Value manager John Rogers Jr. has built Ariel Investments into the largest African-American-owned mutual fund company in the U.S.; it oversees $11 billion. Rogers sits on the boards of McDonald’s, Nike, and the New York Times (NYT) and has been active politically, including co-chairing former President Barack Obama’s inaugural committee. The Chicagoan has also focused on narrowing the racial wealth gap and improving financial literacy through his philanthropic work.
What is the wake-up call here for businesses and investors?
Rogers: The African-American community is much worse off than people think: Between 1996 and 2013, college-educated White Americans saw wealth increase 96% and college-educated Blacks saw wealth decline 10%.
We used to have a very successful, large black business community 40 years ago, when I got home from Princeton. We used to have political leaders who insisted anchor institutions in our community work with black businesses, understanding a strong black business community would mean more employment, philanthropy, and stronger, more vibrant communities. We have lost those businesses.
Today, African-American businesses are typically the storefront business or service company that have been crushed in this pandemic and now in these riots. Our businesses are closing much faster than white companies; they don’t have multigenerational wealth and savings. And our extended families are being destroyed by the virus because of the health gap. It’s a horrible storm that, after all this history of discrimination, is coming home to make it much worse.
What should companies do to narrow the gap?
So many well-meaning [corporate] programs are about supplier diversity programs, for example, allocating 20% to minority contractors. That’s the lowest margin, least profitable parts of their spend. In the parts of the economy where there is growth, wealth, profits and jobs—technology, financial and professional services—we are the least represented. It’s unacceptable. We have to go back to anchor institutions working with local businesses in everything—not just their supply chains.
We have to get away from old-fashioned supplier diversity and do what University of Chicago calls business diversity. If you are [a big company], you are spending [lots of money] on professional, legal, accounting, consulting, advertising, and marketing . People need political power to hold institutions accountable. [Companies] can’t say they gave a donation or created a new internship program, but still spend 99% of their money in companies dominated by white men.
What should the asset management industry be doing?
The Forbes 400 is chock a block with hedge funds, money managers, private equity and venture capital. Not only do they hire for their own companies but they control jobs and contracts for companies they bring public and invest in.
Our industry has enormous wealth and enormous opportunity. It’s great to do internships but we need to hire African-Americans in senior roles, not just one token person but more representative of our population—and make sure we are working with African-American businesses too. Ariel is a co-chair on an effort sponsored by the Federal Reserve of Chicago to create more of a pipeline of talent for financial services. Two top African-Americans at Northern Trust (NTRS) started their career at Ariel; one of the three African-American partners at William Blair started here. If you hire more black people at your firm, that supports black business development; it’s a positive ecosystem.
What do you say to those who say they need a pipeline for more African-Americans in senior positions?
If you go back and look at many of the successful African-Americans in financial services now or on Wall Street—Bill Lewis of Lazard, Ron Blaylock in private equity, Chris Williams in investment banking, Jim Reynolds from Loop Capital—we all got our career start in the early 1980s. I was the first African-American to work at William Blair. Political leaders had said to companies they needed black partners or managing directors to get a relationship with the city. Wachtel Lipton named a black partner because Walmart insisted they weren’t going to do legal business unless there was an African-American partner. All of a sudden, they found all these stars. It’s a huge deal when customers demand it. If [you say to companies] that if you don’t make progress and have minority leadership, we won’t do business with you, people find the talent. The talent is there—if they get out of their network and segregated communities.
Ariel helped launch the Ariel Community Academy—a public school on the South side where investing is infused through the curriculum. What should the industry be doing to improve financial literacy?
We have to push large financial institutions to support public schools in ways that are meaningful and create paths [to build] financial expertise. If we can do it, why can’t everyone? It’s not just about having them learn about the stock market but also seeing role models that look like them and thinking about financial services careers in grade school and high school. We have had several people go through the academy that have started successful financial service careers.
No one has been pushing them to do this. This is a nuanced thing but most of the progressive people who you think would push for that aren’t the people who think about Wall Street in a favorable light. Often they help get microloans and Pell grants, which are great, but they look down their nose at this nasty business world. But we know our country is based on being a capitalist democracy. If we don’t have strong businesses, we don’t have success.
What are some examples of efforts by companies that are moving the needle?
Some companies are doing wonderful things: Northern Trust and Regions (RF) are doing terrific things around diversity. McDonald’s has the longest history of working with black businesses. It has over 300 African-American franchisees. If you look at Black Enterprise’s list of top black businesses, a lot of them are restaurant suppliers because McDonald’s has them as suppliers. These companies have to be celebrated for their history of creating multigenerational black wealth.
What is different this time with the protests?
Things are worse than were 40 to 50 years ago, but because of the ESG [environmental, social, and governance] effort and everyone from Jamie Dimon to Larry Fink talking about these issues for the first time—and dynamic Congressional leaders in leadership roles for the first time, we have some green shoots here that we are moving in the right direction. In this horrible and heartbreaking crisis, the only thing you can see that is hopeful is that it is grabbing attention; people are starting to see how tough things are and the frustration that has been built over decades, across the board.
Written by Reshma Kapadia. Originally published in Barron’s on June 5, 2020.