Diversity Knocking Hard on Corporate Doors

Corporate supplier diversity programs are coming under increased scrutiny as America’s minority groups steadily march toward becoming the majority — at least collectively. Most will admit that no corporate giant has perfected its inclusion plan yet and minority business enterprises continue to struggle for a place at the table when these multinationals are selecting business partners.

Among those painfully aware of this is Chaka M. Patterson, vice president and treasurer of Exelon Corp., one of the nation’s largest electric companies with $17.3 billion in annual revenues. He helped developed Exelon’s supplier diversity program that includes a $67 million revolving credit facility with minority-owned banks such as City National Bank of New Jersey (No. 5 on the BE Banks list with $473.3 million in assets) and Legacy Bank (No. 13 on the BE Banks list with $230.9 million in assets).

Editorial Director Alan Hughes caught up with Patterson, 41, at the 2010 Marathon Club DealMakers Summit in Chicago. Here’s what he had to say:

One of the reasons large corporations give for not doing business with minority businesses is that they’re just too small. Is that real?

No, it’s not real. I think it’s complete and utter nonsense. All of these [minority] banks are big enough that they have high-quality, highly talented people to get the work done.

What is it going to take for corporations to really get it right?

If politicians and regulators are held accountable by people who look like us then they in turn will hold companies like mine accountable. For example, we do a merger or acquisition and have a large presence in Illinois and Pennsylvania. If regulators in those two states said, “One of the criteria we’re looking at is how much money you are spending with businesses owned by people of color in connection with this transaction.” And if they don’t like the number, maybe they won’t approve it. So it takes a multi-pronged approach. You have to have a more diverse pool of senior executives and board members. You have to have the political pressure and the education has to be there for the constant pipeline of potential executives.

What else is needed?

Let’s create sizeable entities that can grow into an enormous institution. So I think the final leg to that stool would be some consolidation among some of the minority-owned investment banks. If you could put together the top three or four into one shop they’d be very powerful and get a lot more business because it takes the size issue off the table.

But we tend not to do business or merge with each other. Some have the mindset of rather owning 100% of a $10 million company than 50% of a $30 million company.

I don’t understand that because that $30 million company can grow into a $100 million company.  Among minority-owned investment banks, Christopher Williams (CEO of Williams Capital Group LP) has done a pretty good job. He got a piece of (former BE 100s investment bank Utendahl Capital Partners) when Utendahl decided to exit a business. So at least with investment banks there’s some thinking around a way to do more than just work together but actually merge. On the asset manager side, it’s a no-brainer. You can’t be a $100 million, $500 million or even a $1 billion fund.  It’s just too small. We have concentration limits so even if Exelon wanted to do a big allocation with someone, we’d be half the fund. I’d love to see some of these asset managers get together so big corporations can give them big allocations.