Two trailblazing CEOs of color issue a cautionary notice to businesses disregarding diversity.
Ken Chetault, who served as the CEO of American Express from 2001 to 2018, became one of the few Black executives to lead a Fortune 500 company at that time. His tenure marked a significant milestone.
In a candid interview with CNN, two influential business figures spoke out against corporations shunning strategies to foster diversity. They argued that such an approach would limit opportunities for individuals who face barriers due to factors beyond their control, including race, socio-economic status, and educational background.
In essence, abandoning diversity, equity, and inclusion (DEI) initiatives could hinder the future prospects of leaders like Ken Frazier or Ken Chetault in the corporate world.
Their cautionary message comes at a time when DEI initiatives are under attack from conservative political and legal fronts. Companies such as John Deere, Tractor Supply Co., and Harley-Davidson have scaled back their DEI programs recently, wary of potential backlash similar to what affected Bud Light's business following the beer brand's association with a transgender influencer.
Frazier, 69, and Chetault, 73, underscored the importance of diversity strategies in a nation where not everyone starts on an even footing and prejudice exists. Together, they launched OneTen, an organization dedicated to creating one million employment opportunities for individuals without a four-year college degree.
Frazier emphasized that DEI's primary goal is to nurture talent, evaluate it fairly, and uncover untapped talent and disadvantaged talent in a world where not everyone has an equal chance to demonstrate their abilities. "Businesses will miss out on top talent unless they actively pursue strategies to develop leaders who have faced discrimination," he said.
DEI and Merit
Critics like Elon Musk argue that DEI is "reverse racism" and that race should supersede all qualifications in hiring and promotions.
However, these critics ignore the historical context of "meritocracy" and its benefits for businesses, according to Frazier and Chetault.
DEI often encompasses employee training, resource networks, and recruitment practices aimed at promoting diversity in terms of race, gender, socio-economic status, and other backgrounds.
Research from Boston Consulting Group has shown that DEI initiatives boost profits, reduce employee turnover, and increase employee motivation. Companies with DEI teams tend to be more diverse in terms of ethnicity, with a higher share of Asian, Black, and Hispanic employees compared to companies without DEI teams.
Frazier's personal journey at Merck underscores the necessity of companies actively investing in initiatives to advance hidden talent. As a lawyer, Frazer began working at Merck in the 1990s. Under the guidance of then-CEO Roy Vagelos, a first-generation immigrant who was sensitive to discrimination and recognized its prevalence, Frazier transitioned to the business side of Merck and ascended to leadership roles within the company.
Vagelos recognized that promotions and advancement were not always based on merit alone but on factors like family connections. Without Merck's active efforts to develop strategies for promoting hidden talent, Frazier might not have had the same opportunities for career advancement.
Those advocating for a return to old-fashioned meritocracy overlook the fact that centuries-old interpretations of merit often relied on racial biases and connections, said Chetault.
"The idea that merit reigned 50 years ago is a misconception," Chetault explained. "The standards for merit were not balanced at that time, and promotions or admissions were often based on factors other than talent."
Frazier and Chetault do not blindly endorse all DEI programs but acknowledge that opponents have used select examples to discredit DEI entirely.
"Teaching people about the negative impacts of racism and prejudice is essential and crucial," Chetault confirmed. "But drawing racial lines in employee classification is not constructive."
Companies Retreating
Following the wave of racial justice protests in 2020, many corporations significantly increased their investments in DEI initiatives. In that year alone, businesses spent an estimated $7.5 billion on DEI efforts.
However, several companies have since retrenched under the pressure of legal and political challenges.
Frazier acknowledged the cyclical nature of societal trends, which sometimes swing against companies working to tackle racial inequities. He referred to the current climate as one that is pushing back against DEI efforts.
In 2023, the Supreme Court made a landmark decision ruling that colleges and universities cannot consider race in the admissions process, eliminating a long-standing precedent that had benefited historically underrepresented students in higher education.
Meanwhile, conservative legal groups have filed lawsuits targeting corporations' diversity initiatives, and political leaders like Florida Governor Ron DeSantis, Arkansas Senator Tom Cotton, and others have encouraged brands like Bud Light, Disney, and Nike to roll back their inclusivity efforts.
Lately, digital campaigner Robby Starbuck has been focusing his efforts on criticizing brands favored by conservative consumers, like Harley-Davidson and Tractor Supply Co., and encouraging backlash against initiatives promoting diversity, equity, and inclusion (DEI). Starbuck chooses companies whose DEI policies were only established in the past few years and might be more susceptible to pressure.
According to Frazier and Chenault, there is a divide between companies that promptly introduced diversity programs following George Floyd's death in 2020 and companies that have ingrained these initiatives into their core business operations.
"Those companies jumped on the bandwagon because the trend was pushing them to do so, so now they’re finding it tough to keep up with it," Frazier explained. "However, for companies that have incorporated DEI into their company culture, it's deeply embedded, like marbled meat. They don't feel the need to alter that."
In light of the backlash faced by companies like Bud Light for their DEI initiatives, businesses must consider the potential consequences of abandoning diversity strategies, as this could limit the opportunities for leaders like Ken Frazier or Ken Chetault in the corporate world.
Frazier highlighted that DEI initiatives not only promote fair evaluation of talent but also uncover hidden and disadvantaged talent, ensuring that businesses do not miss out on top talent due to discrimination.
