GE encourages its nonunion minority and female employees to join affinity groups at its aviation facility in Lynn, Mass., and at other locations throughout the country and abroad. Yet, at headquarters, GE has a white ceiling.

Five decades years after President John F. Kennedy launched an ambitious effort to integrate the workplace, a white ceiling still exists. The difference now is that white women are part of the problem.

In 2009, more than 40 percent of the Fortune 100 had no minorities among their executive officers. 1 These white-ceiling companies often depict a rainbow of employees on the leadership pages of their Web sites. They advertise their employee networks and expound upon their commitment to diversity with inspirational statements. But the executive officers who are entrusted with setting policy in the corporation, the names listed in the annual report, are Caucasian.

By not following a diverse strategy, companies may be depriving shareholders of higher returns. A 2008 study that compared the financial performance of Diversity Inc.’s Top 50 Companies for Diversity to a matched sample showed that firms with a strong commitment to diversity outperformed their peers on average with higher profit margins, and greater return on equity and assets. 2

Corporations that fail to develop a group of diverse employees could well be denying customers of stronger products. In The Difference: How the Power of Diversity Creates Better Groups, Firms, Schools, and Societies, author Scott Page explained his theorem about how collective wisdom, the ideas contributed by diverse groups and individuals, exceeds the sum of its parts. His book solidified the added value created by diversity in a way that had not been done before.

Executives who decline to cultivate diverse leadership also may be depriving their organizations of resilience, the ability to overcome dramatic, life-threatening challenges. In the book The Diversity Index, Raymond Gilmartin, a former Merck CEO, said he credited the diversity of the company and its leadership for enabling the giant pharmaceutical company to recover quickly from the Vioxx debacle, the largest prescription drug recall at the time.
“If you offer opportunity to everyone to fulfill their full potential,” said Gilmartin, “you create an organization that would deal with adversity and be more resilient than others.” 3

Fewer White Male Bastions

Before examining the underbelly of twenty-first century diversity, it is heartening to note the progress that companies, and the predominantly white males who have led them, have made over the past 14 years. There were just a few white male bastions left in the Fortune 100 that employed no women or minorities at all among their executive officers. In 2009, only six percent of the Fortune 100 consisted of entirely white male teams; a rapid decrease from 15 percent in 2005, and 38 percent in 1995. See Figure 1.

Such rare and disappearing breeds occurred in many sectors--industrial products, retailing, insurance, energy and media. Alcoa, Berkshire Hathaway, Costco, Exxon Mobil and News Corp. were the last holdouts. The industries did not form a pattern, as they had done in 2005, when energy companies represented 40 percent of the homogeneous teams.

The Zero Companies:
Least Integrated Executive Officer Teams in the Fortune 100

(Fig. 1)

1995 2005 2009
Alcoa AmerisourceBergen Alcoa
Archer Daniels Midland AT&T Berkshire Hathaway
Bank of America Bellsouth Corp. Costco Wholesale
Bellsouth Corp. Berkshire Hathaway Exxon Mobil
Berkshire Hathaway CVS News Corp.
Boeing ConocoPhillips
Cardinal Health Costco Wholesale
Chevron Corp. ExxonMobil
Cisco Systems JP Morgan Chase
Costco Wholesale Lehman Brothers
Dow Chemical News Corp.
Duke Energy Sunoco
Electronic Data Systems United Technologies
General Motors Valero Energy
Goldman Sachs Wal-Mart
Hewlett Packard Co.
Home Depot
IBM
Johnson & Johnson
Kroger Company
Lehman Brothers
Lowe’s Company
MCI
Mass Mutual Life Insurance
Merrill Lynch
Motorola
State Farm Insurance
United Technologies
Valero Energy
Wachovia
Walgreen
Wal-Mart
Walt Disney

The corporations whose executive officers included men of color but no women of any race also decreased in the same time period. In the 2009 Fortune 100, just four companies featured a racially integrated male team but had no females, a decline of 50 percent from 1995. See Figure 2.

Corporations have made tremendous progress in promoting women to the top jobs. Overall, the number of firms that have failed to include women in the highest ranks has decreased to 10 percent in 2009 from 48 percent in 1995. Ninety percent of the Fortune 100 had at least one female on the team in 2009. Men have demonstrated that they were ready to promote women, and the women have shown they were ready to be promoted. However, it was mainly white women who were promoted. In 2009, only 21 percent of the Fortune 100 firms employed minority female executive officers. While their representation has improved from just 2 percent in 1995, it is still alarmingly low.

Fortune 100 Companies with Male Minority Executive Officers,
But No Females of Any Color

(Fig. 2)

1995 2005 2009
Coca-Cola Delphi Citigroup
E.I. DuPont De Nemours E.I. DuPont De Nemours Intel
General Electric Intel Sprint
Intel Sysco
Lockheed Martin
Procter & Gamble
Time Warner
Weyerhaeuser Co.

New Leadership, Same Race

White male and female teams have come to form a new problem, a white ceiling. One third of the Fortune 100 firms employed white male and white female executive officers, but no minorities, in each of the three years studied over 14 years: fiscal 1995, 2005 and 2009. Most of the companies in Figure 3 did not have all-white executive leadership in each year of the study. Some, such as the pharmaceutical giant Bristol-Meyer Squibb, the computer maker Dell, and the insurance companies MetLife and New York Life, had all white executive officers in 1995 and integrated their teams in 2005 and 2009. They suddenly progressed.

Fortune 100 Companies with All White Male and Female Executive Officers
(Fig. 3)

Fiscal 1995 Fiscal 2005 Fiscal 2009
Albertson’s
Alcoa, Inc.
Altria Group, Inc.
American International Group (AIG)
Archer-Daniels
Midland, Co.
Bristol-Meyers
Squibb Co.
Cardinal Health, Inc. Cardinal Health, Inc.
Caterpillar, Inc.
Caremark Rx, Inc. CVS Caremark
Cisco Systems Cisco Systems
Coca Cola Co.
Dell, Inc.
Dow Chemical Co.
Duke Energy Duke Energy
Electronic Data Systems
Fed Ex Corp Fed Ex Corp Fed Ex Corp
E.I. DuPont De Nemours E.I. DuPont De Nemours E.I. Du Pont De Nemours
General Electric Co.
General Motors
Goldman Sachs Group Goldman Sachs Group
HCA, Inc. HCA, Inc. HCA, Inc.
Honeywell, Inc. Honeywell, Inc.
International Paper Co.
J.C. Penney Co. Inc. J.C. Penney Co. Inc. J.C. Penney Co. Inc.
J.P. Morgan Chase & Co. J.P. Morgan Chase & Co.
Johnson & Johnson
Johnson Controls, Inc.
Lockheed Martin Corp.
Lowe’s Co. Lowe’s Co.
Mass. Mutual Life Insurance Co.
McKesson Corp.
MetLife, Inc.
Microsoft Corp. Microsoft Corp.
Morgan Stanley Morgan Stanley
Nationwide Mutual Insurance Co. Nationwide Mutual Insurance Co.
New York Life Insurance Co.
Northrop Grumman Corp. Northrop Grumman Corp.
Pfizer Inc. Pfizer Inc.
Plains All American Pipeline
Procter & Gamble Co.
Sears Roebuck and Co.
St. Paul Travelers Co., Inc. Travelers
SBC Communications
Sprint Corp.
Sunoco, Inc. Sunoco, Inc.
Sysco Corp.
TIAA-CREF
Target Corp. Target Corp.
Time Warner, Inc.
UnitedHealth Group, Inc. UnitedHealth Group, Inc.
Tyson Foods, Inc.
United Technologies Corp.
Valero Energy Corp.
Verizon Inc. Verizon Inc. Verizon Inc.
Viacom Inc.
Wachovia Corp.
Walt Disney Co. Walt Disney Co.
Wellpoint, Inc.
Wells Fargo & Co. Wells Fargo & Co. Wells Fargo & Co.
Weyerhaeuser Co.

The integration of executive officers at other companies was more cautious. The consumer products company Procter & Gamble, the aerospace manufacturer Lockheed Martin and the forest products company Weyerhaeuser had minority executive officers in 1995, but no women. By 2005, the companies had white female officers, but no minorities. By 2009, they had both minority and white female officers. Over 14 years, these companies moved carefully toward a mixed team. This pattern of integration is common, adding a male minority or a white female as an opening occurs.

