publicly committed many billions to support Black businesses and communities, but most of them aren’t organically connected to Black people or places. The best way to leverage those is to invest in Black-led financial firms with a history and strategy to invest in high growth business led by Black people.”
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The bottom line
We won’t get accountability without regulation.
We can’t expect nonprofits and third-party organizations that, rightly or wrongly, rely on those same corporations for funding, to do this work alone. Jennifer Njuguna, COO of Common Future, and Heather Hiscox, CEO at Pause for Change, point out that this “connects to the very power dynamics that inhibit the use of policy as a strategy for increased equity and justice.” The promises from companies to “self-audit” are equally fraught. We’ve learned that the past year of action is not moving the needle fast enough.
What can we do to fix this? Tax and regulate. The federal government must be the main actor holding companies accountable. It can demand racial equity audits and compliance with auditors. It can standardize metrics for pay equity and diversity in corporate leadership through the IRS. It can incentivize stricter outcomes by tying them to corporate subsidies. (McKinsey’s recommendations for embedding racial equity in the federal government? A national task force, a national report, and “holistic cross-cutting solutions for key outcomes.” Yeah, I know.)
Formalizing social responsibility in the corporate sector already has supporters across the political spectrum. Senator Elizabeth Warren’s Accountable Capitalism Act would require companies to consider all stakeholders in decision-making, and Marco Rubio has “argued for prioritizing long-term corporate investments over short-term profit maximization.”
CEOs would likely be fired by their boards if they put too much of their bottom line at risk in the name of racial equity. I get that. Most of the actions I listed above aren’t easy, but meaningful action is possible. As we wait for companies to account for their progress, let’s not celebrate mediocrity.
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What’s Up This Week? 👀 ✨
Caught my attention
Did you know Facebook is the #1 purpose-driven, leadership-aligned company? Me neither. The ROLL100 thinks so. Published with Fortune, it’s “the first metric to capture the Return On Leadership of Fortune 500 companies” that measures “several key components of Stakeholder Capitalism.” 😶😶😶 Facebook is included alongside Goldman Sachs, Microsoft, Johnson & Johnson… this captures everything that is wrong with rankings. These are the data points that end up forming the backbone of ESG funds (“Fortune thinks they’re purpose-driven so let’s throw them in our responsible tech portfolio”), green-washed marketing, and public confusion. I do understand that this is for Fortune 500 companies, but I wish that someone would create a ranking of the small or medium-sized enterprises that are actually producing positive social returns without propping up authoritarian regimes.
A deep dive
Matt Levine’s “Money Stuff” newsletter in Bloomberg is, in every sense, a deep dive. Over the last few weeks, he’s explained things in the economy, from the way Elon Musk manipulates the price of bitcoin to the way green activists have won seats on Exxon’s board. I loved this last column because he explained the complex ways that boards, shareholders, and CEOs exercise power over each other. If you find yourself talking about concepts like “shareholder primacy,” without a real understanding of what that looks like, this is a good place to start. You don’t have to read it all (honestly I didn’t have the patience for SPACs), but understanding things as they are is the first step to subverting them, right?
Someone you should know about
Substack is cutting off my word count, so I’ll make up for it next week. 😉
until next time,
-Caitlin
This post is one of three examining Common Future’s collective commitment (or lack thereof) to Black wealth and Black lives. Read the other pieces in this series: Lessons from Tulsa, OK on the consequences of data missing from our past, and Present ways leaders in our network are building Black wealth through financial, social, and physical capital.