Cheryl L. Wade

excerpted from: as Corporate Social Responsibility: Empathy And Race Discrimination , 76Tulane Law Review 1461-1482, 1469-1480 (June, 2002) (73 footnotes)

Even before companies such as Texaco and Coca-Cola paid huge amounts to settle racial discrimination suits, Professor Charles D. Watts, Jr. linked "unique aspects of [American] society" to the persisting and long-standing problem of "racial discrimination in employment." Watts observed that some economists conclude "that the market will, in fact, eliminate racial discrimination in the long run" because it is not profitable. "Have we not had a long run experience with racial discrimination? When will this lengthy intermediate period come to an end?" Professor Katherine V.W. Stone also considers the economists' theory that discrimination is "irrational and inefficient," observing that economists have been wrong in predicting that discrimination's inefficiency would lead to its demise.

While some academic scholars have considered the intractability of racism in large publicly held companies, books on corporate governance are silent on race issues. These are the books most likely to be consulted by corporate boards and managers, because they offer practical consideration of appropriate directorial and managerial behavior. The books cover good times and times of crisis, but they do not offer advice about how to avoid debacles such as those that occurred at Texaco, Coca-Cola, and other companies, which culminated in huge financial settlements paid to racial discrimination victims. Considering the evidence of continued racial discrimination and harassment, it seems that corporate officers and directors are not thinking or talking about race and racism withintheir corporations other than in the most superficial ways.

Professor Ian F. Haney López has written about the pervasive importance of race in all areas of the law. "Race suffuses all bodies of law . . . even 'the purest of corporate law questions'. . . . [N]o body of law exists untainted by the powerful astringent of race in our society." López emphasizes the structural nature of racism in the United States and argues against the predominant belief that racism is a disease that primarily affects individuals. He describes the factual reality of institutional racism, writing that the failure to acknowledge racism in America's institutions "not only fails to challenge but reinforces a crucial cultural and political myth, that every element in U.S. society is committed to equality and social justice for racial minorities."

If race "suffuses all bodies of law," why aren't corporate lawyers, managers, officers, and those who advise them writing and talking more about race? Why aren't boards and officers creating and implementing the types of effective monitoring systems that may more capably confront workplace racism until they are forced to do so after racial discrimination litigation is filed? What can convince corporate directors and managers to live up to the fiduciary duty of care they owe shareholders to monitor compliance with antidiscrimination law in a way that would better achieve internal corporate social responsibility that may have external or societal impact? My initial consideration of these questions led me to an intuitive conclusion that empathy may be a prerequisite for real corporate social responsibility.

Empathy, as used in this Essay, is defined as the "[i]dentification with and understanding of another's situation, feelings, and motives." "Empathy . . . is more than an intellectual predisposition, or belief; it is a readiness to be engaged in the experience of others." "Empathy has been variously described as a . . . process, . . . a mode of observation, and an information-gathering activity." Initially, I thought that understanding the situation in which many people of color find themselves in companies with racially toxic cultures, would lead to effective monitoring of discrimination. I was drawn to definitions of empathy that described it as a "process" and an "information-gathering activity" because satisfaction of the duty of care is itself a process of information gathering. Perhaps, I thought, empathy for people of color would inspire adequate monitoring of corporate compliance with antidiscrimination law, and such monitoring would foster further understanding of the discrimination faced by people of color. In other words, empathy may inspire satisfaction of the duty to monitor, and the monitoring may foster further empathy.

The role that empathic consideration plays in legal decision making has been examined in a variety of contexts. Professor Estlund has explored the possibility of empathy in the workplace, writing, "Through informal social interactions, employees often learn about each others' lives and develop feelings of mutual understanding . . . [and] empathy." Even while acknowledging the inevitability of empathy, or its potential value in legal decision making, however, scholars have recognized empathy's shortcomings and limitations.