Other firms drifted in and out of having total white representation at the highest level. The system-controls maker Honeywell, for instance, had all-white male and female executive officers in 1995, employed at least one person of color in 2005, but returned to having a totally white executive staff again in 2009. The aluminum products company Alcoa had a white male team in 1995, promoted a white female in 2005, but returned to having an all-white male team in 2009. General Electric had minority executive officers in 1995 and 2005, but had none by 2009. These companies regressed. The companies with persistent white representation--those that had all white male and female executive officers in every year of the study in which they were a company--came from widely different sectors. There was the telecom giant Verizon, the healthcare company HCA, Inc., and the insurance company Travelers. But the retail and financial services industries had the highest concentration of companies with only white executive officers. The retail companies were Target and J.C. Penney, and the financial services companies were: Goldman Sachs, J.P. Morgan Chase, Morgan Stanley, and Wells Fargo.

How Did We Get Here?

In 1961, President Kennedy issued an executive order requiring government contractors to take affirmative action to hire minorities. Before then, many companies had only white employees. Black workers—the biggest minority group at the time—were confined to lowly positions, if they were hired at all. In the first twenty years of affirmative action, corporations focused on actively recruiting and developing first people of color and then women.

An important Supreme Court decision on the Bakke case in 1978 ruled that preferring any members of a particular racial or ethnic group for no other reason than they were a member of such a group was itself discrimination. In his decision, Justice Lewis F. Powell wrote that diversity “encompasses a far broader array of qualifications and characteristics, of which racial or ethnic origin is but a single, though important, element.” Diversity included achievements, talent, social and economic background, where a person grew up, in addition to race and gender. Although the decision pertained to the way universities accepted students, employers paid close attention to the court. They realized they had to hire all kinds of people. Diversity was the thing. 4

Diversity became a more popular concept than affirmative action. Diversity meant companies should hire and promote everybody, but doing it was perplexing. Diversity experts were installed in nearly every Fortune 100 company. Employees were then exposed to diversity training, where they were taught that everyone was the same, part of one great melting pot. Then they learned that everyone was different, like the ingredients of an immense salad bowl. The seeming contradictions required that diversity be conceived as a paradox. Employees were advised to be color and gender blind, but to recognize differences and to celebrate them.

Yet, by the mid-1990s, much scholarly research showed that whites generally were treated more favorably in the workplace than blacks were.5 A study that examined the relationship of race and gender, as managers rated the promotion potential of 1268 managerial and professional employees, revealed that blacks and Asians were rated lower than whites. The study controlled for age, education, tenure, salary grade, and satisfaction with career support. The results also concluded that managers rated female employees lower than male employees. 6

The acceleration of white women’s upward movement beyond that of minorities, from 1995 to 2009, illustrates how gender has outpaced race. In 2009, 90 percent of Fortune 100 companies employed female executive officers, while just 60 percent employed minority executive officers. Chief executives since the mid 1990s have found it easier to move beyond gender than beyond race. That one third of the Fortune 100 firms maintained white ceilings since 1995 reveals that race remains a key factor when considering promotions.

A study published in 2008, the same year President Barack Obama was elected, indicated that race plays a critical role during leadership evaluations and whites are perceived to be prototypical business leaders in the U.S. The visual images surrounding business, political and military leadership have been predominantly of white leaders, driving the expectation that future leaders will be white. The study concluded that a multiplier effect “may persist such that positive evaluations are given to White leaders, White leaders continue to be the prototype for effective leadership and correspondingly, racial minority leaders are continually disadvantaged.” 7

White Diversity

As the concept of diversity took hold, the fine points seemed to get lost, and white women advanced in more companies than minorities did. The promotion of white women in corporate headquarters has helped to keep the racial ceiling in place because of an incomplete application of diversity. Of the companies that do not employ minority executive officers, most include white women. Thirty percent of the executive officers at Target were female; the highest proportion of women of the persistently white group of companies. Simply having two genders is one measure of diversity, even if it is white diversity.

Job segregation occurs when the members of one race or gender are concentrated in a particular job category. In the 1960s, blacks tended to be overrepresented in jobs as laborers. Women were overrepresented as secretaries. One of goals of the Civil Rights and Women’s Movements was to free workers from these confining categories so they could rise to their true potential, achieve better career outcomes, and enable themselves and their companies to excel.

In 2009 there was white job segregation at the top of the Fortune 100. Segregated jobs are believed to reinforce stereotypes that one race or gender is only qualified to do the job in which they are most concentrated. That forty percent of companies that had no minorities among their executive officers could be evidence that ascription was at work. In other words, white workers were considered more seriously for promotion to executive officer than were people of color. Sociologist Donald Tomaskovic-Devey, who teaches at the University of Massachusetts, has explained racial job segregation as social closure; the effort by whites to distance themselves from minorities. The distancing by job description enables whites to preserve a higher status in the workplace, to maintain their authority, and to exclude minorities from better jobs.8 The danger is that this process, however unconscious, telegraphs the message that the job of executive officer is reserved for whites and prevents others who may be just as, or more qualified, from getting opportunities for promotion. According to Yale sociologist James Baron, the process of categorization is self-perpetuating, no matter how capricious.9

Affinity Groups

How did a company such as General Electric go from being ahead of other firms in promoting minorities to the position of executive officer in the 1990s, to becoming a white ceiling company in 2009? One reason has to do with its affinity groups.

In 1989, GE’s chief executive, Jack Welch, peered down through his glass ceiling when he had no people of color or women among his executive officers. The phenomenon was widespread at the time; studies showed there were white women and people of color employed at firms, but usually below the top levels. Welch invited a group of 15 high-potential black employees to meet with him and discuss what was and was not working for African Americans at the company.

At the time, Lloyd Trotter was the highest-ranking African American in the company. He was in the senior executive band, the third highest level from the top tier of executive officers. Welch wanted Trotter and the other black executives to help African Americans advance at GE. Yet what they were discussing ran counter to the culture of the company, which had promoted colorblindness, believing itself to be a performance-driven meritocracy. The black executives wanted to enable black employees to connect with one another without disturbing the basic ethos of the company—without being perceived as asking for special treatment. When Welch asked them how they would do that, they did not have an answer.10

For the next year, the black leaders studied solutions to the glass ceiling that other corporations had tried. They investigated affinity groups at various companies, including AT&T and Xerox, which were supposedly good at diversity to see how they were being run. African American affinity groups started as early as the late 1960s as a way for black employees to network with one another. Trotter wanted GE’s new African American Forum (AAF) to help black employees climb the corporate ladder.

“It was a self-help group aimed at education, however, the only measure of success was upward mobility and promotions,” he said. “It was not a feel-good operation. If we couldn’t get more people promoted than were being promoted before we had this then, it’s been fun, it was good to know you, but it’s not successful.”11

Trotter himself was promoted to officer in 1990. In 1992, he became the first black executive officer at GE at a time when less than 30 percent of Fortune 100 companies had any minorities at that level. He was vice president of GE's Electrical Distribution & Control (ED&C) division, which had roughly $6 billion in sales and 40,000 people. Trotter had long been on a fast track at the company. But his willingness to assume yet another complex challenge in addition to his business responsibilities clearly added a new dimension to his stature.

When the African American Forum was created, the group got pushback from some employees who wondered if African Americans were trying to form a black union, which they were not. It also encountered resistance from African Americans who thought they could make it on their own, without the Forum. To that, Trotter asked, “How has that been working for you?” The results had not been spectacular. Others worried that if they stood out, they would be hammered down. To that objection, he answered, “Let’s be honest, in this mostly white company, you stand out where ever you go.”

The purpose of the group was to network, to get to know one another’s strengths, to help each other overcome weaknesses, and to notify one another of job opportunities. Trotter wanted to open his Rolodex to the group, to share information with them, and prepare them with information for job interviews.

“Our white counterparts had that, while diverse individuals have a tougher time,” he said.12

Essentially, the purpose of the African American Forum was to rival the power of the white promotion network, which itself was segregated, not necessarily by intent but historically, as white men worked through their social and professional networks to find out about opportunities, discuss potential candidates for openings and make selections.13 The mere creation of the African American Forum implicitly stated that race as a separate culture within the organization was going to challenge the promotional preferences that white males received in the organization. Segregating the black workers into their own network created a lobbying group within the company whose ideas and concerns would have to be included in the organization. They too wished to be counted.

The Forum’s ultimate goal was to get more blacks into GE’s senior executive band, made up of about 360 people in 1990. From that group, Welch handpicked about 110 officers, and from that smaller group, he selected about 20 executive officers. In 1990, when Trotter became the first black officer out of 110 officers, he brought the accomplishments and concerns of African American employees to the attention of those people in the highest levels of the corporation.

