Are corporations responsible for addressing racial inequality? In a timely and compelling examination of corporate race relations during the civil rights movement and current corporate processes and decision-making on race, Gina-Gail S. Fletcher and H. Timothy Lovelace, Jr. argue in their article, Corporate Racial Responsibility, that corporations are responsible for addressing racial inequality because they have historically been inescapably involved in it.
The authors’ historical exploration of race and corporate relations is an important contribution to scholarship. The authors show that corporate engagement in race is not new. It extends back to the time of slavery and became much more extensive during the civil rights movement. As the authors document, sit-ins at hotels, restaurants, and other segregated businesses were catalysts for the civil rights movement.
Businesses were drawn to voluntary desegregation, which was woefully unsuccessful as evidenced by accounts in cities like Birmingham, Alabama and Atlanta, Georgia. It was not until the passage of Title II of the Civil Rights Act of 1964, mandating that businesses desegregate, that change began to occur. The authors explain that this is compelling evidence that mandates succeed while voluntary action, a form of corporate social responsibility, does not.
With history as the backdrop, the authors address contemporary debates on corporations’ engagement with issues of racial inequality, focusing on three specific issues: the critique that companies are becoming “woke,” the belief that addressing race may negatively impact corporate profitability, and the idea that companies are engaged mostly in “cheap talk.” Regarding the critique that companies are now becoming woke, the authors remind us that criticisms like this mirror segregationists’ resistance during the civil rights era. History also shows that the desegregation project, much like corporate support for racial equity today, has support across the political spectrum. On the belief that racial equity is in tension with profitability, the authors explain that there are many non-pecuniary benefits of racial equity not often captured in these criticisms. On cheap talk, the authors note the value in public affirmations of racial equity, which can be used for tangible action toward change.
The authors further argue that past and present iterations of corporate engagement in racial equity present a market-fundamentalist, value extractive approach to racial equity that reifies existing hierarchies. Market fundamentalism means that corporations tend to engage in racial equity work when it is worthwhile financially, such as when there is support for the business case for diversity. Like market fundamentalism, value extraction is about obtaining value from people of color without attempting to change the underlying arrangements that support racial inequality, such as establishing structures to ensure board diversity.
However, even the business case for diversity is not always enough. During the civil rights movement, white business owners had little to no incentive to voluntarily desegregate or recognize the dignity of Black people regardless of the potential profitability of desegregation. Today, scholars of corporate governance recognize the flaws of the business case. And empirical research shows that the business case has a negative impact on belonging for underrepresented groups, including Black people, women and LGBTQ+ individuals.1
The authors make two categories of proposals for change to address market-fundamentalism and value extraction. The first category is proposals that can easily be implemented and, in some cases, have already been implemented by companies. The second are bolder and will be more challenging to implement in this politically fraught environment. In the first category are measures like changes to board composition, pay equity, employee resource groups, internal tracking of diversity goals, and partnerships between companies and racial justice nonprofits. In the second category are things like requiring third party suppliers and law firms to improve corporate diversity. In the past, corporations have required law firms to staff matters with more diverse lawyers. However, current political tension has made these kinds of approaches more controversial. Another more challenging recommendation is to develop “corporations of conscience” who will lobby the government for new civil rights laws. Corporations of conscience “seek to advance racial justice in any situation regardless of profitability.” (P. 425.) In my view, this is a call to action for corporations to do better despite conservative pressures to squash corporate engagement with race.
- See generally, Oriane Georgeac, Detrimental effects of the “Business Case for Diversity” for Underrepresented Groups’ Belonging, 2021 Acad. of Mgmt. Proc. 12750 (2021).
