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Bridging the Wealth Gap of Racial Disparity in The Boardroom and Beyond

Understanding the root causes of the Black and white wealth gap in America is crucial for initiating meaningful change and fostering a more equitable boardroom and, from there, society. Acknowledging the historical and systemic factors at play allows us to work towards dismantling the barriers perpetuating this racial disparity. To challenge existing structures and advocate for policies that promote economic justice, Steven Rogers, former professor at Harvard Business School and current trustee at Oakmark Mutual Funds, gives us solutions, backed by research and experience, to bridge the gap and empower our board members to be leaders in making a difference.

The Lasting Impact of Governed Oppression

Racial disparity stems from historical and systemic factors, including government policies that have both subsidized white wealth creation and perpetuated the impoverishment of Black communities. To further explain, you can consider:

  • The Wealth Disparity Today: The average net worth of white families, approximately $170,000, stands in stark contrast to the average net worth of Black families, which amounts to only $17,000. These numbers are indicative of the ongoing legacy of structural racism and discrimination that has limited opportunities for wealth accumulation among Black individuals.
  • The Government’s Role in Wealth Creation: The wealth gap is the result of deliberate actions taken by the federal and state governments, which have historically favored and subsidized white wealth creation (the accumulation of assets and wealth by individuals who identify as white), while simultaneously neglecting the economic well-being of Black communities.

This history of racial inequality in the United States reveals a complex web of policies and practices that have disproportionately favored white wealth creation. One of the critical factors still contributing to the wealth gap today is the institution of slavery. This was not only condoned but supported and sponsored by the federal government. The consequences of this in corporate America continue to reverberate through generations.

Factors Contributing to the Black and white Wealth Gap

While we can acknowledge that some government actions were not driven by personal dislike towards minorities, including Black individuals, their primary purpose was to serve the economic and financial interests of the majority, which was white individuals. To shed light on the systematic mechanisms that perpetuated these racial disparities, here are key examples of governance that continue to impact the state of the Black and white wealth gap:

  • Black Codes and Exploitative Labor Practices: Black communities endured many decades of oppressive Black codes. These laws targeted Black individuals, resulting in their imprisonment for minor offenses like walking on the wrong side of the road. The incarcerated Black individuals were then sometimes leased out to white individuals and companies forced to work without pay. This exploitative system, known as convict leasing, deepened the racial disparity.
  • Federal Subsidization of white Wealth through Redlining: Subsequently, for around forty years, the federal government played a role in subsidizing white wealth through a discriminatory practice known as redlining. Under this policy, mortgages were guaranteed for white individuals, while Black individuals were systematically denied access to fair and affordable housing, further restricting economic opportunity.

The representation of Black members on corporate boards today still remains disproportionately low. Without equal access to resources and opportunities, Black men and women will continue to face barriers to entry and advancement in corporate settings. Boards must challenge these existing structures and advocate for policies that promote economic justice and empowerment for Black members of the board. This includes prioritizing diversity at all levels of a company, especially when it comes to:

  • Diversity and Inclusion in Leadership: Organizations with diverse leadership tend to perform better because they draw on various perspectives and experiences. By not adequately representing Black individuals in decision-making roles, businesses miss the mark on this cornerstone of an effective board.
  • Corporate Social Responsibility: Companies can contribute to narrowing the wealth gap by ensuring equitable hiring and promotion practices, investing in minority-owned businesses, and championing policies that promote economic justice.
  • Stakeholder Trust: Companies that show commitment to diversity and inclusion tend to earn greater trust and loyalty from their stakeholders—employees, customers, investors, and the communities they operate in.
  • Regulatory Compliance: As the push for diversity in corporate leadership gains momentum, regulators increasingly require companies to disclose their diversity statistics and consider rules to mandate diversity in boardrooms.

What You Can Do in The Boardroom to Bridge The Gap

Rogers reminds us of a valuable lesson: instead of fixating on the symptoms; it is crucial to focus on identifying and addressing the root cause of a problem to tackle the underlying issues effectively. In terms of addressing the gap, the key focus now is on narrowing it, and to do so, he recommends taking these three actions:

  1. Contribute 9.21% of annual philanthropic dollars to Historically Black Colleges and Universities (HBCUs).

This goes for individuals and corporations. Dr. King, a Morehouse College alumnus, acknowledged the unique position of HBCUs. Although they were established during an era of segregation and mainly by white benefactors, HBCUs have never practiced segregation themselves. Instead, these institutions have consistently opened their doors to all applicants, particularly as Black students were historically barred from predominantly white institutions.

As of today, according to Rogers, these institutions have educated 80% of all Black judges, 50% of all Black engineers, and 40% of all Black lawyers. Why 9.21%? Figure 9.21 holds a poignant significance, representing the nine minutes and 21 seconds during which Officer Chauvin held his knee on George Floyd’s neck.

  1. Deposit meaningful dollars into a black-owned bank.

Black-owned banks play a pivotal role in economically empowering the Black community by directing capital where it’s most needed. While less than half a percent of mortgages from white-owned banks are granted to Black individuals, Black-owned banks show a stark contrast by providing 70% of their mortgages to the same demographic. This glaring disparity in financial resource accessibility is underscored by personal stories like that of Rogers and his wife, who were initially denied a mortgage on their home.

These institutions often rely on deposits from individuals with limited disposable income, leading to frequent fund withdrawals restricting these banks’ ability to amass large deposits akin to their white counterparts. How does the potential for financial growth and sustainability continue?

Despite the challenges faced, such as a third of Black individuals having zero net wealth, Black-owned banks continue to be critical in servicing the financially underserved Black community. Rogers compiles a comprehensive list of Black-owned banks across the US in his book, complete with contact information. He extends this effort to include historically Black colleges and universities, providing necessary contact details for their development offices.

  1. Spend money at Black-owned businesses.

Shopping at these businesses can create more opportunities for meaningful savings, property ownership, credit building, and generational wealth within the Black community. Additionally, the growth of these businesses stimulates local economies, leading to increased spending, tax revenue, and community development.

In his book Banking on Black Enterprise, Timothy Bates notes that Black-owned businesses hire Black individuals much more than white-owned businesses in predominantly Black communities. This phenomenon mirrors that of female-owned businesses, which employ women at a higher rate than male-owned companies, as noted by Rogers. Supporting Black-owned businesses contributes to increased employment opportunities within the Black community.

Collective Action for Systemic Change

Collective action is necessary to address the wealth and opportunity gap truly. Whether in the boardroom or as individuals, it is crucial to acknowledge and actively work towards dismantling systemic racism and promoting economic justice. This includes investing in diversity initiatives, advocating for policies that promote equity, and holding corporations accountable for their actions.

In his book, Rogers presents a template for a letter that urges individuals to reach out to their legislators and government officials. The essence of his proposal is to address the wealth gap by providing reparations to every black individual in the United States who is 18 years or older and was born in the country. He emphasizes the importance of collective action, urging individuals, companies, and boards to support these initiatives. This proposal for reparations, along with the three other key actions he gives us, serve as a call to address historical injustices and work towards a more equitable future.