There is an unavoidable irony in the confluence of the passing of Proposition 209 in the State of California (to outlaw affirmative action in favour of minorities) and the recent run of events at Texaco. Indeed, an amnesiac waking up to the American political scene around the time of the recent presidential election, say an accident victim coming out of a coma but being left with a 30 year memory lapse, might have assumed that discrimination on the grounds of race, gender or creed was a thing of the past. Why else would all those Californians have voted to ban positive discrimination on the day they also voted Bill Clinton back into office?
Had our amnesiac not come round for another day or two, the conclusions drawn might have been rather different, however. By then everyone was aware that at least one company in the US was still behaving much as the accident victim would have expected big companies to behave 30 years ago.
The Texaco story displayed a clearly racist turn of mind among high-ranking corporate executives, whose comments were recorded on tape but not contradicted by their fellows. And however convincing the company’s persuasive CEO managed to sound, he nevertheless was at the helm of a company in which a little bit of affirmative action might have helped to balance the discouraging conditions in which most African American employees found themselves working at Texaco.
So what has this to do with investor relations? Well, first, Texaco has had its reputation as a corporate citizen unquestionably tarnished, which will discourage at least some potential shareholders and customers. Second, the company has had to pay out a few hundred million dollars by way of a settlement, together with legal and other costs incurred to fight off the crisis. Third, as a result of the brouhaha, it had to manage a share price drop and devote time to keeping media and markets placated.
Fourth, Texaco just might have been a better company if it had been more inclusive – and had been able to benefit from the potential and the talents of all its employees, instead of just those that fitted the preferred image of some of its hiring and firing class.
Many companies and many investors accept the importance of non-discriminatory policies at rank-and-file level and at management level, yet fail to see the purpose of board diversity. But might this not help raise awareness among senior management of the folly of discriminating against anything except unsuitability for a task? And in the process help the company make better use of all its people; avoid negative publicity; and allow all those Californians to go on thinking they did the right thing in supporting Prop 209?