First, one component of empathy is finding similarities with the object of empathic understanding, or analogizing the other's situation to that of the one who empathizes. The comparisons that inspire empathy, however, obscure important distinctions and reduce the possibility for true understanding of another's circumstances. Second, some scholars conclude that "we think we-and others-have much more empathy for the downtrodden than we, in fact, do" and that this kind of "[f]alse empathy is worse than indifference . . . . It encourages the possessor to believe he is beyond reproach." Third, "unequal power arrangements can block any instinct toward empathy." Fourth, a single decision or situation may give rise to competing claims for empathy. In a criminal case, for example, one can empathize with the victim or the defendant, depending on the circumstances that gave rise to the defendant's conduct. Finally, "empathy does not guarantee that our emotions will lead us to act in an ethical or just way."

Understanding empathy's shortcomings may begin to explain the entrenchment of racism in the workplaces of large publicly held corporations. White managers and directors, successful themselves, are not likely to understand the impediments to success faced by many people of color. Much of the racial discrimination that occurs in the workplace is unconscious. The privileges enjoyed by whites in the workplace remain unnoticed by the beneficiaries, masked by discussions of meritocracy. Any unfairness faced by a white male in the workplace may be used by him in an attempt to understand the unfair treatment of people of color. The comparison between his own situation to that of minority employees will produce, at best, a superficial understanding of racial inequities faced by employees of color. His attempt to understand, to empathize, will place him beyond reproach, leaving him unable to recognize any unconscious bias in employment decision making.

Inequities in power arrangements within a company may also preclude white managers from empathizing with employees of color. Moreover, the manager must grapple with several competing claims for empathy. He is required to "empathize" with shareholders, and must also attempt, in some instances, an understanding of situations faced by nonshareholder constituencies. Finally, even if managers and directors find a way to understand workplace racial realities adequately, they may not be moved to make changes.

Because empathic understanding of people who are different from the one who empathizes is difficult, or perhaps impossible, as some have argued, taking action to enhance empathy for people of color is not the solution for persistent workplace racial inequities. Empathy is not the solution, empathy is the problem. "Empathetic feelings toward members of one's own racial group . . . explain indifference or even hostility toward members of other racial groups." Empathy for others who are similarly situated is not difficult, and in the workplace, this may mean that corporate managers and directors, almost all of whom are white and male, will easily empathize with corporate constituents who are most like them.

Enhancing empathy for people of color is not a viable resolution of the persistent problem of racial discrimination. Ubiquitous empathic understanding on the part of corporate boards and managers for other white males, however, may begin to explain why racism persists in large companies. White men are hired more easily, promoted more frequently, and paid more than people of color and women because they are most similar to the white men who make these corporate decisions. Senior executives and directors may fail to investigate and monitor compliance with antidiscrimination law because they empathize with the white men who are hired, promoted, and paid more. At the same time, they may not be able to empathize with their employees of color.

A. Barriers to Empathic Consideration for Employees of Color

An examination of the relationship between the African-American community and the segment of society to which an overwhelming majority of corporate managers belong (most corporate directors and managers are white and male) illustrates the barriers that preclude empathic consideration for racial minorities. While the observations I make in this Essay apply to all racial minorities affected by corporate activity, I use the social realities relating to African Americans as a vivid example of empathic barriers. One force that helped create these barriers to empathy is the alarming fact that people of African descent are the subjects of almost daily news items relating to criminal activity. While it is indisputable that African Americans engage in criminal activity, these frequent portrayals of African-American criminality, coupled with the social reality of racial isolation and de facto segregation, may make it difficult for some white Americans and, most relevant to the thesis in this Essay, corporate managers, to empathize with African-American victims of racial discrimination. One of the most obvious and poignant examples of the racial isolation that separates black and white citizens is the de facto segregation in school systems resulting from de facto segregation in housing. Because black and white citizens lead such separate lives, it is easy to think of this racial minority as undeserving, dangerous, unlawful. They are not victims, they are predators. The sagas of the untruthful allegations of black criminality made by Charles Stuart and Susan Smith are two famous examples of the willingness of some whites to perceive citizens of African descent as perpetrators of heinous acts, not victims of discrimination or harmful untruths.

