Do Large Public Companies Do Business With Minority Firms?

Even though businesses owned by Americans of color have suffered more than white-owned businesses as a result of the recent economic downturn, President Obama has not focused on the special problems that plague minority-business owners. The President’s silence about the impact of the financial collapse on communities of color is most likely attributable to the nation’s political and social climate generated by his election. There has been a great deal of discussion about the President’s election as the precipitating factor ushering in a new post-racial era. Many Americans want to believe that the election of the first African American President signals the end of racism and discrimination, particularly as they affect the African American community. I, however, agree with Michael Eric Dyson who said that “post-racial” is not synonymous with “post-racism”. It seems that for many Americans, the assertion that we now live in a “post-racial” world means that we no longer need to engage in discussions about race and racism. Our national discourse about race and racism has been superficial and wrought with difficulty, but since President Obama’s election, the post-racial assertion mandates silence on these issues. We have elected a Black President. Racism has ended. This seems to define today’s “post-racial” era.
President Obama’s silence regarding the disparate impact the financial collapse has had on Americans of color is not likely attributable to his belief that racism and discrimination are no longer problems. He has made several comments that indicate otherwise. But his silence about racism’s link to economic discrimination based on race obscures a troubling irony relating to minority entrepreneurship. Intuitively, one would think that in the Obama era, the so-called “post-racial” era, it would be easier for Americans of color to establish and succeed in their own small businesses. The counterintuitive reality, however, is that it was easier for African Americans to become entrepreneurs and thrive in the twentieth century than it is in this second decade of the twenty-first century.

Ernesta Procope, an African American, is a twenty-first century businesswoman, who has headed Wall Street’s largest minority-owned firm for decades. Her story is a success story, but, it is a story about success achieved in spite of subtle and perhaps unconscious decision making that impedes the entrepreneurial achievement of twenty-first century African Americans. This twenty-first century narrative reveals the intractability of the problem of lack of access to opportunity for black entrepreneurs.

In the 21st century, black entrepreneurs encounter more difficulties in establishing businesses and getting credit than their white counterparts. African American entrepreneurs frequently pay higher interest rates than similarly situated white businesspeople. It is more difficult for businesses owned by African Americans to remain viable. Black businesses’ sales and profits are typically lower than those of their white counterparts. Based on data gathered from the 1999 and 2001 U.S. Census Bureau, “…African American and Latino firms are less successful on average than are White or Asian firms. In particular, businesses owned by African Americans and Latinos have lower sales, hire fewer employees, and have smaller payrolls than White-owned businesses. African-American-owned firms also have lower profits and higher closure rates than White-owned firms”.

Mrs. Procope’s story reveals a counterintuitive proposition. The impediments to entrepreneurial success for 21st century black entrepreneurs are different from the obstacles their 20th century counterparts faced, but the obstacles are nevertheless as, and perhaps, even more serious. Minority entrepreneurs in the twenty-first century find themselves in a paradoxical situation. There are several federal, state and local programs in place designed to assist small minority-owned and women-owned businesses. These programs help small women and minority-owned businesses get loans and procure business from the federal government as subcontractors. In addition to these programs, many large public companies have diversity programs that attempt to ensure that the small business owners who supply them with goods and services are racially diverse. These programs, however, cannot resolve the problems that minority business owners face as a result of the subtle, often unconscious racism of the twenty-first century.
For example, because of federal and local programs, there is likely to be a perception that minority entrepreneurs have an unfair advantage. This perception may cause many of the decision makers at large publicly-held companies to overlook minority entrepreneurs and give business opportunities to white-owned firms who are seemingly disadvantaged by minority-business programs. This is likely to happen in spite of the public companies’ supplier diversity programs. This perception that people of color enjoy unfair advantages under programs designed to mitigate the effects of centuries of race discrimination fueled energetic anti-affirmative action efforts in recent decades.

Another obstacle to entrepreneurial success for minority business owners, particularly Black and Latino businesspeople, is best examined by understanding the subprime lending debacle that unfolded in the first decade of this century. There is irrefutable evidence that African Americans and Latinos were targeted by mortgage brokers and lenders for high-interest subprime loans even when the minority borrowers qualified for lower-interest prime loans. This discriminatory targeting occurred in consumer lending also. During the height of the subprime mortgage debacle, billions of dollars in wealth were drained from minority communities. This drain in wealth means that minority consumers have less wealth, resulting in a reduction in sales for many minority businesses. And, of course, discriminatory lending practices would impact minority entrepreneurs seeking capital to start or sustain their businesses.
In September, 2009, I visited The Museum of American Finance in New York City’s financial district. The museum is affiliated with the Smithsonian Institute and is the only public museum that focuses on entrepreneurship, money and the nation’s financial history. At the museum was an exhibit called “The Women of Wall Street” containing the stories of present-day and historical female icons in American finance and economic development. Incredibly, not one of the approximately ten narratives was about a woman of color.

The museum, located at 48 Wall Street, is just a few doors away from The E.G. Bowman, Co., Inc., the full-service commercial insurance brokerage and loss control firm founded by Ernesta Procope. Mrs. Procope, a renown and revered business icon, particularly in the African American community, is affectionately known as “The First Lady of Wall Street.”. I was stunned that Mrs. Procope’s story was not included in “The Women of Wall Street” exhibit. Hers is a compelling story of a brilliant and persistent entrepreneur who transformed the store-front homeowners and auto insurance company she founded into the commercial brokerage firm it is today. Her entry into the commercial market was not easy. She had to struggle to get major corporations to do business with her firm. Her struggle was successful, yielding a client list that has included PepsiCo Inc., General Motors Corp., International Business Machines Corp. and Time Warner Inc.

I spoke to Mrs. Procope about her exclusion from “The Women of Wall Street” exhibit a few days after I visited the museum. “I am not surprised”, she told me. I listened to her with quiet resignation as she told me about the racism and sexism she has faced for her entire professional life.

One of the most troubling aspects of Mrs. Procope’s exclusion from the exhibit is that it results from the type of racism and discrimination that cannot be legislated away because it is subtle and perhaps unconscious. The museum’s all-white “Women of Wall Street” exhibit is a type of denial of access to opportunity that is just as harmful to minority business owners as a Fortune 500 company’s refusal to do business. This denial of access renders minority firms invisible to potential clients. This is a problem that lingers in the twenty-first century. It is a problem that cannot be resolved by federal or local programs designed to assist small and minority businesses, nor can it be resolved by supplier diversity programs in the private sector.

“As far back as 1978, the federal government mandated that federal agencies – as well as corporations that do business with them – award roughly 8 percent of the value of their contracts to small, disadvantaged and minority-owned businesses, including those that are black-owned.” Most large public corporations have created programs designed to increase the likelihood that they will do business with minority suppliers. But, “[c]ontracts frequently get awarded to suppliers that the functional manager already knows – which according to the numbers, very likely don’t include any that are black-owned.”

The museum’s failure to include Ernesta Procope’s successful business story may also be attributable to unexpressed, perhaps even unconscious attitudes that perceive minorities in general, and the businesses they own in particular, as inferior. This unconscious bias is likely to be shared by the major corporations with whom Procope’s company seeks to do business. In fact, her company has been asked on several occasions to sign a contract with a major company as a supplier. The major company is fulfilling a requirement that it do business with a certain percentage of minority firms in order to procure government contracts that impose such requirements. But, the deal suggested by some major companies did not include the actual provision of services from Procope’s firm. The only thing the companies required was that Procope’s firm say it was a supplier, even though it had to provide no services at all. Mrs. Procope and her managers have consistently refused to participate in these arrangements.