US corporations need to publish range numbers, says Ariel’s Hobson

As more companies announce diversity and inclusion policies, Mellody Hobson, Co-CEO of Ariel Investments, believes there is an easy way to hold companies accountable: math.

“Math has no opinion – you have the math. The only way to do this is to have an annual review of these issues to see where you’re gaining ground, where you’re losing ground,” she told Sharon Epperson by CNBC as part of the network’s Inclusion in Action forum.

“Measuring it and then doing what it takes to get those numbers out, I think, makes everyone accountable,” she said before adding that tying compensation to diversity metrics could be the quickest changes.

The lack of diversity in the highest echelons of American business is certainly not new, but last year the issue came to the fore in protests for racial justice.

In addition, minority workers were hardest hit by the pandemic and the economic slowdown that followed. As the economy recovers, unemployment rates are significantly higher for blacks and Latinos than for white Americans.

“When we think about the recovery, the hiring companies will make, with an emphasis on inclusive hiring practices, will make a huge difference,” said Hobson, who sits on the board of directors of JPMorgan Chase and Starbucks.

Hobson noted that acting to promote growth and equity in all hiring practices, including at the board level, is a step in that direction, but not enough. She focuses on what she calls the three “P” s – people, purchasing, and philanthropy. It’s the shopping category that Ariel believes needs more attention. This encompasses all areas of a company’s purchasing power and supply chain.

“We believe this is another area where you can start moving the needle for business equality in America,” said Hobson.

In February, the company announced Ariel Alternatives, which is focused on scaling up sustainable, minority-owned companies. Hobson said the initiative will focus on connecting capital and customers in ways it believes has never been done before.

She noted that much of the conversation about minority companies is focused on access to capital while overlooking the customer side of things, which is equally important.

“If you have clients, you can get capital and I think that sometimes got lost in translation,” she said. Ultimately, the goal of these companies is to become Tier 1 suppliers to Fortune 500 companies.

The initiative is aimed at medium-sized companies with sales between 100 and 1 billion US dollars.

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