Frequent portrayals of African Americans as criminal affect every aspect of American life, including the workplace. "[E]ven middle-class blacks have to work consciously against [the] stereotype" of African-American criminality. There is also a legacy of inferiority that taints the collective reputation of African Americans. This legacy derives from the social construction of enslaved Africans as less than human. It was against the law to teach them how to read and write. Public and popular depictions of African Americans as "incompetent, shuffling, and dim-witted" persisted long after slavery ended. In theater and literature, people of African descent were depicted as "lazy, illiterate . . . sambos [who] spoke nonsense." Minstrel shows portrayed the formerly enslaved Africans as "inept . . . or child-like." Attacks on the intellectual acuity of African Americans continue today. One of the most recent examples is a book arguing that African Americans are genetically inferior to whites and Asians.

Negative societal messages about African Americans abound. These messages are internalized by many, and this affects even the professional reputation of African Americans. The fact that most negative beliefs about African Americans are held unconsciously does not lessen the harm to the collective reputation of Americans of African descent. African Americans are implicitly and explicitly stereotyped as criminal and unintelligent. These are characteristics that are obviously antithetical to corporate success, and, to the extent such stereotypes are unconsciously held by corporate managers, empathy for people of color who confront discriminatory employment practices is impossible.

The best example of the positive value of empathy for victims of discrimination is found by considering the woman's place in corporate life. This nation's legal and social discourse on sexual discrimination and harassment has been far more extensive and meaningful than that which has taken place regarding racial discrimination. Formal discussions of, and prohibitions against, racial discrimination lack the detail and clarity found in legal and corporate prohibitions against sexual harassment and discrimination. For example, in a treatise on the law relating to civil rights and employment discrimination, there is a section entitled "Sexual and Racial Harassment," describing problems in the workplace. Only a small part of the extensive discussion is devoted to racial discrimination. Almost every one of the cases cited relates to sexual discrimination or harassment. Only one of the cited cases clearly covers the problem of racial discrimination. Moreover, the Equal Employment Opportunity Commission (EEOC) has published several policy guides relating to the problem of sexual harassment in the workplace. I found no EEOC-published guidance on the problem of racial discrimination.

Corporate officers, directors, legislators, administrators, and even judges may more easily understand, and be able to empathize with, women professionals who allege gender discrimination. The stories told by women who are victims of discrimination may be similar to the stories of unfair treatment that these jurists and executives, most of whom are white, have heard told by their wives, sisters, daughters, and even mothers. Generally, jurists and corporate managers who are white will have fewer opportunities to hear personal accounts of discrimination told by people of color because they have no familial or other close personal relationship with people of color. Empathy for racial minorities, with whom there is no close personal relationship, is less likely. This may explain why sexual harassment policies in particular, and sexual discrimination law in general, are far more developed than policies and law relating to racial discrimination and harassment.

B. Empathy: Women of Color in Corporate America

All of the accounts of the Texaco debacle ignore the significance of the fact that the litigation was filed initially by an African-American woman who remained the named plaintiff in the class action. Nothing is said about the discrimination that she and other women suffered because they were women of color. Even in a book authored by Roberts giving her personal account of Texaco's toxic racial culture, nothing is said about differences in the way women of color were treated when compared to minority men. For example, one pregnant woman was the target of a degrading "joke" that was attributed to the racism of the "joker," rather than his sexism, even though the "joke" was about her pregnancy.

In the immediately preceding Part, I hypothesized that corporate directors and managers are more likely to empathize with white women who are victims of discrimination than with minority victims of discrimination. Close personal relationships with white women who share personal narratives of discrimination inspire corporate managers to develop policies against sexual harassment and discrimination. Corporate policies prohibiting racial discrimination are not as clearly stated, and conduct that breaches these policies is infrequently monitored. Because close personal relationships between corporate managers, most of whom are white and male, and people of color are more rare than their relationships with white women, directorates and management respond more effectively to sexual discrimination and harassment than to racial discrimination allegations. I compare empathic understanding of women and racial minorities, not to compare or compete about who has suffered the most, but simply to make an observation about the way companies are governed and the role that empathy plays in their governance.

