The rage driving demonstrations after George Floyd’s killing comes immediately from frustration over abusive treatment inflicted upon African Americans by the police as well as the systematic discrimination they have suffered from many sectors of our society. Yet, there is another large factor contributing to the deep disaffection that many blacks feel. They have been left out of the economic promise of our country — historically robbed of any meaningful share of our nation’s wealth. A Brookings Institution study shows that African Americans on average have only 10 percent of the wealth that whites enjoy ($17,000 compared to $170,000).
Much of the blame for this lies with our largest businesses. While many top corporations are now professing to support diversity and inclusion, the number of minorities in their top positions – on their boards and in their C-suites – has been described as “not great” and “dismal.” For example, a suit filed last January by two former African-American executives of McDonald’s charges the company with pervasive racial discrimination.
Yet black Americans are hardly alone in being left out of our country’s prosperity. Even before the pandemic, 80 percent of our citizens were living paycheck to paycheck, and 40 percent of them did not have enough savings to pay for a $400 emergency. The coronavirus has made that situation much worse. Forty million people are now out of work and many of those jobs may not return after the plague ends.
Meanwhile, as the stock market has been recovering, the wealthiest continue to claim a gigantic proportion of those assets — with the richest 10 percent owning 85 percent of common stocks. And the net worth of modern-day tycoons has reached a level that even John D. Rockefeller or Cornelius Vanderbilt would envy.
For instance, Amazon CEO Jeff Bezos’s total wealth is now valued at $150 billion, and that’s not counting the $50 billion owned by his ex-wife. In addition, the annual compensation of CEOs continues to soar — on average topping $12 million at our 500 largest companies.
Government initiatives such as the proposal by former presidential candidate Andrew Yang for a guaranteed annual income could alleviate some of that inequality. Since that seems unrealistic in our current political climate, the business community must take decisive action to bring about a more economically inclusive society. Our largest companies are the repositories of much of our nation’s wealth, and they should be creating more good-paying jobs, directing many of them to minorities and other disadvantaged groups.
Corporate leaders showed some inclination to move in that direction last summer when the Business Roundtable published a statement that firms ought to be run not just for their shareholders but also in the interest of all their stakeholders. That would include investment in their employees, their communities and the environment. But recent behavior shows that those may be hollow aspirations. Corporations overwhelmingly used the savings from the gigantic tax cut they received at the end of 2017 not to expand their operations and hire more workers but to buy to back their stock, thus increasing the gains of the already wealthy.
A more effective way to compel socially responsible corporate action would be to enact legislation similar to that proposed by Sen. Elizabeth Warren (D-Mass.) in her Accountable Capitalism Act. Corporations are given the privilege of limited liability and perpetual existence. In return for that, Warren’s bill would require that companies with gross receipts over $1 billion be chartered as federal corporations.
They would then have enforceable legal duties not only to make money for their shareholders but also to serve the interests of their employees, their customers and the local and global environment. In addition, in a manner similar to Germany, the workers at those firms would elect 40 percent of the members of their boards of directors. Profits earned by those large firms would thus be more fairly shared with a broader segment of the public.
The recent protests have highlighted many injustices and they should make us more aware of those who have been excluded from the broad benefits of our society. All Americans should participate in our country’s prosperity, not just a privileged few. And one way to accomplish that would be to enlarge the obligation that large corporations have to all our citizens.
Daniel J. Morrissey is a professor and former dean at Gonzaga University Law School.