There are some words no corporate CEO wants to hear. “Morley Safer is on the line for you,” is one of them. “The Reverend Jesse Jackson is calling a boycott of your company,” is another.
After two failed bids for the Democratic presidential nomination, Jackson apparently came to the conclusion that real economic progress for African-Americans would be more easily achieved in the corporate realm than in the political realm. To get elected to high office, Jackson would need to win a majority of votes, including white votes. To influence corporate America to change its ways, he would merely need to harness the power of public opinion—and even a relatively small segment of the public could wield enormous pressure.
Jackson created the Rainbow/PUSH Coalition, a grassroots civil rights group that would work with corporate America when appropriate—sponsoring an annual Wall Street Conference on diversity issues, for example—and call attention to corporate America’s shortcomings when appropriate: on issues ranging from minority hiring to community reinvestment. Wielding the threat of unfavorable publicity—and if that wasn’t enough, a boycott by black consumers—Jackson had waged successful campaigns against companies such as Citigroup and Anheurser-Busch.
Then, in May of last year, he turned his attention to Toyota.
The company had attracted Jakcson’s ire with a promotional campaign that featured a smiling African American man with “tooth art” in the shape of a RAV4 sport utility vehicle. The image appeared on a postcard, part of a guerrilla marketing campaign, that had been placed in racks in nightspots, fitness centers, coffee houses and other locations frequented by style-conscious youth.
Toyota had voluntarily withdraw the ad two weeks earlier, after complaints from consumers, but that didn’t appease Jackson, who had targeted the Japanese automaker once before. Jackson had clashed with the company a 1998 print ad for Toyota Corolla that highlighted the car’s legendary reliability. The ad, which ran in minority publications, featured a picture of the Corolla and copy that read, “Unlike your last boyfriend, it goes to work in the morning. The 99 Corolla. 31 years of being dependable, reliable and more durable than most relationships. Imagine. A lasting commitment without ever arguing over the remote control. Too bad Toyota doesn’t make boyfriends.”
At a press conference to protest the latest outrage, held outside Toyota’s headquarters in Torrance, Cal., Jackson accused the company of “using racist advertising while excluding blacks among its dealers, board of directors, and advertising teams.” With characteristic understatement, Jackson condemned the ad campaign: “The only thing missing is the watermelon.”
Inside the company, the reaction to Jackson’s attack was one of shock. Toyota rejected Jackson’s characterization of the ad campaign and its criticism of the company’s progress on diversity issues.
“We had started looking at diversity initiatives 10 years ago,” says Guillermo Hysaw, the company’s vice president of diversity. “At the time, it was called affirmative action. Then, about four years ago we introduced our core values, and from that exercise evolved some specific initiatives related to diversity. We were guided by two things: first, these initiatives were the right thing to do, and second, these initiatives were part of a business imperative. We look at diversity as opportunity to create leverage for sustainable competitive advantage.”
The company claimed to have made “great strides” in its efforts to increase the number of minority-owned dealerships. “While overall dealer count has remained relatively unchanged, the percentage of minority-owned Toyota and Lexus dealers has increased by more than 20 percent since 1998 and compares well with the auto industry in general.”
It had targeted diversity issues in its strategic philanthropy efforts too. In August 2000, for example, Toyota made a $1 million donation to the National Underground Railroad Freedom Center, an interactive learning center being built in Cincinnati to commemorate the nation’s “first human rights movement.”
Toyota also denied there was anything inappropriate about the postcard. According to the company, “The promotional piece referred to by Reverend Jackson was one of three free postcards, intended to present the new RAV4 sport utility vehicle as a style statement to a young and very trendy audience. As an emerging trend, ‘tooth art’ is associated with other leading-edge fashion statements, such as body jewelry and tattoos, especially in the entertainment world. The image was selected for one of the postcards because it combined a warm smile with a leading-edge fashion statement.”
The postcard was distributed in nightclubs, coffeehouses and other establishments favored by the young and style-conscious. The card was not aimed at the mass market, nor to a specific ethnic group, but was intended to communicate RAV4’s styling to a youthful audience through personal expression.
Nevertheless, the company had agreed to withdraw the offending postcard. “There were people within the African-American community who did not find the postcard offensive,” says Hysaw. “They understood the reference to tooth art. But there was a segment of the population—generally older and more southern—that this ad was offensive to them because to them, the people who are associated with gold teeth are not the most desirable element in the community.”
Said the company in a press release: “Toyota and its advertising agency had no intention of creating negative or stereotypical imagery, and extend sincere apologies to anyone who was offended by the promotional item. Toyota is proud of its long-standing commitment to create a corporate culture of inclusion.”
Under the circumstances, it would have been easy for Toyota to overreact to the criticism—to attack Jackson and his motives—or to under react, to dismiss the criticism out of hand.
