The Case for Quotas

thirty seven percent don't have a single black director. The word quote is well, it immediately raises eyebrows and some hackles. But is it finally time for corporate America to consider a more coercive power? After all, a recent law in California that mandates female representation on boards of public companies has resulted in meaningful gains, and as Rebecca Greenfield rights in remarks, quota as well, they won't solve racism, and

they definitely invite lawsuits, as they have in California. But maybe, as she writes, this is a debate worth having if it helps force corporate diversity programs to shape up. The case for quote is they've helped women. Can quotas help change the racial makeup of C suites? And management by Rebecca Greenfield. At a virtual panel moderated by Goldman Sachs Chief executive officer David Solomon on the evening of June nine,

g Day's Island made a simple but pointed comment. We better have more than four black CEOs of Fortune five companies, said the boss of Tapestry, which owns coach Kate Spade and Stuart Weitzman. And not in ten years, not in fifteen years, but in the next year or two or three.

The whiteness of America's C suites has always been glaring, but this call by Zeitland, one of the four current African American corporate leaders and just seventeen over the last two decades, is even more urgent against the backdrop of massive protests over police brutality and entrenched racism. His plea isn't likely to be heated, however, unless companies decide to

radically revamp their diversity playbooks. Over the past decade, organizations of all stripes have spent billions of dollars trying to get more members of underrepresented groups to the top highest paying jobs. They have poured resources into hiring, retaining, and promoting minorities and women, but for African Americans in particular,

these efforts have been feudal. There are fewer black CEOs than five years ago, fewer black executives at some of the biggest banks, and even fewer black coaches in the NFL. The racial disparities are starkest at the top, but it doesn't get much better further down the hierarchy. The organizational chart at most mainstream organizations looks very similar to the organizational charts of plantations, says Victor Ray, a sociologist of race theory at the University of Iowa. Black folks are

at the bottom. It takes an almost utopian commitment to achieve fair representation. The c suite and top management must be dedicated to the issue, and it helps if many of those people are already non white. Most companies are nowhere near that. What's the next best thing? How about coercion, or, to be more specific, quotas. The word immediately raises eyebrows and hackles for some. It evokes a time when quotas

were used to limit non white and Jewish employment. Business leaders who thrive on metrics to measure success become allergic to them once they involve race. But it's worth bringing up. As the Black Lives Matter protests get companies to reframe their thinking. Almost every major company has put out a statement condemning racism or racial inequality. Some have even made

policy changes. Cephoras signed a pledge to dedicate fifteen percent of its shelf space to products from black owned businesses. On June ninth, Adidas announced at least thirty percent of new hires would be black or Latino. A good faith target, not a quota, but that thinking needs to permeate entire organizations to result in more black c e os or even more black managers, says Robert Lieberman, a professor of

political science at Johns Hopkins University. Right now, companies have these pretty deeply embedded structures that are geared toward diversity, says Lieberman, who studies race based discrimination and policy. If a diversity program is to become an instrument of racial equity rather than an instrument of creating and sustaining diversity,

they're going to have to do something different. So why not consider the coercive powers of quotas and perhaps the most successful diversity push in recent years, California, passed a law in twenty eighteen, requiring all public companies based in the state to have at least one female director by the end of At the close of one boards with five directors must have at least two women, and those

with six or more have at least three. Failure to comply costs a hundred thousand dollars the first year and three times as much after that. The move was unpopular, even with women, because it suggested hiring committees would have to lower their standards a year after compliance began. That's not what happened. Instead, opportunities opened for overlooked executives. There was a perception when the law passed that there was

a limited pool of qualified candidates. Ane Lisa Barrett, a governance expert at KPMG's Board Leadership Center, told Bloomberg News in March it doesn't seem to have been the case. Women accounted for almost half of new board seats in the state last year, outpacing female hires for similar positions in the rest of the country. There are judicial roadblocks, of course, Since the Supreme Court weighed in on its first affirmative action case in nineteen seventy eight, its limited

government use of numerical targets. In the ruling a university admissions case, the court said an institution could use race as a factor in its decisions, but that quotas went too far. Meanwhile, California's law has faced multiple legal challenges. Judicial Watch, a conservative activist group, called the requirement unconstitutional in a lawsuit filed on behalf of taxpayers and a shareholder of a California based company with an all male

board argued in a federal complaint that it's discriminatory. The first case is ongoing, the second was dismissed in April. While lawyers duke it out, California companies are moving ahead with meeting their quotas. Even if the law is struck down, the gains women have made will be in place. Boards are just about as white as they are male. As of twenty nineteen, thirty seven percent don't have a single

black director. Still, a law similar to Californias that would address racial inequities is highly unlikely and would face much stronger opposition than the gender quota law, says Michael Hyder, chief diversity officer at Corn Ferry. There is an apprehension among companies that if they are perceived as setting a target for hiring for people of color, that the focus

will mean hiring less qualified candidates. Hyder says it's a familiar, yet unfounded fear that is hilarious on so many levels, says Kimberly Reyes, who spent years working as one of a few black copywriters at various companies. Even without quotas, people assume you were hired because you were black, and once again see Reverence, California. If legislators won't act, shareholders could State Street, Black rock and activist investors already pressure

companies to disclose the gender diversity of their boards. Those campaigns have resulted largely in gains for white women. They could shift their focus to black representations, says Natasha Lamb, a managing partner at our Juna Capital, which pushes banks and tech companies to disclose gender and racial pay gaps. People bristle at the idea of racial quotas, Lamb says, but they work. There need to be interventions, She says.

