One year into their $50 billion spending pledge, a mere $250 million seems to have been spent. What gives?
During the summer of 2020, America’s corporate leaders couldn’t make promises fast enough. As the murder of George Floyd sparked nationwide riots and set off months of unrest and tension, companies swore that this time, things would be different. Almost every member of the S&P 500 made some form of pledge to increase diversity representation and diversity-based spending. They’d be the change they wanted to see in the world, and they’d make it happen with money. Lots and lots of money…
All in all, some $50 billion was earmarked for racial equity, according to William Michael Cunningham, CEO of Creative Investment Research. His firm uses press releases and public announcements to tally who’s promising what… and what they’ve spent. So far, the pledge-to-payout ratios aren’t looking good.
A mere $250 million has been visibly spent. That’s one-half of one percent of what was pledged – just .005%!
Is the rest of the money coming any time soon? It’s hard to tell…
Corporate processes – especially in larger firms with entrenched supply chains and vendor systems – can take a long time to change. Even well-intentioned firms may still spend months or even years following protocols to unlock fresh funds, allocate those funds across divisions, take applications, vet vendors, and approve new contracts with certified diverse suppliers.
Speaking to that speed, in a Wall Street Journal piece on linking executive compensation to diversity metrics, Steven Davis, who is a director at retailer American Eagle Outfitters Inc., grocery store chain Albertsons Cos., paint maker PPG Industries Inc. and energy company Marathon Petroleum Corp., said boards should have a five-year diversity, equity and inclusion strategic plan. Viewed through that extended time window, the moves that firms have made over the last year can be thought of as early signs of action, or the first fruits of change.
And yet, haven’t diverse communities spent enough time celebrating incremental changes? Hasn’t there been enough back patting for baby steps and good words? Isn’t it time… finally, finally time… to stop twiddling with the edges of the system and start making serious structural changes?
The millions who took to the streets in the summer of 2020 weren’t calling for a .005% change in how this nation operates. They weren’t agitating for goals which might possibly get met in 2025, or maybe even 2030. They were saying “Enough. No more. Change needs to happen NOW.”
So what can be done to make the pledges of 2020 a reality in 2021, 2022, and every year beyond? Here’s a few suggestions…
First, when a firm pledges to increase diverse spending, make them get specific. How much will be spent, and by when? If the pledge is in the form of a percentage, i.e., a 25% increase in spend or bringing the supply chain up to 40% women owned firms, the baseline and timeframe should also be noted.
Next, get an independent tracker or trustee involved. If there’s a fiscal pledge, companies can work with the trustee to pass over the money immediately and then redeem it back as contracts are signed. Independent tracking firms can also help supplier diversity numbers be counted accurately and publicly, preventing “heat of the moment” pledges from getting lost in the noise later.
Finally, build accountability into the pledges. If a firm falls short of it’s promised diversity spend, what’s the consequence? Does anyone get fired? Will the firm be fined? Should individual or owners be barred from promotion or industry events for taking social credit but not taking social action? Or should the entire leadership team and board of directors be made to feel the lack of action somewhere they’ll notice… like their pocketbooks?
It’s a compelling idea – and one with room to make a difference. Right now, just 20 firms on the S&P tie a portion of executive compensation and bonuses to whether or not diversity metrics are met. That’s double what it was in 2018… but still a tiny fraction of the companies involved. Yet, change – big, structural change – isn’t going to happen unless those at the very top insist, just like those at the very bottom, marching in the streets, that real change happen. Not in the future… not someday “soon”… but now.