Affirmative Action Works - Business Sector

Affirmative Action Works

Business Sector

Introduction

As we approach the year 2000, the percentage of men of color and all women entering the labor force will be increasing. Consequently, employers without plans to eliminate barriers to hiring and promotion will be cut off from large segments of America's labor force. Having seen these trends for decades, today's corporate leaders view affirmative action as a business necessity in an increasingly diverse world. By expanding the pool of talent for companies to draw on, affirmative action brings diverse skills and backgrounds into the workforce, thereby helping firms compete domestically and internationally.

Last fall in Washington state, Rick Fersch, president and CEO of Eddie Bauer, called a meeting of executives from the technology, communications, manufacturing, and retail fields to discuss ways to defeat Initiative 200. "The main message is simple," Fersch said, "I-200 will create a spirit in Washington that is not conducive to business. It puts a taint on a state that is known to be progressive."

As a signal of their support for affirmative action, CEO's of corporations including Exxon, 3M, Boeing, Amoco, Bechtel, Goodyear, Sony Electronics, and Dupont believe that "a society with a history of deeply rooted exclusionary practices demands proactive policies to create opportunity and to eliminate both conscious and inadvertent discrimination.... We believe that developing and utilizing the full potential of the entire population of our society is critical not only to our nation's economic growth but to our political stability, to our social well-being, and to our global leadership responsibilities" (Wall Street Journal, 1997).

In 1994, the United States Department of Labor presented Proctor & Gamble the Opportunity 2000 Award, which is given annually to one company committed to instituting equal employment opportunities and creating a diverse workforce. Proctor & Gamble was recognized for its multifaceted, comprehensive affirmative action and executive development programs. In May 1995, Edwin L. Artzt, then chairman of the board and CEO of Proctor & Gamble, received the Private Sector Leadership Award from the Leadership Conference on Civil Rights. In accepting this prestigious award, he said, "Affirmative action has been a positive force in our company. What's more, we have always thought of affirmative action as a starting point. We have never limited our standards for providing opportunities to women and minorities to levels mandated by law.... Regardless of what government may do, we believe we have a moral contract with all of the women and minorities in our company--a moral contract to provide equal opportunity for employment, equal opportunity for advancement, and equal opportunity for financial reward."

"Affirmative action makes good business policy," says the National Association of Manufacturers. Ninety percent of 120 corporate CEOs surveyed by Fortune magazine in 1984 said their companies had implemented affirmative action programs to satisfy "corporate objectives unrelated to government regulations." Indeed, 95 percent said they would continue to use them regardless of government requirements. In a more recent 1992 survey of CEOs, only 2 percent called affirmative action programs "poor."

Lucio A. Noto, Mobil Corporation chairman, remarked, "I have never felt a burden from affirmative action because it is a business imperative for us." In a recent letter to shareholders, Noto wrote, "A diverse, inclusive and productive workforce is essential to our future. Early in 1996 we heightened our focus on inclusion and diversity, and tied management compensation to progress in these areas. This effort has the full commitment of our board and senior management, as well as my own personal attention."

Similarly, chemical giant DuPont recognizes the business value of promoting diversity. More than a decade ago, DuPont decided to go beyond affirmative action regulations by setting a goal of making half of its new hires for professional and management positions women or minorities. Likewise, the Business Roundtable and the

National Association of Manufacturers repeatedly have endorsed affirmative action.

Hugh L. McColl, Jr., Chairman and CEO of Bank of America, the largest bank in the United States, is "bothered by the recent ideological siege against the purpose of affirmative action." Several years ago, McColl pledged to spend 10 percent of the bank's procurement dollars doing business with minority-owned firms. The actual amount allocated has been at least 15 percent since setting this goal. "It just makes good business sense for the private sector to assume more responsibility for the welfare of its communities, its employees, and its consumers," says McColl.

In a speech given recently, McColl extolled the virtues of diversity, inclusion, meritocracy, and unity, and the power that each carries in the workplace. McColl stated that differences in cultural and personal characteristics make the workforce diverse; yet characteristics that are shared serve to unify the workplace. "If we fail to embrace these differences as blessings, we will not succeed. At the same time, we will not succeed--indeed, we will not survive--if we fail to find unity in our values, our culture, and our purpose as an organization.... Diversity is important to us as a business imperative" and we must ensure that "differences are valued as a source of strength."

One of a handful of African Americans named recently to top posts of major U.S. companies was Warren E. Shaw, CEO at Chancellor Capitol Management, a $28 billion New York money-management firm. Shaw said that he and the others named to top posts had "all been in our businesses for 20 years." He credited the Great Society programs of the 1960s, and especially affirmative action, for "opening doors" and giving talented managers a chance.

Paul Allaire, CEO of Xerox Corporation and Chairman of the Council on Competitiveness, said, "Diversity is good for business; more than that, it constitutes a competitive advantage. Let's not forget this simple fact during the debate about affirmative action. For diversity breeds the creative energy companies need to compete in a global economy....Our own experiences tell us that the most diverse companies, companies ruled by a hierarchy of

imagination and filled with people of all ages, races, and backgrounds are the most successful over time."

"When it comes to affirmative action, we will continue to press the envelope, but at the same time we will be moving to a broader concept--that is, managing diversity," said John F. Smith, Jr., CEO and Chairman of General Motors. "As a global company, we want to fully benefit from a diverse workforce;...our diversity is our strength.... Having people of widely different ethnic, racial, and social backgrounds in our corporations has not slowed our pursuit of excellence--it has accelerated it. We will continue to do everything possible to bring minority group members and women into General Motors and the mainstream economy. We cannot, must not, waste this talent."

