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It may seem as though newer companies with “more enlightened” younger leaders would do a better job of naming minorities to top positions than long-established companies, but in fact, younger firms are less likely to have nonwhite directors.
That was one of several findings by Clayton Rose, member of the Council on the Graduate School of Business, Columbia University adjunct associate professor of finance and economics, and former corporate executive at JPMorgan. Rose shared his research with students in the strategy symposium course taught by Harry Davis, Roger L. and Rachel M. Goetz Distinguished Service Professor of Creative Management, on April 20 at the Charles M. Harper Center.
The legacy of the Civil Rights movement and ongoing social pressures have contributed to greater success for African Americans in business leadership than for other minorities, he said. “Firms are clearly shaping the racial composition of their senior teams in response to these pressures,” he said. The more sensitive the firm’s executives and the greater the social pressure, the more likely the company will have a nonwhite director. “In the absence of these institutional pressures, firms would have fewer nonwhite directors,” he said.
Still, Rose found that better-established companies seem to be satisfied after hiring one or two minorities do little afterward to enhance diversity. Rose’s research showed the percentage of director seats held by nonwhites (African American, Hispanic, Latin, Asian American, Asian, and Indian) increased from 2.4 percent in 1980 to 13.5 percent in 2000. But those minority-held posts in 2000 represented only one or two minority directors per firm, most of them African Americans. “There seems to be a limit on the number of African American directors,” Rose said. “There’s a kind of a ‘check the box’ thing that goes on here. Once [companies] get their one or two, they’re done, and they move on.”
Statistics from 2003 revealed that out of 1,496 executives sampled, 124—or about 8 percent—were nonwhite, Rose said. Few directors (3.5 percent) and executives are of Hispanic and Asian heritage, even though in 2000 they comprised 10 percent of the eligible population.
In fact, social psychologists' research shows that Hispanics form the largest nonwhite population group and are the fastest growing, while Asian Americans have best education and job credentials, the two groups are least represented in top jobs, Rose said. He cited organizational theory by social psychologists, which shows that “race gets in the way” of work group performance because of such issues as cohesion, integration, conflict, turnover, and attachment. “It’s particularly problematic for whites, who really try to opt out of these racially mixed groups,” Rose said.
He said the research shows that business executives have learned how to talk about race, comply with social pressures, and manage the issue to the extent that it must, then dismiss it. But he questioned what will happen when Hispanics become the predominant minority, increasing from 13 percent of the population to 25 percent. “That’s a major-league change,” Rose said.
Second-year students in Davis’s class found Rose’s research thought-provoking. Sandeep Ganesh said it sounds as though “African Americans should be off doing their own thing and Hispanics should be off doing their own thing,” but he is bothered by the possibility of such segregation. Darin Stewart suggested companies build minority leadership by encouraging collaboration among racial groups throughout layers of the company, not just at the top.
—Mary Sue Penn