In typical GE style, the African American Forum was organized in a hierarchical fashion around geographical hubs where different businesses were located. Chapters formed at the sites themselves. Each chapter has an executive board that meets bi-weekly while the chapter meets quarterly. The officers of the chapter of the African American Forum at GE Aviation in Lynn, Massachusetts, are president, vice president, treasurer and secretary.

Dane Elliott-Lewis is a board member of the Forum at GE’s engine plant in Lynn, and he contributes about four hours of his own, unpaid time per week to the chapter. Five to six key people run the group on a daily basis. A weekly meeting is likely to be attended by about 15 people, and most have worked for the company for less than 10 years.

Recruitment and Retention

The African American Forum in Lynn has made presentations to universities and professional societies of black engineers. It has organized tours through the plant to educate interns, new recruits, and the public.

The friendship that results from getting to know other African Americans at the plant and in the region is believed to increase retention. Elliott-Lewis is an engineer who was first hired by GE Aviation in Evendale, Ohio in 1998. He then transferred to Lynn, where he certifies that GE’s products, such as engines, comply with standards set by the Federal Aviation Authority, the Department of Defense or any foreign agency before they go into the marketplace. He joined the African American Forum at both locations in order to meet people and make friends after working long days that usually start at 7 am and end at 5 pm.

“You get out of the workplace and get to go out to dinner together,” he said. “There is a chance to unwind and get to know people better.”14

Mentoring

Members of the Forum who have up to 10 years of experience at the firm mentor interns and summer employees to educate them about how to be successful within the rigid culture of the organization. Elliott-Lewis has advised young black men to tuck in their shirts, shave regularly and remove their earrings so they will fit into the GE culture. He believes it is important for employees to understand the dress codes of the different businesses and management levels. He counsels African Americans to dress two levels above the job to which they wish to be promoted.

“Two levels above me is an executive. I look at the executives, and I don’t see them wearing jeans so I don’t wear jeans,” said Elliott-Lewis. He believes executives are watching to see whether they can “put this person in front of a customer to represent GE or are they going to embarrass us.”15

He tries to be as candid with younger employees as African American executives have been with him.

“To give positive career advice, I found African Americans more comfortable to approach than others, and that is one of the benefits of the AAF. You have that community in which I found people being more frank with me personally,” said Elliott-Lewis.16

Cultural Education of the Corporation

The Forum tries to positively influence how other employees view African Americans as a group. As part of Black History Month the group hired a jazz trio and steel-drum players to perform during lunch in the cafeteria. It also invited the Tuskegee Airmen, the first black pilots who fought in World War II, to come and speak, which attracted a standing-room only audience.

Career Education and Visibility

The Forum holds an annual symposium in the Washington, D.C., area, where a few thousand African American employees from around the nation come to hear what is new, what has been accomplished, and what is on the agenda for the coming year. GE’s CEO addresses the group, and the senior staff members meet with employees to get to know them better and to answer questions. Such a large meeting enables leaders to see minorities in a new light; as a large and multifaceted group. It also enables non-African American executives to experience what it is like to feel like a minority.

Trotter made sure that all the GE African American interns attended the symposium in order to persuade them to continue working for the company.

“Just the dialogue with young folks was exhilarating for me. It’s all about talent, and how we get more than our fair share of it at GE,” he said.17

That kind of large meeting also enables a minority group to feel like a majority group. It enables them to see the array of talent that their group provides to the conglomerate’s businesses be it in aviation, capital, energy, medical, rail or water. It expands the psychological barriers that can develop when minorities are unable to see their own kind in leadership positions. It helps remove the sense of isolation and futility that can develop in a limited work environment.

At the symposium and throughout the year, the Forum offers workshops that are useful for anyone wishing to advance. One of Elliott-Lewis’ favorite sessions was “Best Corporate Secrets Revealed” which refuted the notion that simple hard work would suffice in a complex environment like GE.

“Your success is going to be ten percent what you know, your abilities,” said Elliott-Lewis, reciting the unwritten rules. “It’s going to be thirty percent who sees you and sixty percent is your image. That is one thing that new employees in particular don’t get.”18

The African American Forum gives black employees visibility which they might not have had without it. At the chapter level, the leaders meet with a GE diversity council, comprised of the plant’s key managers to report on activities and request funding. Chapter leaders remain very much in sight of people who are looking for the next generation of leaders.

Business Development

The executive level of the Forum, comprised of the highest-ranking African Americans at the company, has also reached out to develop business in Africa. They donated $20 million in medical equipment to 20 key hospitals after identifying countries with good governments and solid infrastructure. Although it was a humanitarian gesture, the hope was the hospitals would become accustomed to using the equipment and buy from GE in the future.

“It’s good business for GE because we sell a lot of medical products, and generally, the products you trained on are the products you buy,” said Trotter.19

The African American Forum helped raise the number of African American officers from 0 in 1989 to 12 in 2008. The senior executive band—the officers in waiting—grew from one to 34 during the same period. But by the time Trotter retired in 2008, he was still the only African American executive officer. In 2009, there were no African American executive officers at GE.

The Women’s Network

In 1997, Jack Welch called a meeting with about 25 of the senior women at GE to the executive dining room and asked them why they did not start a self-help network like the African American employees had. At the time, there were just nine female corporate officers out of 160, less than 7 percent, and no female executive officers. Some of the women felt that Welch was “from a different generation” that underestimated the contributions women could make to business. There was some trepidation as to the type of conversation that would ensue at the meeting. In fact, one of the women said at the meeting that she feared it would turn into a “chick bitch” session.

Welch laughed at that idea, apparently hearing the term for the first time.

Lorrie Norrington, a vice president at the time, embraced Welch’s idea. She felt her career had been good and wanted a critical mass of women to reach down and pull up the next generation, to ensure they were highly skilled and could advance quickly.

Four women visited six different companies with women’s networks—Procter & Gamble, Deloitte & Touche, Kraft, were among them—to find out about their organization, processes and goals. They sought advice from the African American Forum, and wrote a two page summary about what worked in the networks, and what did not. They came up with a similar structure to the African American Forum hubs were organized geographically. There was a hub chairperson, a regional chairperson and an executive council.

Considerable debate ensued as the senior women discussed what the network should try to accomplish. They argued as to how radical a vision of women they should advance. They wondered how much responsibility the group should assume for the hiring, development and promotion of women. What would the company’s position be on childcare?

“We made a conscious decision to play within the confines of the culture,” said Susan Peters who was in human resources, as vice president of corporate development. “We said it’s not going to be a replacement for the efforts that the company should be making on behalf of diversity. We are not going to advocate.”20

They found themselves in the same bind as the African Americans; wanting to strengthen their own group, but unwilling to ask for special treatment fearing it would cause backlash from the rest of the organization. From the beginning, the Women’s Network chose evolution, not revolution. Although the group decided to work within the system, and not to take on confrontational issues, they still got pushback from some men who feared they were trying to develop an unfair advantage. “Where’s the Men’s Network?” some men asked. In response, the women told them they could join the Women’s Network, which was open to everyone, or they could form their own network. A few men showed up at early meetings, but then stopped attending. They did not form their own formal affinity group.

In September 2000, an article appeared in The New York Times describing Jack Welch’s diversity problem; no females who reported directly to him.21 It featured pictures of all the men, but not one woman.

“It kicked people in the butt. It was a black eye, and no one felt proud about it,” said Beth Comstock who worked for NBC and was a founder of the Women’s Network. “The company looked terrible, like we were stuck in the Fifties. It was a rallying cry. We said we're not going to continue to have this be the image of our company. It elevated the Women's Network more.”22

Confronting Bias

Susan Peters, a GE human resources executive, began looking at how women were being evaluated by managers and noticed they tended to be rated either as not tough enough, or too tough if they took a “do it because I say so” approach to leadership. Taking command and ordering people around, which was considered a male style of leadership, was deemed “witchy” in women. Her conclusion was consistent with what psychologist Alice Eagly calls role congruity theory which posits that prejudice develops against women who exercise leadership in a take-charge manner, which is typically thought to be a male style of leadership. Or, they are judged as too passive because women are often stereotyped this way.23

Peters found that the women were criticized no matter how they led. As someone who was responsible for development of corporate leaders she tried to sensitize other managers to the possibility that women were losing ground because of this perception. She also introduced these ideas to the Women’s Network where they began to explore a more productive way for women to lead in GE’s team culture. Consistent with the diversity philosophy of including different perspectives on problem solving, women were encouraged to ask for input, build consensus, and move forward. They were urged to lead differently so they would not be penalized for being too weak or too strong, trying to avert some of the penalties of GE’s performance measurement system.