Anthony Patrick Carnevale and Susan Carol Stone, in The American Mosaic: An In-Depth Report on the Future of Diversity at Work, wrote: "Without some form of affirmative action, there is no guarantee that the effort to achieve fair levels of minority and female representation within organizations would be as widely maintained. Progress was inadequate in the late 1960s before affirmative action went into effect. Organizational cultures are changing, but change is a protracted process. Big gains have been made in some industries, but there is still a long way to go.... Furthermore, the elimination of preferences would very likely result in a certain amount of backsliding, even if largely unintentional.

"From another perspective, it may be moot to argue whether affirmative action should stay in place. As long as antidiscrimination laws remain on the books--and they will remain--a rational means of implementing them is needed. Organizations clearly favor affirmative action over the alternative, an uncertain environment where the absence of clear guidelines would expand the potential for lawsuits. Thus, even if current affirmative action

policies were curtailed, they are likely to be resurrected in another form."

Survey of Chief Executive Officers

Organizational Resources Counselors, Inc., a management consulting firm, surveyed 140 corporate executives and found that 95 percent have adopted affirmative action programs in order to meet federal requirements. A significant number--73 percent--would continue tracking their company's progress with numerical objectives even if the federal regulations were lifted. Fifty-eight percent of these companies also have internal voluntary plans, most with numerical objectives.

These CEOs reported uniformly positive attitudes toward the impact of affirmative action on the organizational performance of their workforces. Ninety-four percent reported improvements in hiring and recruitment, while 88 percent viewed affirmative action programs as effective in increasing promotions, 70 percent in performance appraisals, 53 percent in marketing; 41 percent said that productivity improved as a result of affirmative action programs.

For 62 percent of the respondents, the achievement of equal employment opportunity (EEO) goals is included in the performance appraisal process as a measure of management accountability. Thirty-five percent indicated that

incentive compensation for executives is tied to EEO performance.

The corporations surveyed represent a cross section of American industries, with 39 percent in manufacturing, 15 percent in finance, 11 percent in utilities, and 10 percent in service industries. Nearly 60 percent reported employing more than 10,000 persons.

Glass Ceiling Commission

According to a 1995 fact-finding report of the bipartisan Glass Ceiling Commission, only 5 percent of Fortune 2000 senior managers are white women, and they generally are paid less than their male counterparts. More than 95 percent of Fortune 1000 executives are white males.

The Commission was created during the Bush administration and directed by former Secretary of Labor Lynn Martin. Members of the Commission represent business as well as advocacy groups. The report, titled A Solid Investment: Making Full Use of the Nation's Human Capital, stated that women are making progress, but the "rate of change is discouragingly slow."

Former Secretary of Labor Robert Reich, in a message accompanying the report, commented, "Narrowing the

pool of talent from which they draw is--among other things--a blunder in competitive tactics."

Today, more women are in the pipeline for top corporate jobs. In 1980, white women accounted for 27.1 percent of all middle- and upper-level managers, while women of color accounted for 3.2 percent. By 1990, those numbers had risen to 35.3 percent for white women and 6.9 percent for women of color. Women have achieved the most success in the fields of finance, insurance, and real estate.

During the decade from 1982 to 1992, women of color made only nominal gains in senior management positions: African-American women filled 2.3 percent of these positions in 1992, up from 1 percent in 1982; Asian-American women filled 1.8 percent of these positions in 1992, up from 0.4 percent in 1982. The percentage for Hispanic women actually declined, from 1.3 percent in 1982 to 0.2 percent in 1992.

The report described successful practices by companies such as Xerox, Eastman Kodak, Johnson and Johnson, and Corning Glass, to name a few. These practices focused on leadership and career development, rotation and

non-traditional employment, mentoring, workforce diversity, and family-friendly policies.

"Companies that have successfully eliminated the barriers that prevent minorities and women from [entering] top business positions generally have done so by addressing stereotypes and making diversity part of their strategic business plan, and all have the support from the companies' chief executive officers," the report concluded.

Pay Inequities

The return on investment in education does not pay off as well for women as for white men. A 1982 analysis by the National Committee on Pay Equity showed that college-educated women of color earn about the same as white male high school graduates, and nearly $15,000 less than college-educated white men. (See below.)

1990 Income by Race, Gender, and Educational Attainment

NOTES: No comparable data was available for Hispanics, Asian Americans, and American Indians. Income levels are for executive, administrative, and managerial occupations in the private sector, which includes business services, communications, construction, entertainment, manufacturing, public administration, and utilities industries.

SOURCE: 1990 Bureau of the Census

In a 1994 Department of Labor study of the labor market, women represented 51.2 percent of the U.S. adult population, African Americans represented 12.4 percent, and Hispanics represented 9.5 percent. Yet, the

following chart shows the disparities in representation of these groups in selected occupations:

Goals and Timetables Are Consistent with Regular Business Practices

The use of goals and timetables and other numerical measures to track the employment of women and minorities is nothing new, and indeed is consistent with the way corporations handle other important administrative matters. In fact, the current standards for affirmative action were recommended in the late 1960s to the Nixon administration by a group representing 350 large corporations.

Testifying before a House subcommittee in 1985, William McEwen, Director of Equal Opportunity Affairs at Monsanto Company in St. Louis, said that "business...sets goals and timetables for every aspect of its operations--profits, capital investment, productivity increases, and promotional potential for individuals. Setting goals and timetables for minority and female participation is a way of measuring progress and focusing on potential discrimination."