Two pioneering Black CEOs have a warning for companies abandoning diversity

By CNN Newsource

Published October 15, 2024 3:00 AM

By Nathaniel Meyersohn, CNN

New York (CNN) — Ken Frazier grew up in a poor Philadelphia neighborhood as the son of a janitor and grandson of a man born into slavery. He rose to the heights of corporate America as CEO of Merck from 2011 to 2021, becoming the first Black chief executive of a major pharmaceutical company.

Ken Chenault, the CEO of American Express from 2001 to 2018, became just the third Black CEO of a Fortune 500 company in history at the time he took over.

The two pioneering business leaders told CNN in an interview that companies turning their backs on strategies to promote diversity will limit equal opportunities for people who face disadvantages because of their skin color, the neighborhood they grew up in, the quality of school they attended and other forces beyond their control.

In other words, abandoning diversity, equity and inclusion (DEI) efforts could hurt the next Ken Frazier or Ken Chenault’s chances at climbing the ranks of Corporate America.

Their warning comes as DEI initiatives are under fire from right-wing political and legal attacks. Companies such as John Deere, Tractor Supply Co. and Harley-Davidson have retreated on DEI programs in recent months, fearful of a backlash like the one that wrecked Bud Light’s business after the beer brand embraced (and then distanced itself from) a trans influencer.

But Frazier, 69, and Chenault, 73, said corporate diversity strategies are essential in a country where not everyone starts from the same place and bias exists. The two leaders have co-founded OneTen, an organization aiming to create one million careers for people without a four-year college degree.

“At its best, DEI is about developing talent, measuring it in a fair way and finding hidden talent and disadvantaged talent in a world where not everybody has an equal chance to exhibit their abilities,” Frazier said. “Businesses will miss the best talent unless they go out of their way to develop strategies” for cultivating leaders who have faced discrimination — especially those based on America’s “tortured history around race.”

DEI and merit

Opponents like Elon Musk say DEI represents “reverse racism” and that race now trumps all qualifications for hiring and promotions.

But opponents ignore both the history of so-called meritocracy, and the fact that DEI programs benefit business, Frazier and Chenault argue.

DEI is typically a mix of employee training, resource networks and recruiting practices to encourage representation of people of different races, genders, classes and other backgrounds.

DEI initiatives have been shown to boost profits, reduce employee attrition and increase employee motivation, according to Boston Consulting Group research based on data from more than 27,000 employees in 16 countries. Companies with DEI teams tend to also be more diverse. They have a higher share of Asian, Black and Hispanic employees than companies without DEI teams, according to a study by Revelio Labs, which tracks hiring trends.

Frazier said his own rise at Merck demonstrated the need for companies to actively develop strategies to advance hidden talent.

Frazier began at Merck in the 1990s as a lawyer. Under the mentorship of then-CEO Roy Vagelos — the son of Greek immigrants who was sensitive to discrimination because he had experienced it firsthand and saw people advance in the field based on family connections— Frazier transitioned to the business side of Merck. He was put on a path to becoming a leader at the company.

Vagelos recognized career advancement and promotions weren’t always based on “the intrinsic talent of people,” Frazier said. “The reality of the world was if [Vagelos] had used the normal promotional standards of the company — which, by the way, many people conflated with merit because that’s the way they always did it. That wasn’t merit. It was just the way Merck always did it — then I would not have had a chance.”

Those calling for the good old days ignore the fact that promotions or admissions based off criteria considered to be “merit” decades ago often had more to do with someone’s race or their connections, Chenault said.

“This concept that, 50 years ago, merit reigned — the definition of what merit was was not balanced,” Chenault said. The standards for college admissions or promotions are generally much higher today, he noted.

The two leaders don’t agree with every DEI program. But they said opponents have weaponized select examples of diversity programs that are not practiced widely to oppose DEI entirely.

“Clearly, teaching people about the negative impacts of racism and prejudice in America is important and critical,” Chenault said. “But to say to a White student you can only be classified with White students and a Black student you can only be classified with Black students —I just don’t think that is really constructive.”

Companies retreating

Corporate DEI initiatives picked up after a wave of protests for racial justice in the wake of the police murder of George Floyd in 2020. That year, companies spent an estimated $7.5 billion on DEI-related efforts, such as employee resource groups, according to a McKinsey study.

But some companies have recently retreated in the wake of legal and political pressure.

“Our society has experienced sine waves that oscillate up and down and sideways periodically,” Frazier said. “Right now, those sine waves — the political climate —is one that actually pushes back” against companies working to address racial inequities.

In 2023, the Supreme Court ruled that colleges and universities can no longer take race into consideration in granting admission, a landmark decision overturning long-standing precedent that has benefited Black and Latino students in higher education.

Meanwhile, conservative legal groups are now filing lawsuits targeting companies’ diversity initiatives, and Republican leaders like Florida Gov. Ron DeSantis and Arkansas Sen. Tom Cotton and others have pressured brands such as Bud Light, Disney and Nike to roll back their inclusivity efforts.

More recently, social media activist Robby Starbuck has channeled energy on the right to target specific brands popular with politically conservative customers, such as Harley-Davidson and Tractor Supply Co., and led pressure against DEI programs. Starbuck has selected brands whose programs on some of these issues were only implemented in recent years and may be less likely to resist pressure.

Frazier and Chenault said there was a split between companies that rushed to create diversity programs in the wake of George Floyd’s murder in 2020 and companies that have embedded these programs into their business.

“For some of the companies that joined this initiative because the sine waves were encouraging them to do it [in 2020], those are the ones that are struggling to stay with it,” Frazier said. “For those companies that had integrated DEI into the way they do business, fundamentally, it’s marbled into the meat, so to speak. They’re not trying to change that.”