It seemed like the women’s efforts were paying off. Jeff Immelt, who replaced Jack Welch as CEO in 2001, promoted three white women to executive officers in 2003. Immelt was widely praised by the Women’s Network for these promotions. Many members were convinced that, “Jeff gets it.”

The Women’s Network intensified its efforts at leadership development by pairing high-potential female employees with senior male executives as mentors, so they could learn from the experts who had the inside track. The Network trained women to develop skills they would need to advance, such as speaking and making presentations before large groups. When openings became available in the corporation, Susan Peters looked through her names in the Women’s Network for candidates whom she felt should be considered for promotion. Senior members of the Women’s Network advised less experienced women on how to handle tricky situations such as difficult bosses or stubborn subordinates in their offices.

The Women’s Network also holds an annual meeting and, like the African American Forum’s symposium, the event offers its members a chance to see themselves in a new light, and to be seen as a powerful, accomplished group of thousands of different women who specialize in all aspects of GE’s businesses. As they meet, speak with each other and learn about the rest of the businesses, and network, they find themselves in that room, a majority. As they take leadership roles they overcome psychological limits and enable others to do the same. In 2003, a GE employee, in a video produced for the women’s annual meeting, spoke of how she had never thought of applying to become a manager before she joined the network. Like a transformer, the network amplified the power and energy of any one person.

The Network has also experimented with how to engage other employees in the company. When the Women’s Network at GE Aviation in Lynn, Mass., sponsored a speaker, frequently, no men would show up. After some trial and error, the women learned that leadership meant providing for everyone, not just their own group. They began sponsoring workshops on how employees should write their EMS, an internal resume of educational and job accomplishments, that circulates through General Electric, in which people describe what they have done and what they would like to do inside the company. In a culture that is filled with competitive types who are always trying to get ahead, the EMS was sort of a puzzle. Everyone had to fill it out, but no one really knew the best way to do it. The purpose of the EMS is to give management a good look at an employee’s experience, while positioning the employee to take on new assignments. Once the women started offering seminars, people of every race and gender started attending. It provided a needed solution to a problem with which everyone had struggled.

Professional Education

Because members of the Women’s Network travel frequently, the group sponsors phone events, where people dial into a conference call from wherever they are. One guest speaker addressed the importance of communicating across generations and cultures. At GE in Lynn, there are four generations of employees. In addition to communicating with workers of all ages, Terri Graf, an aviation quality manager, speaks to workers in India every morning. Educational seminars help her become more mindful of cultural traditions and sensitivities as she learns to motivate millennials (Generation Y or those born in the 1970s – 1990s) or colleagues of other nationalities.

Cultural Integration

Being a part of the Women’s Network has also empowered women to speak up in their own work areas. When Andrea Cox, arrived at GE Aviation, she was one of the few female engineers out of hundreds of male engineers. The women were expected to adopt the male culture, and were encouraged to learn golf because that’s where “the decisions get made.”

“I was like, ‘Do we have to wear pants and use the men’s room, too?’” said Cox.24

Cox, who competes in triathlons wanted to have a choice about what activities to engage in during the annual employee meetings, not be forced into one activity. Soon there were more choices, to go skiing, go-cart racing, mountain biking, and sailing. For people who had no desire or were unable to participate in those activities, there was bingo.

They expanded the culture.

The local chapters of the Women’s Network also sponsor work-related activities that give the women a chance to connect and unwind. On one winter night, the Boston area network met at an Ann Taylor store to look at the latest fashions in women’s business apparel. When the Women’s Network was first founded in the late 1990s, this type of event was denounced by many women who did not want to spend precious time shopping, or be associated with a stereotypical female activity; they wanted to network and get ahead in the company. But nine years later, the women engineers at GE Aviation in Lynn were looking forward to the evening as something different from the long days they spent at the office. It was a sign they felt comfortable doing what they wanted without the fear of being harshly judged.

“Sometimes you get so wrapped up in your day, but then you go to the event and make the connection with people, and you feel so much better,” said Terri Graf, a quality manager at GE Aviation.25

The Women’s Network, became the largest and highest profile affinity group. At the same time, women at GE continued to rise in management. By 2005, 11 percent of GE’s executive officers were women. By 2009, 30 percent were women. All were white.

The Asian Pacific Forum

GE’s Asian Pacific Forum began organically in Albany and Schenectady, New York, where there was a high concentration of Asian employees. A new hub formed in Connecticut, where GE is headquartered, and then it expanded across the country. In 2002, Jeff Immelt told the senior leaders of the group to take an active role in the organization. He wanted them to focus on the recruitment and retention of Asians. At the time, Yoshiaki Fujimori was already an executive officer of the company. Born in Japan, he had been promoted in 2001, to senior vice president of consumer finance in Asia.

As the Boston hub leader, Rajeshwar Das had 300 people on his distribution list and 100 people who are active members in the Asian Pacific Forum. They form a mini GE, almost all of the businesses are represented. Although Asians represent the largest of the minority groups at GE, the Forum still engages in recruitment. To that end, representatives from the different GE businesses held a career panel and networking session with an Asian group called ASPIRE that is comprised of ambitious Asian women who are in high school, college, or working as young professionals.

To increase cultural awareness within the company, the Asian Pacific Forum sponsored Diwali, a festival of lights celebrated at the end of the fall harvest with sweets and candles in several South Asian countries that marks the triumph of good over evil. More than two dozen employees dressed in native clothing, they greeted people at the door, gave a 10-minute presentation about the celebration and the importance of the Goddess Ganesha in the Hindu religion. At the end, they gave recipients a small gift from India.

Das started with GE in 1982 and is one of the most experienced managers in his field of supply-chain management. As such, he mentors those employees with less experience, putting in an average of 10 unpaid hours of work as the hub leader. Yet he also gains more knowledge about the other businesses, which helps him solve issues in his own job.

“If something comes up in my work role, where I need to know something about factory automation to help one of our businesses, I now have contacts in many other businesses I can go to and get help right away,” said Das. “It has helped me personally.”26

When he was invited to attend the national summit of the Asian Pacific Forum, he was not sure what to make of it.

“I didn’t know if they were trying to put me in a box somehow,” he said. “I just went and listened. Just creating a network and teaching people the ways of GE wasn’t all that appealing to me.”27

Yet, as he engaged, he reconnected with family traditions he had lost after his father died. Das’ father was born in India and worked in human rights at the United Nations. His mother was born in England. Although they lived in the United States, every summer after school let out, while other children would go to camp or play for long summer days, his family spent two months visiting family and friends in rural India. The cultural celebrations, the songs that are part of the Asian Pacific Forum’s vitality remind him of the time he spent exploring the vast colorful and spiritual culture of India. The reconnection has encouraged him to return to India, perhaps one day to do business on behalf of GE.

The Asian Pacific Forum has asked the members in each of its businesses to propose initiatives for growing businesses around the world and in their own communities. They have explored proposals for developing national electrical grids in India, supplying drinking water in China, and developing auto financing in Korea.

However, despite all of the activity by the Asian Pacific American Forum, no other Asians have been raised to executive officer level since Fujimori. In 2009, there were no Asian executive officers at GE. Fujimori is now a corporate officer; he is head of GE in Japan.

Hispanic Forum

Wilhelm Hernandez-Russe joined the Hispanic Forum at GE Aviation immediately after earning his graduate degree in engineering at Cornell University and learned about diversity firsthand. While he is from Puerto Rico, an unincorporated U.S. territory, other Hispanics were American, or from Mexico, or from countries in Latin America.

“We are all Hispanic, but many of us have been raised with different values and totally different experiences,” he said.28

Although all were fluent in English, the Spanish many spoke at home or to family was different. And there were conflicting personalities within the group.

“The first year, the president did not get along with the community service officer; they were always fighting over the phone when planning an event,” he said. “But they were good friends and in the end we found a way to reach consensus. It’s a process.”29

The Boston hub of the Hispanic Forum, which started in 2003, only included about 30 members across all businesses, and 15-20 were in the GE jet engine plant in Lynn. Hernandez-Russe enjoys the Forum because it gave him immediate access to a group of potential friends. It enabled him to gain visibility from plant management and an opportunity to demonstrate leadership before he might have been entrusted with it in a job promotion. Still, he wondered why there aren’t more Hispanics at the plant and planned to suggest that GE recruit more Hispanics from the University of Florida or from Puerto Rico.

There have never been any Hispanics or Latinos who have served as executive officers at GE.

White Ceiling

Despite all of the activity in GE’s affinity groups, by 2009, the company had three white female executive officers, but no people of color among its executive officers. GE had a white ceiling.30 As the Great Recession unfolded, CEO Jeff Immelt cut the number of executive officers to 10 in 2009 from 28 in 2005 as he reorganized the company and laid off about one fifth of GE’s employees.31 It is challenging, but not impossible, to keep diversity strong as a company shrinks.

