“American companies are going to have to work harder”: How today’s affirmative action ruling puts U.S. companies at a disadvantage
“American companies are going to have to work harder”: How today’s affirmative action ruling puts U.S. companies at a disadvantage
On Thursday, the Supreme Court issued a ruling striking down race-based admissions programs at Harvard University and the University of North Carolina. Dozens of corporations, including American Express, Apple and Procter & Gamble, had urged the court to uphold affirmative action by signing an amicus brief saying that diverse workforces improve their business performance “and thus strengthen the American and global economies.”
“Marketplace” host Kai Ryssdal spoke with economist Peter Blair Henry, who is quoted in the brief, about the Supreme Court’s decision. Henry is a senior fellow at Stanford University’s Hoover Institution and dean emeritus of New York University’s Leonard N. Stern School of Business. He is also vice chair of the Boards of the National Bureau of Economic Research and the Economic Club of New York, and currently serves on the boards of Citigroup and Nike. The following is an edited transcript of their conversation.
Kai Ryssdal: When you heard about this ruling, which many people expected, what was your gut reaction, first of all?
Peter Blair Henry: Well, wasn’t surprised. This is long expected. And my first reaction is, as an economist, I’m a trained economist, I think about things from that perspective. And also having, you know, been dean of a business school for a good part of my life and working with many corporations, I think about it from the perspective of business. So if you think about what we teach in our textbooks and what [free-market economist] Milton Friedman said in 1970, your corporations, what do they do? Corporations basically exist to maximize profits. They do other things, but primarily, the role of the corporation is to maximize the profits for its owners and the shareholders. And how do corporations do that? Well, they do that by, you know, hiring a CEO, and the CEO then makes sure that he or she has a team around them that generates high performance. And there’s a lot of data at this point, a lot of studies that show that diverse teams outperform nondiverse teams. And so this, the ruling is going to remove one instrument that institutions of higher education have to produce diverse classes of graduates and is going to make it harder for businesses to generate the diverse teams they need to generate the performance they need to drive the profits that it is their mission to generate.
Ryssdal: You are quoted in an amicus brief in this case as saying this “is a significant competitive handicap if these business men and women have not been in an educational environment exposing them to people from diverse backgrounds.” What do you suppose that, and I ask you this as a guy who sits on corporate boards and a guy who ran a business school, you were the dean at Stern for a number of years. Now what are you going to do?
Henry: Well, if you’re a CEO trying to solve this problem, “How do I create high-performing teams with a pipeline that’s going to be less, potentially less diverse, of course, in the future? I’ve got to think about new instruments because in the past, I could just simply rely on institutions of higher education to produce that pipeline of diverse talent that I was going to need.” So universities are going to need time to figure out how they are going to hit their goals. So corporations are also going to have to solve that problem because they can’t rely on institutions of higher education to provide them the talent for those high-performance, diverse work teams.
Ryssdal: So look, do you think companies in America are prepared and equipped to do that? Because if you think back three years to George Floyd and the promises that corporate America made on diversity, equity, inclusion, there has not been the progress one might have expected. And I guess I wonder now, with this ruling, if companies really have what it takes.
Henry: It’s a wakeup call for sure. And companies are going to have to get even more serious and think about how they can find the talent. And again, to go back to the point, right? The main point is that we know that diverse teams outperform nondiverse teams, that is an observed fact. So given those observed facts, and leaders of corporations are paid very well to deal with facts, they’re going to have to find new ways to produce high-performing teams. And no, I don’t think that the old ways of approaching things are going to cut it. To put it to your point, Kai, in the system that previously existed, even in the years after the George Floyd incident, we know that there has not been as much progress as would be desired. In the aftermath of George Floyd, without the constraints now in place, the job is going to be harder, not easier, than it was before.
Ryssdal: When you were at Stanford, you were a professor of international economics. You’re now a fellow at an institute for international economics. You study it, you work on it, you’re a practitioner of it. Does this ruling put American companies at a competitive disadvantage globally?
Henry: My sense is yes, this really takes away a tool that higher education has to produce, to help to produce the talent that produces the higher-performing work teams for American companies. So American companies are going to have to work harder to produce the teams that have the diversity of thought that is necessary to frankly compete in the global economy. So just to be very specific about it, if you’re trying to sell goods and services, right, to clients overseas, who are by definition in different societies than you are, then you need to be able to empathize and take their point of view in order to outcompete your competitors, who are also trying to sell to those folks. And one of the ways in which America has been very successful in outcompeting our global rivals, American companies have been successful, is by producing teams, again, going back to the research, more diverse teams outperform nondiverse teams in corporations. Why? Because you put around the table making decisions a wide range of viewpoints so you can get to better competitive answers. And that job is now going to be harder.
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