Why Chicago’s History Of Black Business Success Is Fading

Why Chicago's History Of Black Business Success Is Fading
Linda Johnson Rice with her father, John Johnson, the founder of Chicago’s Johnson Publishing Co., in 1985. Today, Ms. Rice is chairman of the company her father built.

AFRICANGLOBE – Looking at the history of Black business success, Chicago has no equal. Unfortunately, the past has not been prologue.

Chicago was the incubator for such significant Black businesses as Johnson Publishing Co., Johnson Products and more than a dozen other nationally recognized Black-led companies. No other city has birthed Black business icons as notable as John Johnson, Ed Gardner and, of course, Oprah Winfrey.

But as those success stories fade into history, prominent black business professionals are raising unsettling questions about the current state of black entrepreneurship: Where is the next generation? Why do so many executive suites and corporate boardrooms lack minorities? And is Chicago’s mainstream business culture institutionally biased against promoting African-Americans into the upper ranks?

Chicago has more than its share of nationally recognized African-American politicians, entertainers, musicians and sports figures. But the decreasing visibility of major black business leaders is stark in comparison to the region’s sizable black population and its storied history. A Chicago Urban League survey released this year showed that only 6.6 percent of corporate board members in parts of four Great Lakes states are black.

“It used to be that Chicago was the mecca of black businesses, but there’s no doubt that we have gone backwards substantially when it comes to successful African-American entrepreneurs,” says John Rogers Jr., founder and CEO of Chicago-based Ariel Investments LLC.

Tapped by Mayor Rahm Emanuel in 2011 to lead a task force on business diversity, Mr. Rogers has delivered numerous speeches citing the bleak statistics. But he wonders just how many corporate leaders have been listening. There are few black-led companies among the top 25 national firms in many important sectors—banking, construction, law, finance. When Don Thompson was named CEO of McDonald’s Corp. last year, he became just the sixth active black CEO at a Fortune 500 company. Loop Capital Holdings LLC’s James Reynolds and Mr. Rogers also are among the few exceptions that prove the rule.

“The reality is, we are not being included in the lucrative, fast-growing parts of our economy—the sectors where long-term, real wealth is created: hedge funds, private equity, investment banking,” Mr. Rogers says. ”The state of diversity in the finance industry is appalling. Ninety-nine percent of leaders talk a big game, but in places like Chicago, we have gone backwards. We’re just not fighting hard enough.”

Why Chicago's History Of Black Business Success Is Fading
Left to right: Ed Gardner and Oprah Winfrey; Ariel Investments LLC founder and CEO John Rogers Jr.

Black leadership is equally hard to find in other key Chicago industries, such as commercial real estate development, futures and options exchanges and the burgeoning technology sector. If Mr. Rogers’ statements have merit, and the dismal statistics suggest they do, how did this happen? Why are Blacks still so behind the curve, 50 years after the March on Washington?

Experts point to a complex array of reasons.

For one, cultural and consumer-buying patterns have changed. Larger, mainstream companies now market products to Black consumers, and African-Americans are less likely to look solely at Black-owned companies for their needs. Thus, it’s harder for a Black entrepreneur to market products or services primarily to Blacks and achieve success.

“Johnson Publishing and Johnson (Products)—those companies grew and thrived when there was real segregation in the market,” says Andrea Zopp, president and CEO of the nonprofit Urban League, which advocates for African-American causes. Today, that segregation is waning. The business model that John Johnson and Ed Gardner pursued—dominating the Black market because the larger White consumer market was closed to them—no longer exists.

The recent economic crash also cannot be overlooked. Anecdotal evidence suggests that Chicago’s Black business community has taken an even greater blow than White-owned businesses. Before the recession, Chicago had 17 banks either owned by minorities or focused on lending to minorities. Six failed. And as banks have failed and credit has tightened, Black entrepreneurs have found working capital harder to come by. In addition, when companies begin struggling for mere survival, efforts to diversify often are shoved to the back burner.

The reverse migration of Blacks from the Midwest and Northeast to Southern cities, such as Atlanta, Houston and Dallas, also could be negatively affecting Chicago’s Black business community. Atlanta, in particular, has become a magnet for college-educated blacks.

The Chicago region lost 72,000 Black residents from 2000 to 2010, according to census data. Chicago and its suburbs, especially its southern suburbs, long had been home to the second-largest population of Blacks in the country. But in the early 2000s, Atlanta surpassed Chicago in that category.

Yet the Chicago region’s overall Black population remains at more than 1.6 million residents. And the Urban League’s Ms. Zopp notes that her group has seen no drop in African-Americans registering for job-training and other business-oriented classes.

Fewer Business Grabs 

Another partial explanation comes from the demographics of MBA programs. Compared with other racial groups, fewer Blacks are gaining admission to elite business schools, according to a 2006 study by the Journal of Blacks in Higher Education. This could diminish the supply of talented, highly trained Black business professionals entering the job market.

Among the 24 high-ranking business schools that responded to the survey, only 291 first-year MBA students, or just 4.4 percent, were Black. The survey also found that while leading undergraduate schools tend to accept Blacks at a higher rate than Whites, most business schools did not practice such race-sensitive admissions. Of the 12 leading business schools that provided responses, only Cornell and Purdue accepted Blacks at a higher rate than the rate for all students.

Others point to cultural barriers as another reason for the lack of diversity. “I believe it’s just institutional racism, pure and simple,” says Steven Rogers, a lecturer at the Harvard School of Business and a former institute director at Northwestern University’s Kellogg School of Management.

As evidence, Mr. Rogers (no relation to John Rogers) notes that minorities and women remain underrepresented on the boards of top-grossing companies. In 2012, more than 70 percent of board members directing Fortune 500 companies were White men, according to a study released in August by the Alliance for Board Diversity, a collaboration of nonprofit groups dedicated to promoting corporate diversity. The study concluded that boardroom diversity has inched up only slightly over the past decade.

Steven Rogers rejects the notion that the talent pool of Blacks is insufficient to make greater progress. He says racial bias is the main culprit, adding that this view is common among Blacks in the business world. But the sentiment is articulated mostly in private, the professor says, because few African-American professionals see an upside to speaking out. After all, it’s not going to boost sales or win a promotion for a Black professional to demonstrate in the streets or be quoted in the media complaining about institutional racism.

In sheer numbers, Chicago trails only New York in the number of Black-owned businesses, according to census data. Chicago was home to more than 58,600 such businesses in 2007, the most recent data available shows. New York had nearly 155,000 Black-owned businesses, while Houston had roughly 33,000 and Detroit had almost 32,500. But even with Chicago’s robust showing, “it’s still sort of like being the tallest short person in the room,” Harvard’s Mr. Rogers says. “When you look at these decisions about who to move up in a company, these are qualitative decisions, and we know that bias of all kinds plays a bigger part in those decisions.”

An Eye-Opener

Janice Corley says she has experienced such bias. Ambitious, confident and well-educated, Ms. Corley arrived in Chicago from her native Houston in the 1980s fully equipped to climb the ladder in the city’s high-flying corporate world. But she says she soon crashed into what she calls Chicago’s “granite ceiling” for minorities.

“I used to train the young White guys until I realized that I was training people to eventually be my boss,” she says. “After a while, I thought to myself, ‘Why am I training these kids out of college to eventually tell me what to do?’ It was eye-opening.” Ms. Corley abruptly quit her job at General Motors Financial Co. in Oakbrook Terrace in 1989. (She recalls her boss telling her dismissively, “You’re just having a bad day.”) She soon fled Chicago’s finance sector altogether and today is an independent real estate agent based in the Gold Coast.

“If you’re a White guy and fit the Superman profile—6 feet, 2 inches, blue eyes—you can go anywhere and do anything and win,” Ms. Corley says. “But if you are African-American, you realize you have to be three or four times better. It really took me a while to understand that good “ol boy network in Chicago.”

Her experience appears to be shared by others. A 2009 city of Chicago survey found that 17 percent of African-American construction firm owners reported that they had suffered discrimination over the previous five years, the highest figure among all minority groups. In the same survey, 63 percent reported they had difficulty obtaining enough working capital to win contracts, again the highest among all racial groups.

Because such biases remain prevalent, Blacks who ascend the ladder often feel as if they are making the steep climb alone. A recent study by the Grassroots Collaborative, a coalition of Illinois activist groups, found that even as the downtown job market boomed in recent years, the number of downtown jobs held by Black Chicagoans declined. So there can be a sense of isolation when an African-American reaches a senior position, looks around the room and sees only White faces, Ms. Zopp says.

This is not to say that all companies ignore diversity. Some Chicago-based businesses have a strong commitment to diversifying their workforce, at both lower and senior levels. John Rogers and Ms. Zopp cite McDonald’s, Exelon Corp., Northern Trust Corp. and others. In fact, Mr. Rogers says he is slightly more optimistic than he was a couple of years ago when he first embarked on his mission to enhance corporate diversity. But he also stresses that, even in the age of an African-American president, progress remains slow.


By: David Mendell