The protests are an intervention. Shareholders exercising their voice is an intervention. Without intervention, nothing is going to change. Vanguard says it had already planned a twenty twenty emphasis on getting boards to disclose their racial and ethnic data. Black Rock says it continues to be committed to pushing for board diversity. State Street says it's committed to being part of the solution. The boardroom is just one of many white corners of the business world up and down the

corporate ladder. Strictly enforced targets could legally be used to fix racial imbalances, says David Obenheimer, director of the Berkeley Center on Comparative Equality and Anti Discrimination Law. Quotas can't be used in perpetuity, he says, but they can be put in place for a short period to correct a manifest imbalance in workforce makeup. It's sort of like dieting,

says Oppenheimer. Sometimes you have to go on a severe diet to lose some weight, and then hopefully you can go on a maintenance diet where you can eat a little bit more. That's the theory. One hopes it works better than dieting. Why aren't more companies wielding the powers of this blunt but useful tool in their commitment to diversity. Quotas are always a bit of an issue, says Pam Jeffords, A diversity and Inclusion consultant with p WC. Our goal

is to inspire people versus shame them. The consulting firm for is to look at hiring rates instead. The idea, she says, is to make sure companies aren't hiring any specific demographic at a greater rate than another. Jeffords concedes that alone won't change overall representation over time. What are we really looking for. We don't want the numbers to go down. There's been some decreasing in hiring rates for

black employees. Half measures rarely move anyone forward. Take the Rooney Rule, named for Dan Rooney, former chairman of the Diversity Committee of the NFL, which pioneered it. The two thousand and three rule, widely adopted by Corporate America, requires hiring managers include a diverse slate of candidates for a given role. Since two thousand three, non whites have been considered for open slots in head coaching positions at professional football teams. There are just as few black coaches now

as there were then. In May, the league's owners all but admitted the failure of the program when they met to consider additional incentives for teams that hire non white coaches. To be sure, quotas are limited in what they can achieve. In Norway, where public companies must set aside forty percent of board seats for women, they hold forty two percent of those positions. But even with all those women in charge,

men still hold most of the executive power. Only seven point seven percent of those companies have female chief executives. In Malaysia, government policies giving preferential treatment to the ethnic Malay majority have helped them move up the social and economic ladder at the expense critics say of ethnic Chinese and Indians. Quotas won't solve racism, As u S Supreme Court Justice John Roberts said in a two thousand seven ruling, the way to stop discrimination on the basis of race

is to stop discriminating on the basis of race. Sending black people into a hostile environment isn't much better than not hiring them at all. If you hire a lot of black people and the culture is such that their jobs are at risk, they will be undermined, says Nadia Owusu, who does diversity and inclusion work at Living Cities, and earlier this year, wrote a column for the online magazine Catapult called hiring a chief diversity officer won't fix your

racist company culture. Indeed, the internal dynamics of corporations often end up undermining the executives in charge of diversity, many of whom are women of color. OWUSU says. Quotas also invite lawsuits, as they have in California. Harvard's use of race as a factor in deciding on admissions has been called an evil of private prejudice and discriminatory by Edward Blum, a legal activist who's brought multiple suits against universities, including Harvard,

for what he sees as biased admissions policies. The Supreme Court has allowed institutions to consider race in hiring and admissions as long as it's in an organization's interest. Affirmative action was originally meant to counteract deeply ingrained prejudices. It has traveled somewhat of a distance from that idea, says Johns Hopkins Lieberman. It used to be a form of reparations and compensatory justice, a form of payback for inequalities that exist because of the u S history of slavery.

It also counteracts programs like legacy admissions that work as affirmative action for white people. Through the decades, However, it's become part of a mushier push for diversity. Racial justice has been dropped in favor of a business case for diversity of thought and experiences, says Lieberman. Indeed, while research has confirmed the financial benefits of diverse teams, the profit

motive hasn't changed the face of corporate America. Many companies still look for credentials Ivy League, Fortune Five internships, for example, that perpetuate the status quo. A debate about quotas may just force corporate diversity programs to shape up. Maybe thinking about the issue as a matter of justice, not just money, will make a difference. Diversity as the reason for affirmative action is incredibly ah historical, says Reyes, a Fulbright scholar

who's written about Affirmative act and for The Atlantic. It was initially supposed to be about writing wrongs or trying to balance something lopsided without quotas. How exactly do you change that? With Jeff Green, Donald Moore, Kim Boston, and Michael Holter. And that's this week's remarks and the cover story. Check out more stories in the magazine this week. It is now on newsstands. It's on the Bloomberg and online at Bloomberg dot com. I'm Carol Masser and I'm Jason Kelly.

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