It is even more unlikely that corporate decision makers would have the kinds of personal relationships that would foster empathy with women of color. Stereotypes and personal experience with women of African descent, in particular, lead to conceptions of women of color that are completely antithetical to the paradigm of corporate success. The personal relationships with women of color, which are experienced by most who belong to the class of persons to which corporate officers and directors belong, revolve around the provision of childcare, elder care, or domestic work.

C. Empathic Approaches in Corporate Governance

The power and importance of empathic understanding is demonstrated by the observation that empathy may be the basis of some fundamental corporate governance principles. Certain corporate governance rules may have emerged because of the role empathy plays in the processes of corporate decision making. I offer several examples.

First, the Delaware Supreme Court explicitly acknowledged the role empathy plays when special committees of the board of directors are formed in order to determine whether derivative litigation alleging directorial or managerial wrongdoing that harmed the corporation should go forward. The Court held that substantive review of a special litigation committee decision to prevent such litigation is necessary, because committee members will empathize with the directors or officers whose conduct is challenged. "[W]e must be mindful that directors are passing judgment on fellow directors in the same corporation . . . . The question naturally arises whether a 'there but for the grace of God go I' empathy might not play a role." Professor Donald Langevoort describes what I have labeled empathy as an "'in-group' bias that colors how [directors] evaluate claims by others (such as derivative lawsuits brought by shareholders) that threaten one or more group members." Second, empathy may preclude board members, even outside directors who are not employed by the company, from adequately monitoring the conduct of chief executives because they too are senior officers.

Third, judicial justifications of the business judgment rule tacitly describe empathic understanding of the difficulties of corporate decision making. Courts explain that they defer to the business decisions made by corporate boards under the business judgment rule, because they cannot reproduce the exigencies of boardroom decision making in the courtroom. This illustrates unexpressed empathy for corporate officers and directors. Moreover, the very basis for the creation of the business judgment rule is to resolve the problem in large publicly held companies that those who own the company, the shareholders, are not the ones who manage the company. In other words, the business judgment rule is necessary because directors and managers cannot be expected to empathize sufficiently with shareholders.

Another example of corporate governance rules implicitly aimed at inspiring empathy is found in the Securities Act of 1933. Section 77k imposes liability for materially misleading statements or omissions in registration statements. The section also provides what is called the "due diligence" defense, which is available to any defendant who conducted a reasonable investigation about the truthfulness of registration statement materials. The Act defines reasonable investigation as requiring a level of reasonableness that "a prudent man" would apply "in the management of his own property." This standard inspires empathy for shareholders, or potential shareholders, who may rely on a registration statement by requiring defendants to manage shareholders' affairs in the same way they would manage their own.

Even the most mundane corporate governance issues implicitly recognize the importance of empathy, or aligning the interests of the decision maker with the interests of the group for whom decisions are made, as a way to resolve the separation of ownership and control problem. For example, some companies provide corporate managers with stock options. This aligns the manager's personal wealth with that of shareholders. It fosters a manager's identification with the company. Robert Hamilton writes:

The National Association of Corporate Directors has recommended that a significant portion of each director's compensation should be paid in the form of stock in the corporation rather than in cash. This recommendation, designed to align the economic interest of directors more closely with those of the shareholders, has been widely adopted.

[a1]. Dean Harold F. McNiece Professor of Law, St. John's University School of Law. I would like to thank Professors Martha Fineman, Martha McCluskey, and Dalia Tsuk for planning and executing the Workshop on Feminism, Corporations, and Capitalism, sponsored by the Baldy Center for Law & Social Policy and the Feminism and Legal Theory Project, at which an earlier draft of the Essay was presented.