The 4% Problem and Efforts To Invest in Corporate Diversity

Business man talking on the phone

Journalist Jamal Simmons recently joined CBS This Morning to discuss his new Democracy Journal column, entitled “The 4 Percent Problem.” According to the Simmons, Black inclusion stalls at nearly 4% across nearly every leading sector of the U.S. economy, from technology to finance. Although many corporations made impactful commitments to racial justice following George Floyd’s death in summer 2020, Simmons calls on them to follow-up with tangible commitments to diversity within their top ranks. 

“It’s not about one particular company, it’s about a whole sector, a trend that runs across sectors,” Simmons said in the May 2021 interview. “We have to attack this problem from both ends of the pipeline: you got to deal with the people who are coming into the pipeline at the entry level, and make sure we have recruitment criteria that allow more people to come in. And then we’ve got to deal with people at the top levels, people in the leadership.”

The statistics Simmons identifies are alarming. Analysis from the Institutional Shareholder Services’ ESG division found that a mere 4%of U.S. corporate board members are Black. Moreover, Black people account for about 12% of the U.S. population but occupy only 3.2% of the senior leadership roles at large companies in the U.S. and just 0.8% of all Fortune 500 CEO positions.

Philanthropist Robert F. Smith shared Simmons’ interview on his Twitter feed, noting “in 2021, blaming ‘the pipeline’ for low diversity is not enough. A holistic solution means aiming higher, holding organizations accountable, and truly empowering Black institutions to achieve excellence.”

Solutions To Break the 4% Ceiling

To help mend this gap, Simmons suggests a multilateral approach to encouraging diversity and representation. A staged integration model accepts the efficacy of Black-led talent development and capitalizes on it by transitioning leaders into mainstream organizations, like taking the finders fees usually paid to headhunters and spending that money with Black organizations instead. 

Another approach encourages hiring directly from Historically Black Colleges and Universities (HBCUs), in addition to investing in these programs to ensure their students provide a pipeline of future world-class hires. Simmons also suggests that corporations formalize lateral leadership transitions within their top ranks and make explicit searches for specialized talent. This means purposefully selecting Black-owned consulting firms, businesses and partners, in addition to creating direct pipelines for promoting Black executives from within. A combination of these proposals, according to Simmons, would help expand Black representation beyond its current four percent ceiling. 

Robert F. Smith’s Efforts To Boost Representation at the Top

Philanthropist Robert F. Smith is a leading advocate on these same issues, helping build a pipeline of talented students of color who will be the corporate leaders of tomorrow. The internX program, which matches leading STEM employers with diverse internship candidates, was created by the Fund II Foundation, of which Smith is founding director and President. The initiative provides paid internship experiences, networking opportunities with senior executives and skills for future employment to talented students across the country. 

Smith, along with the Fund II Foundation, also founded Student Freedom Initiative, a national nonprofit organization dedicated to ensuring freedom in professional and life choices for students attending Minority Serving Institutions (MSIs). Student Freedom Initiative provides both an income-contingent funding option for education costs via their Student Freedom Agreement and other tools and resources intended to enhance the higher education experience and broaden student outlooks for career paths. Set to launch in fall 2021, it aims to propel students at select Historically Black Colleges and Universities (HBCUs) across the country into more successful careers through both in-school tutoring and mentoring, and postgraduate loan repayment alternatives.

Smith also urges diversity within his top ranks as the Founder, Chairman and CEO of Vista Equity Partners. Under his leadership, Vista is a member of the Thirty Percent Coalition, a collaboration between corporations, investors and advocacy groups to achieve diversity in senior leadership and the corporate boardroom. The coalition conceives and implements collaborative strategies with organizations, helping them boost gender and racial diversity internally. Representatives from all coalition members, which include companies like Blackstone and nonprofits like YWCA USA, come together for the mid-year meeting in the spring and for the coalition’s fall annual summit.  

Watch a recent virtual appearance by Smith at the annual Thirty Percent Coalition Summit and learn more about Smith’s push for diversity in the corporate boardroom.