White ceiling companies tend to return to having only white executive officers when the number of minorities was kept to a minimal, tokenistic level. GE had only promoted one African American and one Asian to executive officer. It never achieved a critical mass and kept going.

Causes of White Ceilings in the Fortune 100 (Fig. 4)

1. CEO has never promoted a minority to executive officer.
2. The number of minority executive officers has remained at a minimal, tokenistic number. No critical mass is achieved that enables racial representation to continue as executive officers turnover.
3. Women’s employee affinity groups have emerged stronger and more powerful than other employee affinity groups and tend to be dominated by white females.

The CEO chooses the executive officers, not the affinity groups. Yet, as the affinity groups grew, some became more influential at GE than others. With more than 5,000 members in the United States alone, the Women’s Network became the largest and the most powerful affinity group at the company. It was dominated by white women who benefitted from sharing the same race as the white male leadership of the company. And perhaps because of its size, and the number of senior leaders who were involved, it was able to question the leadership performance evaluation system.

The solution to the white ceiling is not to penalize white women for doing well, but to consider why they did succeed. The Women’s Network at GE developed differently than the African American, Asian or Hispanic affinity groups. It examined the traditional measurements of women’s leadership style at the firm, warned both executives and women to beware of falling into the trap of perceiving female leaders in a stereotypical manner and women of behaving in a stereotypical way. The Women’s Network challenged the rules, the internal measurements of performance. It focused on learning leadership and advancing.

While companies clearly enjoy having affinity groups because they frequently develop extra business for the organization, the groups can be just as useful for developing leadership and examining bias in a company. If employees are spending their free, unpaid time in these networks enriching the company beyond their stated jobs, and engaging in recruitment, mentoring and cultural education, it seems that the organization should respond by grappling with the question of whether performance measurements of race, gender or sexuality at a company are equitable or not.

When a company experiences a white ceiling, Ashleigh Shelby Rosette, who teaches at Fuqua School of Business at Duke University, recommends that managers examine the evaluative process and ask themselves why whites are congregated in leadership positions and minorities are not. “If racial minorities consistently attain objective achievements, but those accomplishments are not reflected by good leadership ratings or positive leadership perceptions, managers should attempt to rectify this disconnect and consider the presence of cognitive biases that may favor Whites over racial minorities,” she wrote.32

Minority Women

While women’s affinity groups have advanced white women, they have not advanced women of color. One possible reason for this is that minority women do not benefit from access to white men in either the living room or the locker room.33 They are not members of the dominant race, as white women are and do not share every day access to the most powerful group in society, white men. They also do not share the dominant gender, as African American, Hispanic, or Asian men do with white men. Women’s networks tend to be dominated by white women. African American, Hispanic and Asian networks tend to be dominated by males. In 1995, not one of the companies in the Fortune 100 companies had a multicultural women’s group. Some companies, such as PepsiCo and IBM, have started special multicultural women’s networks to begin to give these women the opportunities that other employees have received from their affinity groups.

In the 1990s, diversity experts complained that businesses were more focused on assimilating women and people of color rather than engaging in serious cultural change within organizations. R. Roosevelt Thomas in Redefining Diversity wrote “managers continue to talk about facilitating the assimilation of minorities and women.”34 But as they have developed over the years, affinity groups have enabled minorities and women to magnify their voices so the culture will hear them. Through the power of incremental change, by reinforcing positive stereotypes minorities and women have gained acceptance within the corporation. Chief executives increasingly support affinity groups to engage in diverse employee recruitment, retention and development and often back them with significant company resources. Hewlett Packard officially spent about $500,000 in 2006 on its employee affinity groups.

By increasing the pluralism of the culture the groups generally have raised the chances that diverse employees will be judged by a peer, not necessarily someone from a dominant culture. As more diverse employees become accepted, they have begun to question whether companies’ performance is really bias free or not. The number of affinity groups in the Fortune 100 doubled in ten years, from 1995 to 2005. There was a positive correlation between affinity groups and high officer integration; 90 percent of the most integrated companies had them. But not all of the networks have benefitted equally, or propelled one of their own to the highest position.35

GLBT Groups

As they have grown and developed, the Gay, Lesbian, Bisexual and Transgendered (GLBT) groups in some corporations have worked effectively to advance workers’ rights. At the computer and printer maker Hewlett Packard, the GLBT group was one of the first to form
“Their intent really was to connect and reduce the isolation that they felt,” said Cindy Stanphill, HP’s head of diversity. “What most gay people will tell you is ‘I can’t be myself if I have to come in and hide who I am. I spend a lot of time hiding that versus being productive.’”36

The GLBT group at HP has invited straight people to help them understand how to be successful in the system. As the group has evolved it has provided feedback to the company to make its processes and systems more inclusive so that they are not measured with “a straight, white male yard stick,” said Stanphill.37

In addition, the development of affinity groups enabled HP to strengthen its ability to fight discrimination in its workplace. In 2004, the Ninth Circuit Court of Appeals backed the company for asking an employee to remove a poster that HP believed to be discriminatory. In the case, the plaintiff, Richard Peterson put up a poster quoting various Biblical passages condemning homosexuality in response to posters the company had put up of African-American, Hispanic, Caucasian, elderly, and gay employees, with the caption "Diversity is Our Strength." Peterson found the poster of a gay man offensive to his religious views. When the company asked him to remove the poster because it discriminated against gays, he sued HP alleging that the company discriminated against his religious views. The court ruled that the company was right to promote an atmosphere of tolerance in the workplace. While people were entitled to their own religious or secular views, according to the court, no one had the right to persecute other people at work in the name of religion.38

Importing the Important People

The white ceiling remained robust in each year of the study, 1995, 2005 and 2009 partly because globalization brought other Caucasian nationalities into the firms. Companies’ expansion into Canada, Europe and the Middle East enabled companies to benefit from the workers in those markets who were educated, spoke the necessary languages, knew how to excel in foreign markets, and were considered diverse. It is understandable that companies would hire people who are native to specific markets. Local knowledge, experience, and language ability are all enormous assets when trying to gain market superiority. Once inside the corporate structure, many of these employees have worked their way into the highest ranks of leadership, moving well beyond the role of country director. The aluminum producer, Alcoa, employed no minorities or women as executive officers in 2009, but 38 percent of its white males were born abroad. They came from Germany, Norway and Austria. United Technologies, which includes Otis Elevators, Pratt & Whitney engines, and Sikorsky helicopters, had one white female on its otherwise white male team, but one third of the executive officers were born outside of the U.S. Three came from France, two from Canada. On average, nine percent of white male executive officers of the Fortune 100 in 2009 were born outside of the U.S.

National origin is certainly one measure of difference. Verizon’s chief information officer was born in Iran, as was Wells Fargo’s head of technology. Three of the executive officers at the investment firm Morgan Stanley came from Lebanon, Ireland, and the United Kingdom. These workers bring foreign accents and the allure of international markets with them to the United States.

Some companies prefer multinational diversity over national diversity. In 2009, more than half of the Hispanic/Latino executive officers of the Fortune 100, 53 percent, were born outside of the United States. They came from eight different countries in Latin America. More than half, 52 percent, of the Asian executive officers came from abroad, mainly India. Overall, one third of “minority” executive officers in the Fortune 100 in 2009 were born beyond U.S. borders, suggesting that companies have found a way to use the global worker as a diversity asset here in the U.S. The microchip maker, Ingram Micro employed 7 out of 11 executive officers who were born outside of the United States, including 100 percent of its “minorities.” One hundred percent of the Coca Cola Company’s “minority” executive officers were born in Liberia, Colombia, and Mexico. Others came Turkey, France, Ireland and Australia.

There is nothing wrong with hiring people with a different national origin—they are protected by the Civil Rights Act of 1964. Immigration is an important narrative in American history. But some companies, in their drive for global profits, have used diversity to trump affirmative action at the highest level of the corporation.

In 2009, executive officers of the Fortune 100 who were born outside of the country were overrepresented. They comprised an average of 10 percent of executive officers when the foreign-born cohort of people who would be educated and experienced enough by 2009 to hold such a position comprised just 1.5 percent of the total U.S. population.39 This illustrates how Fortune 100 companies--the biggest and richest corporations in the country--favored multinational diversity over national diversity.

