Economic inequality is pervasive inside and outside of companies. Some CEOs, like
Bank of America’s
, have made efforts to bridge that gap.
Moynihan, who chairs the World Economic Forum International Business Council, has been an outspoken advocate for stakeholder capitalism, publicly encouraging sustainable practices, urging other CEOs to prioritize the welfare of employees during the Covid-19 pandemic, and pledging $1 billion to confront racial and economic inequality.
The Bank of America CEO joined a recent Barron’s conference, The Wealth Gap: A Global Perspective, to discuss the company’s pledge to help local communities and the need for banks to address economic and racial inequality.
Our conversation below has been edited and condensed for clarity.
Barron’s:Brian, sorry to point out the obvious, but you are a Caucasian man, a one-percenter. What got you interested in this topic?
Moynihan: [Diversity and inclusion] became an early-on interest. It comes from the basic principle that, especially in banks, we are companies that are creatures of our communities. Helping people succeed in that community is critical, so it’s sort of endemic to the way you do business. We believe strongly that you could produce returns for your shareholders and produce good for society.
Let’s talk about the $1 billion initiative from BofA to help local communities address economic and racial inequality. Is that philanthropy or a business opportunity?
We in the company have been looking at this question of how to help communities, how to have economic opportunity and economic mobility. We were working on [solutions] in Charlotte with a group of CEOs. Inside our company, [peoplehave] been working with our Hispanic leadership group and our Black African American leadership group on the idea, “How can we help more on economic mobility?”
Then you had the racial justice and social justice issues that hit the country hard, starting with the George Floyd killing, so the group started accelerating the plans to deploy that. We [already] do about $250 million [each year] in charity, we do $5 billion low- and moderate-income housing finance, we do a lot of those things. But [the leadership group] said we need to redouble our efforts really geared at economic opportunity, mobility, and things like that for communities of color.
We said, let’s go after [four] pillars: health, housing, education [and] job skilling, and entrepreneurship. But frankly, this is about working with other groups and other businesses to make it happen, because it’s going to take a lot of work and a lot of effort.
What are some specific initiatives?
About two or three weeks ago, we announced the first allocation, $300 million. That included things along every dimension, the healthcare dimension included, to stop this virus from spreading. [Covid-19] does affect Hispanic communities and Black communities more heavily. We’ve been donating [personal protection equipment], masks in particular. We did a vaccine clinic for testing with Howard University in the neighborhoods of Washington, D.C.
Another part of it was in the educational space. One was to community colleges [that focus on African American, Hispanic, Latino, and other minority communities] to work on [job skill development]. Then the HBCUs, it was more about career pathing, job development, interviewing practices, and things like that.
Then the other piece was equity investments. We already had $100 million, plus deposits, in [minority depository institutions] as a whole. And then we said there would be another $200 million for equity investments in growth companies that need capital.
What is the role of financial services institutions in addressing income and racial inequality?
The financial institutions have a long history in helping make community-based lending, both directly and through other institutions. We today have about $16 billion in the [community development financial institutions] structure across America as an investment in them to re-lend. If we can’t make the loan to a borrower because they don’t meet our underwriting criteria, we work with them to make the loan.
The other way we do it is with our direct lending. We’re one of the largest small-business lenders in the country. We have a huge portfolio of loans to minority-owned companies and women-owned companies and make that a priority. We think of ways that we can lend and provide capital in our regular way. On housing, we do $5 billion a year of low-, moderate-income housing. The point about all this is it needs to be more. That’s where the new [$1 billion initiative] comes in.
As the head of the International Business Council, you’ve said a lot about stakeholder capitalism. Why is stakeholder capitalism critical to solving racial and income inequality?
We need to aim capitalism to solve the big problems facing the world. The metrics we’ve been working on at the [International Business Council] give you a way to measure the companies making progress. The idea is to have those exposures so that the companies [that] are making progress can be rewarded by teammates coming to work for them, clients doing business with them, shareholders investing in them.
Think about how much private enterprise can drive through our purchasing and vendor contracting principles [and] capital formation in minority-owned businesses [and] women-owned businesses. Think of all the equity capital in the world aimed at solving these problems. It’s not as daunting as trying to do it with philanthropy or governments. They just don’t have the money and capitalism needs to align itself and drive it in the metrics.
How do you decrease the wage gap between the lowest and highest paid employees within an organization?
The key is to concentrate on what you do at each level. We went from $15 an hour over three years to $20 an hour, so the starting wage in our company is $40,000 for anybody. The first thing is what do you do to help—not the gap as much as how you make sure everybody in our company enjoys a great standard of living, a great set of benefits. Everybody has the same health care plan. The difference is the people in the lower pay stratum in our company contribute 10%, and the people in the upper pay stratum contribute 90%. We have used that—having people who make more pay more—to keep the cost down.
People focus on the gap, but in a capitalistic society, you’re going to have differences in pay for different skill sets in the company. We concentrate on making sure every job is equal pay for equal performance. We measure diversity and ensure that we are getting diverse percentages all the way through the company. We lay that out for people and disclose it.