Entrepreneurs can help the cause of economic justice
The writer is the founder and CEO of Lafayette Square
The murder of George Floyd and the protests that followed gave new urgency to the American debate on racial injustice. We’ve made progress – racial equity is now a goal in capitals and boards, and we’ve seen some examples of police reform.
But, as a black man who has spent decades on Wall Street, I can say from experience that we will not make tangible progress without economic justice. And that will only happen when people of color and women have the chance to start and grow successful businesses, build wealth and create opportunities in marginalized communities.
American companies have pledged to spend $ 50 billion to achieve racial equity. But while impressive, the capital is less important than how it will be deployed. Before the money can be put to good use, we must address the fact that people of color and women are grossly under-represented among business owners. They are also a small segment of the investment industry.
Only about 2.2% of American businesses large enough to have paid employees are owned by blacks, 5.8% are owned by Latin Americans, and 19.9% are owned by women. There are only 20,000 minority and women-owned mid-market businesses (with revenues of $ 10 billion to $ 1 billion), a surprisingly low number considering that there are 44 million blacks, 61 million Latin Americans and 169 million women in the United States. Only 11 percent of small minority-owned businesses had employees other than the owner.
The big banks approve about 60% of loans requested by white small business owners, but the rate drops to just 29% for black owners. Businesses owned by women and people of color manage a meager 0.9% of the industry’s more than $ 70 billion in assets.
To achieve economic justice, more women and people of color must become entrepreneurs and create businesses that can positively impact communities. It means providing affordable housing and services, supporting the success of other small and medium-sized businesses, and empowering people of color and talented women to build successful investment businesses that promote financial inclusion.
There is a growing talent pool of women and people of color within large U.S. corporations who have the skills to become successful entrepreneurs. Female and minority managers are now more in demand and benefit from better job security, earning opportunities and influence within their company. Paradoxically, these “golden handcuffs” can discourage entrepreneurship. After finally climbing the corporate ladder, they may be reluctant to leave a secure job with the company. I spent over a decade on Wall Street before going out on my own.
I call on women and people of color to take the plunge and build large-scale businesses. Policymakers can and should provide solutions at the institutional level to help mitigate entrepreneurial risk, in particular access to the capital needed for growth, technical assistance on business creation and management, and for-profit models. success stories that these entrepreneurs can emulate. Our society must also help minority entrepreneurs and women entrepreneurs to support each other in making decisions about hiring employees, building supply chains and locating their operations.
More than 10% of new board members appointed in 2020 were black, up from a historic rate of around 4%. This increased board influence can be used to hold companies accountable for their investments and supply chains.
By the next anniversary of George Floyd’s murder, I hope we can see real progress in the number of people of color and women who are starting businesses, supporting fellow risk-takers, and creating economic opportunity. This can only happen if they use entrepreneurship to empower themselves, each other and the community.