These findings present a troubling pattern, suggesting that some companies are interpreting diversity not as a melting pot or as a salad bowl, but as a smorgasbord from which they can take whatever they want and leave the rest. Diversity now appears to have varying definitions at companies. Some treat diversity as a nutritious main course; they hire and promote everyone. Others treat diversity as a condiment; they spice up the corporate suite with a white woman here, an exotic accent there. Diversity as an employment concept certainly has not solved white job segregation at the top of the company.

Ominous Trend

Companies that once excelled in national diversity are abandoning it in favor of multinational diversity. In 2005, 55 percent of PepsiCo’s executive officers were female or minority and well exceeded the average of nearly 21 percent diversity among executive leadership in the Fortune 100 at the time. Then CEO Steve Reinemund had worked hard to develop his team. Whenever Reinemund gave an internal talk at PepsiCo, he reiterated his core desire to create an “environment where true greatness can be achieved by valuing people for their differences, strengths, talents and callings that they bring.”40 Reinemund recognized not only the urgent demographic need to include more women and minorities in the company’s operations, but the business opportunity that their inclusion presented.

“How can you conceive of all the products consumers want, how do you develop those products, market those products and sell those products if you don’t have a total team from the front line to the boardroom that represents the consumers you want to sell to?” asked Reinemund.41

PepsiCo, a consumer package goods company, operates under the brands of Pepsi cola, Lays, Frito-Lay, Tropicana, Quaker, and Gatorade in the United States. At Frito-Lay, for example, the company does everything from producing the seeds for farmers to plant, to putting the final product on the shelf. They try to ensure that they do business with a variety of races, ethnicities and genders at every level, from farmers who plant the seeds to people who own the stores. He believes it is the comprehensiveness of how PepsiCo makes, moves and sells it products that has enabled it to include race and gender into its overall process from the entry level position to the CEO.

“That’s what makes us strong,” said Reinemund. “In 15 out of 17 cities in the United States, the minority is the majority. Take Los Angeles. Walk down any street and walk into the stores and see who shops in there, works there and owns those stores. For the most part, they are not white males. There are very diverse people in those stores.”42

“If you really want to get the best displays, the best locations, the new products on the shelves, you can go into those stores and speak to those shop owners in their native language,” he said. “If you can bring materials that are in their native language that they can put up and communicate with consumers in their native language, you have a much higher likelihood of selling more products. We’ve proven it. We know it for a fact.”43

The linkage from the consumer to the PepsiCo employee is strengthened by the affinity groups whose members include sales representatives as well as officers. The groups started in the late 1960s when African American employees began meeting regularly with one another and management to bring awareness to race issues at the firm. Since then, seven other groups have formed: Women, Women of Color, Asian, Latino, Gay, Lesbian, Bisexual and Transgendered, Disabled. There is even a White Male affinity group. Over the years, these groups have metamorphosed from employees at the periphery of the business, to serving as a club, a support group, a study group, a leadership group, and an entrepreneurial group within the organization. Many groups have reached out into their communities and developed new markets for the company. PepsiCo annually budgeted $500,000 to support the groups, and one insider estimated that the company spent a total of one million dollars a year on them before the economic downturn in 2008.

Inclusion, or learning to value people who look different, move in a different way or have an accent, is an adaptive process in the workplace. In other words, people have to learn to appreciate others, they cannot just be ordered to do so. At PepsiCo, employees have a built-in incentive. They do not just have a job with the corporation; they have a real ownership in the business. Every employee up and down the organization from the CEO to the person on the line in a manufacturing plant is given stock option grants. This means that one person’s success is tied to everyone else’s.

“We build an entire dialogue and process around this as people are hired into the organization,” said Ron Parker, who is head of PepsiCo’s diversity program. “We expect people to act like owners, which breeds an entrepreneurial spirit and brings with it a strong sense of teamwork.”44

Even though the company is far more advanced than most other companies in cultivating diversity, some problems have still developed over the years. In 1997, some African Americans who had applied to be route salesmen for Frito-Lay at its plant in Harahan, Louisiana, near New Orleans, filed a complaint alleging that the company hired more whites than blacks. An investigation revealed further discrimination; the few black salesmen who were hired were assigned to neighborhoods in New Orleans with higher crime rates. In 1999, Frito Lay Inc. agreed with the Equal Employment Opportunity Commission to pay $225,000 in back wages to 233 minority applicants who were victims of discrimination for entry level positions at the plant.45

In response, the company made diversity training of employees mandatory. PepsiCo began to evaluate and measure how well managers were developing and supporting their employees, and began to weigh these measures evenly with how they were accomplishing their business objectives. People objectives and business objectives were weighted equally, 50-50. It became part of managers’ compensation as to whether they were promoting and supporting diversity and inclusion. These items were listed on their professional development review which occurs every six months.

“It was coming at you from all sides,” said Gail Quint, head of PepsiCo’s internal communications. “It became very persuasive.”46

In order to achieve integration, “there have to be some very fundamental things like one, an objective vision, two a set of principles and priorities, goals that you measure, programs that you facilitate, training and feedback,” said Reinemund. “I don’t believe there is one silver bullet, one thing you can do really well to create a diverse and inclusive culture.”47

Reinemund routinely solicited feedback to find out how he could be doing better, which occasionally resulted in some very long and painful discussions.

Reinemund remembered a notable meeting at the company’s headquarters in Purchase, New York. He had invited several black executives to share their thoughts with him on how to attract and promote more African Americans in the company. It was the end of the day, and everyone was mingling outside on the patio. Reinemund, who is white, stood up on a ledge and addressed the group with some closing remarks. When he got home that evening he found a two-page email from a black female executive who described feeling humiliated by his actions. She said that when he stood above the group and looked down on them, she thought of a white master addressing a group of slaves. “My first thought was, she was a brave woman,” said Reinemund, for having the guts to express such strong feelings to her boss. After reading the email, he said; “I felt embarrassed, ashamed that something I did so naturally would hurt someone’s feelings like that.”48

Reinemund wrote back to the woman, invited her to meet with him and apologized to her during a long conversation in his office. Since then, he tries to speak to all groups while standing on their level. The female employee is now a senior executive at PepsiCo.

Now, a lot of chief executives might have dismissed such a complaint as an irritation that seemed to come from left field. After all, Reinemund had hardly grown up in an elite or privileged atmosphere. His father was a German immigrant who established a brewery after moving to the United States long after slavery had ended. But he died when Reinemund was young and as a result, the CEO was raised by a widowed mother with few monetary resources. Reinemund hardly deserved to be compared to a slave owner by the young black employee just because he was white. Still, he openly grappled with her psychological projection.

“You can’t make progress, move forward and accept people if there is no license and freedom to talk about the irritations and sensitivities we each feel,” Reinemund said. “Any cultural change is hard, but this one, because of the human nature of it, is the hardest single thing I worked on in my business career.”49

Reinemund’s experience illustrates the startling and frank dialogues occurring in corporate America. These days the workplace is where some of the most serious and in-depth conversations over race and gender occur. While slavery in the U.S. was nationally outlawed by the Thirteenth Amendment in 1865, the memories of it, told by one generation to the next, can be so powerful as to haunt today’s business meetings. Because of the Black Codes, thousands of African Americans continued to experience de-facto slavery well into the twentieth century if they broke the laws made only for them. The free, hard labor of the black prisoners and chain gangs benefited the state, businesses and landowners. Corporations that are the most dedicated to integration today find themselves undoing the slavery legacy, no matter how unconscious by some and forgotten by others the legacy may be.

The government also constrained the rights of Native Americans, Chinese, Japanese Americans and women. Whether it was the unfair taking of land from native tribes, or confining the Chinese to the roles of railroad builder and shopkeeper, interning the Japanese in camps during World War II, or not allowing women to contract, hold their wages, obtain credit, or work during marriage, these and other groups have historically been unable to develop their full potential in the American marketplace. Legally, they are members of a protected class of workers today, because their rights had been curtailed in the past, and as groups, they still lag economically behind white males.

Because Reinemund, was attuned to inequality, having experienced or witnessed disadvantage in his own life, he understood that business had the power to transform the thinking, abilities and prospects of all kinds of workers. He was unafraid to address the racism and sexism in this country that left an uneven playing field for so many groups in our society that historically have been unable to develop their full value in the American marketplace.

