Robert Smith thinks he has the cure for the wealth gap between black and white Americans. Smith is a financier who is currently the richest black man in America according to Forbes, with a total wealth estimated to be around $5 billion. In an interview published today, Smith endorsed the idea of reparations for slavery but seemed to focus on the idea of corporations putting up money to provide more opportunity for black-owned businesses:
In a video interview with Reuters, the CEO of private equity firm Vista Equity Partners said companies that profited from the Transatlantic slave trade should consider making reparations to African-Americans.
“I think that’s going to be a political decision that’s going to have to be made and decided upon. But I think corporations have to also think about, well, what is the right thing to do?” Smith said in a video interview.
Corporations “can bring their expertise and capital to repair the communities that they are directly associated with in the industries in which they cover,” he added. “I think that has to be a very, a very thoughtful approach. But I think action needs to be taken.”
It’s a bit hard to parse but I think the reference to “a political decision” is the idea of voting in Congress on some form of reparations from the government. But Smith’s main focus is on a privatized reparations plan which he has been promoting for several weeks. It involves asking major corporations to direct 2 percent of their net income into black communities, mostly to create access to capital for black-owned businesses. Forbes did a story on Smith’s “2% solution” in mid-June:
In recent days, Smith, whose net worth is estimated to be $5 billion, has been sharing a concrete plan with the nation’s business leaders that argues that an investment equal to 2% of net income over the next decade would be a small step toward restoring equity and mobility in America. He has implied that America’s big corporations should feel compelled to support such a plan given the exclusionary practices of many industries over several decades. Smith made the case that the average American household charitably donates 2% of its income annually and is asking corporate America to do the same…
In his talk on Thursday, Smith pointed out that the net income of the ten largest U.S. banks over the last ten years was $968 billion. He figured just 2% of that would amount to $19.4 billion, which could be used to fund the core Tier 1 capital of community development banks and minority depository institutions that primarily service Black communities…
“The deprivation of capital is one of the areas that creates a major problem to the enablement of the African American community,” Smith told the more than 200 top philanthropists who attended the 9th annual Forbes philanthropy summit, which this year was held on Zoom. “The first thing to do is put capital into those branch banks to lend to these small businesses to actually create an opportunity set . . . drive it into these small businesses, which employs 60%-plus of African Americans.”
Some companies appear to have already made a 2% commitment. In late-June, Netflix announced it would shift 2% of its cash on hand to put it toward black communities. The companies press release sounded like it could have been written by Robert Smith:
“Black banks have been fighting to better their communities for decades but they’re disadvantaged by their lack of access to capital. The major banks, where big multinational companies including ours keep most of their money, are also focusing more on improving equity, but not at the grassroots level these Black-led institutions can and do.”
As reparations proposals go, this seems like one of the most sensible. It doesn’t involve money from taxpayers and the goal of creating more access to capital and allowing black business owners to, essentially, create progress for themselves and those around them seems a lot more appealing than simply sending people checks.
Here’s Smith describing his plan in an interview with Forbes: