Minority and Women Owned Businesses: Leveraging NYCs Unparalleled Diversity to Boost Middle Class Jobs + Strengthen Our

Neighborhoods By Scott M. Stringer

New York has by far the most minority-owned businesses of any city in Americaover 403,000 representing a key driver of jobs in the citys economy and a mainstay of working, middleclass neighborhoods across the city. Similarly, women-owned businesses represent almost a third of all firms in the New York. Despite their critical presence in every corner of the city, minority and women-owned enterprises (M/WBEs) continue to be shamefully under-represented in government contracts in New York City. In FY 2012, only 881 M/WBEs were awarded contracts, totaling a mere 5 percent of the $10.5 billion spent on goods and services by City Hall1 -- a gross imbalance in a city as diverse as New York. As Comptroller, Scott will set a goal to double MWBE spending by City agencies within three years, from todays $529 million to $1 billion. With the citys recent decision to remove the $1 million cap on contracts for which MWBEs can compete, doubling the projected targets for new contracts is both realistic and necessary. Scott believes that nothing is more important than growing jobs and opportunity for the middle class and those striving to get there, who are increasingly being priced right out of New York. Boosting M/WBEs will not only produce economic growth in neighborhoods throughout the five boroughs, but will increase competition in procurement, helping drive down costs for all taxpayers. Helping to support M/WBEs will also grow jobs in many of the neighborhoods hardest hit by the last recession, research shows. As Comptroller, Scott will take three fundamental steps to achieve this goal and to help grow the strength of M/WBEs and advance issues related to diversity in both city government and corporate America:
1

http://www.nyc.gov/html/mocs/downloads/pdf/Fiscal2012_ExecSummary.pdf.

1) Appoint a Chief Diversity Officer within the Comptrollers Office to oversee M/WBE performance by city agencies, and to leverage the citys pension investments to foster greater diversity on corporate boards. 2) Demand performance by assigning each agency with a letter grade based on their progress in meeting M/WBE contract targets, and posting the grades prominently on the Comptrollers website. 3) Work with the Department of Small Business Services (SBS) and neighborhood organizations to bring workshops and trainings into communities with high concentrations of M/WBEs, as a way to help small businesses navigate the complex contracting process. Appointing a Chief Diversity Officer Scott will appoint a Chief Diversity Officer (CDO) to oversee M/WBE performance by city agencies and to leverage the citys pension investments to foster greater diversity on corporate boards. New York City already lags behind other governments and organizations that have appointed CDOs in recent years. In 2010, then-Governor David Paterson created a CDO for New York State to both promote diversity among the States workforce and boost M/WBE participation in the States procurement. New York State is not alone. From the U.S. State Department to countless corporations that call New York City home, CDOs have played an important role in ensuring that our institutions private and publicare open to all Americans. A CDO within the Comptrollers office will also have the unique ability to work with the Comptroller to leverage our Citys pension investments to encourage greater diversity on corporate boards. In May, Luis A. Aguilar, the Commissioner of the Securities and Exchange Commission (SEC) told the Women's Executive Circle of New York that gender diversity on boards gives businesses a distinct competitive advantage.2 In particular, Aguilar added, companies with women directors deal more effectively with risk[and] improve their ability to attract and retain other talented women. Despite the benefits of diversity on corporate boards, progress has been slow and spotty. In 2002, 13 percent of the more than 5,000 corporate board seats for S&P 500 companies were occupied by women. Today, that number is 17 percent, with only 21 women serving as CEOs of Fortune 500 companiesa mere 4 percent of the total.3 Meanwhile, competitor nations are doing much better. In India and Brazil, 11 percent of large
2 3

http://www.sec.gov/News/Speech/Detail/Speech/1365171515760#.UgAQU9IqZc0. Id.; http://www.catalyst.org/knowledge/women-ceos-fortune-1000.

company CEOs are women and in China 32 percent of senior managers in China are women, compared with 23 percent in the United States.4 Other nations, including Norway Iceland, France, the Netherlands, Spain, Italy, Malaysia, and Belgium have passed laws requiring that a certain percentage of board members be women.5 The lack of progress for women in corporate America extends to the inclusion of people of color on corporate boards. A recent analysis from Calvert Investments shows that Standard and Poors (S&P) 100 companies are still failing to put substantial numbers of women and minorities into board rooms and executive suites.6 The findings of the Calvert study include:

The representation of women and people of color in management roles decreases with each step up the corporate ladder. Fifty six percent of S&P 100 companies have no women or minorities in their highest-paid senior executive positions. 39 companies do not disclose any employee demographic data, leaving consumers and investors unable to determine the effectiveness of corporate diversity initiatives

As the fiduciary of the Citys $140 billion pension fund, the Comptroller can and should play a key role in encouraging corporations to diversify. An August 2012 report by Credit Suisse that examined 2,400 companies over a six-year period (2005-2011) showed a significant correlation between boards that are diverse and a higher firm value.7 As a member of the Thirty Percent Coalitionone of the largest coalitions seeking to diversify corporate boardrooms in Americathe NYC Comptroller has worked with other institutional investors, advocates, and elected officials to file dozens of shareholder resolutions urging companies to adopt language supporting diversity and to diversify the membership of their corporate boards, with the goal of attaining at least 30 percent female representation across public company boards by the end of 2015.8 Having a CDO in house will only strengthen the Comptrollers capacity to perform this critically important work. By investing our pension funds in companies that have diverse leadership, we will maximize return to shareholders, saving taxpayers money and securing retirement savings for 650,000 working class New Yorkers. Ensuring Agency Accountability With M/WBE Grades As Comptroller, Scott will launch a letter-grade system for city agencies to track their efforts to boost M/WBE procurement. Just as the Citys restaurant grading system has led to steep declines in violations of the health and safety code, creating a public, easily referenced grading system for
4 5

http://www.economist.com/node/21526872. http://www.nytimes.com/2010/01/28/world/europe/28iht-quota.html?pagewanted=all&_r=0. 6 http://www.calvert.com/NRC/literature/documents/BR10063.pdf. 7 http://www.fortefoundation.org/site/DocServer/cs_women_in_leading_positions_FINAL.pdf?docID=17902; http://www.europarl.europa.eu/document/activities/cont/201011/20101124ATT00354/20101124ATT00354EN.pdf. 8 http://www.30percentcoalition.org/news/97-institutional-investors-file-shareholder-resolutions.

M/WBE performance will provide a powerful incentive for agency heads to meet and exceed their targets for M/WBE contracting. In compiling these grades, Scott will build upon the current M/WBE Report Card NYC, an online initiative of Comptroller John Liu. These grades will take into account a broader array of criteria and contracts, including:

The number and total dollar value of contracts awarded to MBEs, WBEs and Emerging Business Enterprises (EBEs) The relative progress of any agency in approaching target goals The number of full or partial waivers of target participation requirements granted by each agency, and the number and dollar amount of those contracts for which such waivers were granted The number of non-compliance findings and actions taken in response to such findings Prompt payment performance statistics provided by the Procurement Policy Board

Scott will post these annual grades on the Comptrollers website and will issue a report with recommendations for agencies that continue to lag behind. Bringing Critical Small Business Services to Communities Throughout the Five Boroughs As Borough President, Scott recently issued a first-of-its-kind survey of certified M/WBEs, which found that many M/WBEs do not attend any workshops offered by SBS because workshops are not at convenient times or locations. Many did not even know workshops were available. In fact, SBS workshops and one-on-one trainings generally take place at the SBS offices at 110 William Street in Lower Manhattana significant trip for the majority of M/WBEs in Northern Manhattan, the Bronx, Brooklyn, Queens, and Staten Island. While there are now over 3500 certified M/WBEs in New York Cityan increase of over 200 percent since 2007that equals less than 1 percent of all City M/WBEs.9 Government should not wait for business to come to it. Government must go to businesses, where they are, in all five boroughs. As Comptroller, Scott will work with SBS and community organizations throughout the City to bring SBS workshops to the doorstep of entrepreneurs and will urge SBS to make workshops
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City of New York, Minority and Women-Owned Business Enterprise Program: Preliminary Report for Fiscal Year 2013, available: http://www.nyc.gov/html/sbs/downloads/pdf/LL129_April2013_CityCouncil_Prelim_rpt.pdf; In order for an M/WBE to be counted toward Local Law 129 goals, it must be certified by the City. Certification in the City is handled by the Department of Small Business Services, which offers workshops for M/WBEs interested in becoming certified. See: http://www.nyc.gov/html/sbs/nycbiz/html/summary/course_catalog.shtml#mwbe.

available online so that business can learn about the M/WBE program anywhere, anytime. M/WBEs represent an underutilized resource of potential job growth in communities that continue to suffer from high unemployment. By ensuring that they have all the support they need, where and when they need it, we can help these small businesses thrive and in turn, develop a stronger, more diverse economy.