PepsiCo’s diversity efforts resulted in the development of new products such as Mountain Dew Code Red, which appeals to African-Americans, a wasabi-flavored snack aimed at Asians and guacamole Doritos and Gatorade Xtreme aimed at Hispanics. The company estimated that in 2004, about one percentage point of PepsiCo’s eight percent revenue growth came from new products inspired by diversity efforts.50 In December of 2005, PepsiCo, which had always been second to its chief competitor Coca-Cola, overtook it in market capitalization for the first time. PepsiCo’s stock market value reached $98.4 billion compared with $97.9 billion for Coca-Cola.51

Multinational Diversity

However, after Steve Reinemund left in 2006 and Indra Nooyi took over as CEO, the composition of the executive officers began to change. By 2009, the percentage of female and minority executive officers had fallen to less than 25 percent, the average integration level for the Fortune 100. Half of the minorities and 40 percent of the Caucasian executive officers were born outside the U.S. The Indian-born Nooyi chose a diverse international mix for her executive officers. In her competition with Coca Cola to gain the greatest share of worldwide markets, she has assigned responsibility of overseeing world regions and continents to foreign-born executive officers who came up through the company by working internationally.

Although it projects an all-American image in the United States, only one third of PepsiCo’s workforce is actually located here. In 2009, nearly half of its revenues came from outside the country, which nearly aligned with 43 percent of the company’s executive officers being born outside the U.S. In the future, this global company is likely to earn even more profits and employ even more people overseas. If all companies balance their leadership this way, very few native-born Americans will be running the global companies. PepsiCo’s composition of international executive officers portends an ominous trend. It undoes the hard-fought work of promoting a homegrown diversity team that people in the United States have struggled for, and it reduces the jobs for native workers.

Nooyi herself followed a route to the executive suite that has been taken by other foreign-born executive officers; their careers took off after they received graduate degrees in the United States. Nooyi was born in the city of Chennai, formerly known as Madras, which is located on the southeast coast of India. She earned an MBA from the Indian Institute of Management, in Calcutta and came to the U.S. in 1980.

“At 23, I asked my parents if I could apply to American universities. They did not want me to go but said, "If you get in with a 100 percent scholarship, we can talk about it". So I applied to Yale, which gave me a very good support package, so I had something to negotiate with my parents,” she said.52

After she graduated in 1980 she worked in marketing and strategy at the Boston Consulting Group, Motorola and Asea Brown Boveri. In 1994, she went to work for PepsiCo and rose quickly, becoming the chief financial officer in 2001 and chief executive in 2006.53

Nooyi certainly helped make PepsiCo the largest food and beverage company in North America, and the second largest in the world, valued in 2010 at $60 billion. But for Nooyi diversity means the world, not just the U.S. Her cohorts, other foreign-born CEOs, behave in a similar manner, promoting a higher percentage of foreign-born employees to executive officers, than homegrown, U.S.-born or raised, CEOs promote.

When Rosabeth Moss Kanter published her groundbreaking Men and Women of the Corporation in 1977, she described homosocial reproduction as the tendency for people to hire and promote people who come from a similar background, went to similar schools, share similar political or religious beliefs. Because white men headed most large American businesses at that time, they received the biggest criticism for pursuing the old boy’s network, promoting people like themselves through informal networks. Yet, the studies for this article indicate that most of the homegrown white male business leaders have been listening to the message sent repeatedly to them over the past 50 years that women and other races and ethnicities wish to be part of the team. The same message--to beware of biases in decision-making--needs to be driven home to business leaders of all backgrounds who work in the United States.

Companies with a high percentage of executive officers who were born outside the United States may argue that their high foreign revenues entitle them to such representation. However, that claim does not hold up under scrutiny. In 2009, United Technologies Corporation earned 59 percent of its revenues from abroad, and 33 percent of its top officers were born overseas. But GE earned nearly the same portion-- 54 percent of its revenues from outside the United States--but none of its executive officers was born abroad. Alcoa earned 48 percent of its revenues from outside the United States and 38 percent of its executive officers were born overseas. But during the same period, Boeing earned 42 percent of its revenues from abroad and none of its executive officers was born overseas. Exxon Mobil took in the highest proportion of revenues from outside the country, 80 percent, and only six percent of its executive officers were born abroad.

Promoting a high percentage of foreign nationals may undermine the American bootstrap tradition. Many foreign nationals have been hired by U.S.-based corporations after gaining an advanced degree, a master’s degree or doctorate, at an American university. Foreign students often have to pay for graduate school themselves and are not eligible for U.S. grants and fellowships. If they were able to afford college in their home country, it usually meant they came from a family with resources. The executive officers who were born outside the states tend to come from elite, high status groups in their birth countries. They are not the traditional homegrown minorities that affirmative action and diversity were originally intended to recognize. Yet, if they wind up working on the U.S. side of a global corporation, drawing local pay and benefits, they are counted as minority group members in the company’s annual census of its workers.54 This is especially impacting homegrown U.S. minorities.

There is little scholarly research that explores multinational hiring and promotions. But one study that examined promotion practices at a multinational Fortune 500 financial services firm found that Hispanics, some of whom were born outside the U.S. were rated as higher potential managers than native born blacks and Asians.55 In other words, employers may have assumed that someone who was born outside the United States would have greater knowledge of how to excel in foreign markets. But that is not necessarily guaranteed. Homegrown U.S. minorities and whites may have just as much or more experience in developing international markets. Hispanic Americans tend to straddle two cultures growing up in this country, speaking Spanish at home and English at school and work. Chinese and Japanese Americans also practice cultural traditions and speak native languages at home. Asian Indians frequently go to India for months during the summer to reconnect with family who speak Urdu and other languages.

All kinds of Americans study abroad, take an overseas assignment or simply vacation in a foreign country. Howard University, the nation’s largest historically black university offers an academic program in international business that includes finance, marketing, and management in international cultures. Its students study abroad in India and Europe. More than two million service people have operated abroad as part of the U.S. military since 9/11. The experience and perspective of veterans should be valuable in developing foreign markets. The United States is actively participating in the ongoing internationalization of the world. So, the assumption that Americans have fewer skills to operate internationally than those born overseas is a generalization that loses its significance when closely examined. In other words, it is a stereotype that maybe true in some cases, but not in others. Americans no longer are innocents abroad.

Sustainability

Diversity is increasingly being viewed as yesterday’s topic. The overwhelming majority of 2009 annual reports of the Fortune 100 did not even mention it. The omission marked a profound change from their annual reports in 2005, when diversity was still the buzzword, and their pages were filled with pictures of customers and employees of nearly every race, ethnicity and gender. But in 2009, just four years later, sustainability had become the concept du jour. The new goal was to create long lasting communities by reducing greenhouse gases, toxic environmental waste, and using more recyclable packaging materials. What these companies have overlooked is that communities will not be sustainable without diverse employment strategies.

As businesses embrace sustainability in the use and consumption of energy, water and packaging, thought leaders are now encouraging them to create shared value in communities where they operate. Harvard Business School’s Michael Porter has advanced “The Big Idea” that capitalism, which was under siege after the Great Recession, needs to change from its limited model of engaging in social responsibility as a sideline to creating overall social value for the community. “The opportunity to create economic value through creating societal value will be one of the most powerful forces driving growth in the global economy,” he wrote. “This thinking represents a new way of understanding customers, productivity, and the external influences on corporate success. It highlights the immense human needs to be met, the large new markets to serve, and the internal costs of social and community deficits—as well as the competitive advantages available from addressing them.”56

It is also in the best interest of this country to staff multinational firms predominantly with homegrown workers. According to a report produced by the economic research group the McKinsey Global Institute, multinational corporations contributed 11 percent to employment growth since 1990, even though they represented just one percent of all U.S. companies. In 2007 they employed 19 percent of the private sector workforce, and the global companies paid better on average than other employers. For managerial, professional and technical employees, multinationals paid an average of $102,000 in 2007, which was 37 percent higher than the national average. Multinationals provide good jobs, better-paying jobs generally than medium and small companies. They have a positive impact on the U.S. economy.

It is possible to have a rounded mix of views and talents from minority males and females, white women and men, plus internationals. But it will take consistent effort and persistent attention to get the right mix. Without grooming diverse, homegrown workers for leadership positions at company headquarters, the overall health of the community where the company is located will decline. In the pure play of recent years, Porter wrote that communities “perceive that profits come at their expense” and that they are increasingly left out of corporations’ profitability. Given the history of the United States with its civil rights and women’s movements and its record of class mobility, it is unlikely that workers here will accept companies that do business in their communities but do not employ and promote their people.

Notes

1 I conducted a study of race and gender of executive officers of the 2005 Fortune 100 for this article. An executive officer is defined as a president or vice president who is in charge of a principal business unit, division or function. Executive officers set policy for the corporation, and their names are usually contained in the annual report to shareholders, the 10-K. My researchers and I determined, from photographs and published profiles of the executive officers, their gender, race, and ethnicity according to categories used by the U.S. government. We also gathered data for the same companies for fiscal 1995 and 2009 to show change over 14 years. We then contacted the companies to verify the accuracy of our assessments and made adjustments to the data if the companies offered corrections that were consistent with the names listed in the 10-K, a document filed with the Securities Exchange Commission (SEC). We operated on a fully transparent basis, notifying the companies of the information and statistics we had gathered and telling them that they would be published. We made every effort to get the facts right.

