Black Economic Alliance PAC: Wealthy African American executives take on racial inequality

  The Black Economic Alliance PAC wants to help black Americans get work, wealth and wages, but members are still debating policy.

More than a half-century after the Civil Rights Act of 1964 was enacted and Shirley Chisholm became the first black woman elected to Congress, African American households still have half the income of white families. Sure, black unemployment is close to a record low, as U.S. President Donald Trump points out. But it is still almost twice as high as the jobless rate for whites. The wealth gap is wide: Black families with bachelor’s degrees or higher have a net worth of about US$68,000, about one-sixth that of white households with similar educations.

So for one group of black executives, the message was clear: The wealth we have accrued comes with the power – and responsibility – to enact change.

It started small, as these things do: free tickets for black teens to see the movies Selma or Hidden Figures; a personal donation to assist disadvantaged students pursuing engineering degrees. Then the 2016 election replaced Barack Obama with Trump, who spent years spreading the false claim that the first black president wasn’t a natural-born U.S. citizen.

Priorities changed in Washington. The group of executives raised their sights. In 2017 they created the Black Economic Alliance, which, by their reckoning, is the nation’s only political action committee founded by black business leaders and specifically dedicated to the economic issues – wealth, wages, work – that affect black Americans.

That focus on business and economic issues differentiates the Black Economic Alliance (BEA) from other PACs led by or for African Americans. So does the business experience, and wealth, of its leaders. “We got to the point in our careers where we can take risks,” says co-Chair Charles Phillips, who earned US$43.3 million in 2017 after a subsidiary of Koch Industries Inc. completed a more than US$2 billion investment in his software company, Infor Inc.

Phillips, a former president at Oracle Corp., has said the BEA wants to learn from the political fundraising and influence tactics used by Charles and David Koch, majority owners of Koch Industries and among the most influential donors in conservative politics. In January, Infor said it was getting an additional US$1.5 billion, ahead of a potential initial public offering, from a Koch fund and from Golden Gate Capital.

While the BEA is nonpartisan, all 26 candidates it endorsed in November’s elections were Democrats. They ranged from newcomer Lauren Underwood in Illinois, who became the youngest-ever black woman in Congress, to Tim Kaine, a white U.S. senator who won reelection from Virginia and was Hillary Clinton’s running mate in 2016. None of the Republican candidates the BEA contacted before the election responded to the group’s 10-question survey.

The BEA is tiny in the world of PACs. As of December 7 it had raised US$5.8 million, a fraction of the funds donated to groups such as the National Rifle Association’s Political Victory Fund or the National Association of Realtors’ PAC. And the BEA is still deciding where it stands on controversial economic policies that are dividing the Democratic Party, such as tax breaks for businesses.

“We’re just trying to bring to bear what we know best – in a way that will make an important difference in the lives of people.”

Along with Phillips and his wife, Karen, co-founder of the Phillips Charitable Organization, the 8-person board includes co-Chair Tony Coles, a doctor who’s spent his career at drug and biotech companies, and Fred Terrell, a former vice chairman of the investment banking division at Credit Suisse Group AG. The 22-member advisory board features members of the Obama and Bill Clinton administrations, such as Clinton’s U.S. Secretary of the Treasury Robert Rubin and Obama’s National Security Adviser Susan Rice, as well as former Citigroup Inc. Chairman Richard Parsons and Michael Steele, the first African American to serve as chairman of the Republican National Committee.

The fledgling PAC is banking on this collective financial power and business acumen to give it a voice on economic issues that impinge on black Americans, leaving other important social justice causes to groups including the 110-year-old National Association for the Advancement of Colored People (NAACP).

“We are just trying to bring to bear what we know best – which is job growth and value creation for shareholders – in a way that will make an important difference in the lives of people,” Coles says.

Race is a defining factor for black Americans in a country that spent centuries systemically blocking them from the American dream. Even for those that reach the highest echelons of wealth and status, their fate remains precarious. African American boys from the richest U.S. households earn less when they grow up than white peers with similar pedigrees. Black men raised in the top 1 percent of incomes are as likely to go to prison as white men from households earning around US$36,000, according to research from academics at the U.S. Census Bureau and Harvard and Stanford universities.

“We are at that point in time when you have a critical mass of African Americans that have achieved a certain level of success in business, in health care, in technology, you name the industry,” says Carla Harris, vice chairman of Morgan Stanley’s Wealth Management division, who also sits on the BEA’s advisory board. “We do have a responsibility to lend whatever we have toward moving the needle and more importantly bringing others on board with us.”

But how best to do that? The BEA’s entrance into politics comes as economic solutions proposed by some Democratic progressives – such as newly elected New York Representative Alexandria Ocasio-Cortez’s call for a 70 percent top marginal tax rate to finance a “Green New Deal” – conflict with those widely embraced by the business community. (The BEA focused its resources on helping candidates in the most competitive races. It did not take a position in the overwhelmingly Democratic district that Ocasio-Cortez won.)

Source: Bloomberg News