How Bank of America CEO fights economic inequality
Economic inequalities are pervasive inside and outside of businesses. Some CEOs, like
Bank of America‘s
Brian Moynihan, have made efforts to close this gap.
Moynihan, who chairs the World Economic Forum International Business Council, has been a strong advocate of stakeholder capitalism, publicly encourage sustainable practices, urge other CEOs prioritize the well-being of employees during the Covid-19 pandemic, and by promising $ 1 billion to address racial and economic inequalities.
The CEO of Bank of America attended a recent Barron conference, The Wealth Gap: A Global Perspective, to discuss the company’s commitment to helping local communities and the need for banks to address economic and racial inequalities.
Our conversation below has been edited and condensed for clarity.
Barron:Brian, sorry to point out the obvious, but you’re a Caucasian male, one percent. What interested you in this subject?
Moynihan: [Diversity and inclusion] became of early interest. This comes from the basic principle that, especially in banks, we are companies that are creatures of our communities. Helping people succeed in this community is essential, so it’s sort of endemic to the way you do business. We firmly believe that you could produce returns for your shareholders and produce good for society.
Let’s talk about the Billion dollar initiative of BofA to help local communities tackle economic and racial inequalities. Is it philanthropy or a business opportunity?
Within the company, we have looked at the question of how to help communities, how to have economic opportunities and economic mobility. We were working on [solutions] in Charlotte with a group of CEOs. Within our company, [peoplehave] worked with our Hispanic leadership group and our black African-American leadership group on the idea, “How can we help more with economic mobility?” ”
Then you had the racial justice and social justice issues that hit the country hard, starting with the murder of George Floyd, so the group started to ramp up plans to roll it out. We [already] make about $ 250 million [each year] in charities we fund $ 5 billion for low and moderate income housing, we do a lot of those things. But [the leadership group] says we need to redouble our efforts that are really focused on economic opportunities, mobility and things like that for communities of color.
We said let’s go after [four] pillars: health, housing, education [and] professional skills and entrepreneurship. But frankly, it’s about working with other groups and other companies to get there, because it’s going to take a lot of work and effort.
What are the specific initiatives?
About two or three weeks ago we announced the first allocation, $ 300 million. This included things in all dimensions, including the healthcare dimension, to prevent this virus from spreading. [Covid-19] most strongly affects Hispanic and black communities. we donated [personal protection equipment], masks in particular. We did a vaccine clinic for testing with Howard University in the neighborhoods of Washington, DC
Another part was in the educational space. One was in community colleges [that focus on African American, Hispanic, Latino, and other minority communities] work on [job skill development]. Then the HBCUs was more about career paths, job development, interview practices and things like that.
Then the other element was the equity investments. We already had $ 100 million, plus deposits, in [minority depository institutions] in general. And then we said there would be an additional $ 200 million for equity investments in growing companies that need capital.
What is the role of financial services institutions in addressing income and racial inequalities?
Financial institutions have a long history of contributing to community lending, both directly and through other institutions. Today we have about $ 16 billion in the [community development financial institutions] structure across America as an investment in them to be re-loaned. If we can’t give the loan to a borrower because they don’t meet our underwriting criteria, we work with them to make the loan.
The other way to do it is with our direct loans. We are one of the largest small business lenders in the country. We have a huge portfolio of loans to minority owned businesses and women owned businesses and are making this a priority. We are thinking about ways to lend and provide capital in our usual way. On the housing front, we spend $ 5 billion a year on low and moderate income housing. The point about all of this is that it has to be more. This is where the new [$1 billion initiative] Between.
As president of the International Business Council, you have spoken a lot about stakeholder capitalism. Why is stakeholder capitalism essential to address racial and income inequalities?
We must aim for capitalism to solve the big problems facing the world. The measures we worked on in [International Business Council] give you a way to measure companies that are progressing. The idea is to have these exhibitions so that companies [that] progress can be rewarded by teammates who come to work for them, clients who do business with them, shareholders who invest in them.
Think about what private enterprise can generate through our principles of purchasing and contracting with suppliers [and] capital formation in minority-owned companies [and] women-owned businesses. Think of all the equity in the world aimed at solving these problems. It’s not as intimidating as trying to do it with philanthropy or governments. They just don’t have the money and capitalism needs to line up and drive it in the metrics.
How do you reduce the pay gap between the lowest paid and the highest paid employees in an organization?
The key is to focus on what you are doing at each level. We’ve gone from $ 15 an hour over three years to $ 20 an hour, so the starting salary in our company is $ 40,000 for everyone. The first thing is to know what you are doing to help, and not the gap, but rather how you make sure that everyone in our company has a great standard of living, a lot of ‘benefits. Everyone has the same health care plan. The difference is the people in the lower wage stratum in our company contribute 10% and people in the upper wage stratum contribute 90%. We’ve used that — having people earning more to pay more — to cut costs.
People focus on the gap, but in a capitalist society you are going to have pay differences for different skill sets in the business. We strive to ensure that every job is equal pay for equal performance. We measure diversity and make sure we get diverse percentages throughout the business. We present it to people and disclose it.