Many scientists and anthropologists believe that the designation of race is primarily social and political and not a useful tool for understanding the fundamentals of human beings. The classification of race and ethnicity has a long and controversial history in the United States. Anyone who attempts to measure progress this way immediately becomes aware of the complexity of such a task. The popular understanding is that there are three human races: Caucasoid, Mongoloid, and Negroid. For the study, however, I kept the categories consistent with those used by the U.S. government: Caucasian, Asian/Native Hawaiian and Pacific Islander, Hispanic/Latino, African American, and Native American. People of Arab descent were considered Caucasian, as were people of Persian descent. According to the 2000 Census, 82 percent of people born in Iran who reside in the United States identified themselves as white.

(“Table FBP-1. Profile of Selected Demographic and Social Characteristics: 2000, Population Universe: People Born in Iran,” U.S. Census Bureau, 2001. Retrieved at http://www.census.gov/population/cen2000/stp-159/STP-159-iran.pdf).
2 Stanley F. Slater, Robert A. Weigand, Thomas J. Zwirlein, “The Business Case for Commitment to Diversity,” Business Horizons, 2008, 51, 205.
3 Raymond V. Gilmartin, author interview, 25 February 2008.
4 Justice Lewis F. Powell, “Judgment of the Court,” Regents of the University of California v. Bakke, Supreme Court of the United States, 438 U.S. 265, June 28, 1978, V, A. Retrieved here: http://www.law.cornell.edu/supct/html/historics/USSC_CR_0438_0265_ZO.html
5 Erika Hayes James, “Race-Related Differences in Promotions and Support: Underlying Effects of Human and Social Capital,” Organization Science, Vol. 11, No. 5 (Sep. - Oct., 2000), 493.
6 Jacqueline Landau, “The Relationship Of Race And Gender To
Managers' Ratings of Promotion Potential,” Journal of Organizational Behavior, Vol. 16, issue 4, (391-400) (1995), 391.
7 Ashleigh Shelby Rosette, Geoffrey J. Leonardelli, and Katherine W. Phillips,
“The White Standard: Racial Bias in Leader Categorization,” The Journal of Applied Psychology, 46. Retrieved here: http://www.rotman.utoronto.ca/geoffrey.leonardelli/2008JAP.pdf
8 Donald Tomaskovic-Devey, Gender and Racial Inequality at Work, Cornell University, Ithaca, NY, 1993, 62-64.
9 James N. Baron, “Organizational Evidence of Ascription in Labor Markets,” ed., Paul Burstein, in Equal Employment Opportunity: Labor Market Discrimination and Public Policy, Transaction Publishers: Brunswick, NJ, 1994, 73.
10 Lloyd Trotter author interview, 7 January 2011.
11 Trotter.
12 Trotter.
13 For more details of homosocial reproduction in organizations, see Rosabeth Moss Kanter, Men and Women of the Corporation, Basic Books: New York, 1977.
14 Dane Elliott-Lewis, author interview, 6 November 2006.
15 Elliott-Lewis.
16 Elliott-Lewis.
17 Lloyd Trotter author interview, 7 January 2011.
18 Dane Elliott-Lewis author interview, 6 November 2006.
19 Lloyd Trotter author interview, 7 January 2011.
20 Susan Peters, author interview, 2003.
21 Mary Williams Walsh, “Where General Electric Falls Short: Diversity at the Top,” The New York Times, Sept. 3, 2000. Retrieved here: http://www.mindfully.org/Industry/GE.htm
22 Beth Comstock, author interview, 2003.
23 Eagly, A. H., and Karau, S. J., “Role congruity theory of prejudice toward female
Leaders,” Psychological Review, 109, 2002, 573-598.
24 Andrea Cox, author interview, 6 November 2006.
25 Terri Graf, author interview, 6 November 2006.
26 Rajeshwar Das, author interview, 6 November 2006.
27 Das.
28 Wilhelm Hernandez-Russe, author interview, 6 November 2006.
29 Hernandez-Russe.
30 Caterpillar, the large equipment manufacturer, also reverted to having a white ceiling in its leadership as it reduced the number of executive officers in response to dire business conditions during the Great Recession
31 Jeffrey Immelt did not agree to an interview request.
32 Ashleigh Shelby Rosette, Geoffrey J. Leonardelli, and Katherine W. Phillips,
“The White Standard: Racial Bias in Leader Categorization,” The Journal of Applied Psychology, 46. Retrieved here: http://www.rotman.utoronto.ca/geoffrey.leonardelli/2008JAP.pdf
33 Hannah Hayes, “Women of Color: Why They Are Finding the Door Instead of the Glass Ceiling,” Perspectives, Volume 15, No. 1, Summer 2006, 6. Retrieved here: http://www.abanet.org/women/perspectives/perspectives_womenofcolor2006.pdf
34 As quoted by Frederick R. Lynch, The Diversity Machine: The Drive to Change the ‘White Male Workplace,’ Transaction: New Brunswick, NJ, 2000.
35 I conducted a study of the affinity groups of the 2005 Fortune 100 for this article. My researchers and I sent out surveys asking corporations to identify their affinity groups, tell us when they started and describe their activities and functions. Twenty-one companies completed and returned their surveys. We called and interviewed employees at the remaining firms to finish the surveys. If employees refused to assist us, we were often able to complete part of the surveys by compiling information about the groups published on corporate Web sites. In the course of both the executive officer and the affinity group studies, my researchers and I interviewed more than 300 employees of the firms over the telephone, via e-mail, and in person to find out the techniques they used for finding and developing minority and female talent. For these findings see Susan E. Reed, The Diversity Index: The Alarming Truth About Diversity in Corporate America…and What Can Be Done About It,” AMACOM: New York, 2011.
36 Cindy Stanphill, author interview, 27 July 2006.
37 Stanphill.
38 Sheryl F. Colb, “When Types of Discrimination Compete for Legal Recognition
Should Anti-Gay Religious Practices Be Accommodated in the Workplace?” Findlaw.com, Jan. 14, 2004.
39 Robert Bernstein, Public Information Office, U.S. Census Bureau, email to author, Dec. 1, 2010. (In 1980, the foreign-born population was 6.2 percent of the total U.S. population. Of that group, 24.6 percent of the foreign-born population age 25 and older, had either completed college or five or more years of post-secondary education.)
40 Steve Reinemund, author interview, 8 April 2008.
41 Reinemund.
42 Reinemund.
43 Reinemund.
44 Ron Parker, author interview, April 2008.
45 “Frito-Lay Inc. Agrees To Pay $225,000 In Back Wages To 233 Minority Applicants For Discrimination Found At Louisiana Plant,” Employment Standards Administration Press Release, US Department of Labor, April 21, 1999. http://www.law.ucla.edu/users/crenshaw/racerem/currentnews2.htm
46 Gale Quint, author interview, April 2008.
47 Steve Reinemund, author interview, 8 April 2008.
48 Reinemund.
49 Reinemund.
50 Carol Hymowitz, “Turning Diversity Into Dollars,” The Wall Street Journal, Nov. 14, 2005. http://michaelmyers.biz/materials/WSJ_Diversity.pdf
51 Theresa Howard, “Pepsi Beats Coke with Stock Surge,” USA Today, Dec. 12, 2005.
http://www.usatoday.com/money/industries/food/2005-12-13-coke-pepsi-usat...
52 Indra Nooyi, “Career Snapshot,” The Times (London), October 8, 2008, p. 5. Retrieved through Lexis Nexis Academic Universe.
53 Sarah Halls, “First Among Equals: The FT's definitive ranking of the world's 50 most powerful and successful female chief executives,” FT Magazine, September 26, 2009, 33. “Introducing a Woman’s Touch,” China Daily, June 21, 2010. Retrieved via Lexis Nexis Academic Universe.
54 Chor Huat Lim, email to author, 15 October 2010.
55 Landau.
56 Michael E. Porter and Mark R. Kramer, “The Big Idea: Creating Shared Value,” Harvard Business Review, Jan.-Feb. 2011. Retrieved here: http://hbr.org/2011/01/the-big-idea-creating-shared-value/ar/1

Susan Reed’s book, based on her fellowship research, “The Diversity Index: The Alarming Truth About Diversity in Corporate America…and What Can Be Done About It,” (Amacom) will be published in August.