“The first lesson in a case like this, and I think it’s a lesson Toyota understood, is that you can’t just dismiss this kind of criticism, even if you believe you are doing things the right way,” says Jacinta Gauda, a senior vice president at Toyota public relations agency Golin/Harris International. “I have seen situations where a company that is doing a good job and so it summarily dismisses any accusation it is not. But smart companies look at it as an opportunity to take a new look at their diversity practices.
“It used to be diversity meant hiring minorities. But in the new millennium it’s more complicated than that.” According to Gauda, scrutiny of a company’s diversity practices today can come from more than a dozen directions: the composition of the board, corporate philanthropy activities, hiring practices, marketing activities, community relations, executive leadership, suppliers and vendors.
Says Gauda. “Some firms are focused on one area and the criticism may be coming from another area. It’s helpful to slow the process down and take some time to inventory your practices, to look at best practices in other companies, rather than just reacting to the pressure.”
There is another reason not to dismiss criticism too lightly. If a company has a genuine commitment to diversity, it helps to listen to as many sources within the community as possible—even those skeptical of its efforts.
“We have a focus on continuous improvement,” says Hysaw. “It starts with situation analysis, with understanding the environment and all the feedback that is in the environment. From that, we develop a strategy and then implement, while continuing to check and to analyze to determine whether the strategy needs to be adjusted.”
Confident in the strength of its position, Toyota met with Jackson within days of his initial protest. But Jackson was not impressed. From the civil rights leader’s perspective, the company’s current diversity initiatives simply did not go far enough. “As Toyota’s profits continue to climb, so does its obligation to market its products and services in a professional and respectful manner,” he told reporters. “The creation and placement of offensive marketing materials speaks to the persistent problem of racial and cultural insensitivity.”
Jackson complained that just 63 of Toyota’s 1,378 U.S. dealerships were minority-owned—a number comparable to U.S. automakers such as General Motors and Ford; that the company employed no African-American advertising agencies of record; that only 3 percent of the $10.2 billion spent in manufacturing, marketing and sales went to minority vendors; and that with more than $1 billion under financial management, Toyota engages no minority financial services firms, minority-owned banks, or asset managers.
But perhaps the most bizarre complaint was that “of 13 board of directors, there are no African Americans, Latinos, or women.”
Says Hysaw, “They seemed to think this was a board similar to the board at General Motors or Ford, and so the absence of diversity was an issue for them. But our board is in Japan, and it mostly consists of the management of our Japanese and American operations. It’s not the same situation as a GM or a Ford.”
That wasn’t the only cultural misunderstanding. Some observers believe Toyota was targeted in part because it was a Japanese company. Coming from a heterogeneous culture, Japanese companies have traditional experienced difficulties dealing with the complex racial and gender issues of the United States.
“I think there’s a stereotype about Japanese companies,” says Hysaw. “But we didn’t fit the stereotype. Our relationship to the Japanese company is not one of subservience and dominance. We are an American company with a strong Japanese heritage. Most of our initiatives are driven by the American management and the American staff, with support from Japan.”
Cultural issues added another level of complexity to the disagreement between Toyota and its critics. Things got even messier for the company after rumors started to appear that distorted the original charges and misrepresented the ads. The Internet, in particular, became a source of rumor and misinformation. “Internet postings, emailed images and descriptions have reproduced or portrayed it as distorted or with incorrect color and contrast. The actual printed image carried no text, was naturally rendered and was not a caricature.”
Some reports suggested the 1998 ad depicted an African-American couple, which was not the case. Others claimed the headline from the ad, “Unlike your last boyfriend, it goes to work in the morning,” was printed on the gold tooth postcards, also untrue. And others suggested the ad had been created specifically for minority-owned media. Toyota, however, said the ad had run in only one minority-owned title, Jet, and that was due to clerical error by the automaker’s ad agency,
“Playing on age-old humor, the ad was intended to connect with readers of female-oriented publications such as Teen, Mademoiselle, Glamour and People Weekly,” said Toyota. “It was mistakenly issued for insertion in Jet Magazine, an African-American publication. At that time, the publisher of Jet shared responsibility for the error and with Toyota, printed a joint apology to Jet’s readers.”
Other rumors made reference to a television commercial depicting a Kenyan marathon runner being tracked by an off-road vehicle—actually a commercial for athletic shoe retailer Just for Feet. But the ad had been created by Toyota ad agency Saatchi & Saatchi, and had been referred to by Jackson in his complaint against the ad agency.
Meanwhile, Toyota management was learning that Jackson wasn’t the only one who wanted to use the company for his political ends. The company also became the target of a well-organized campaign to discredit Jackson, claiming much of the money spent on diversity by the companies he targeted found its way into his personal pockets, or those of his supporters.
In the wake of the disclosure that Jackson’s Citizenship Education Fund had paid $40,000 to a staff member with whom Jackson had fathered a child in an extramarital relationship in 1999, the group opened its books—and many observers were shocked to learn the group’s revenues had almost quintupled $2 million in 1998 to $9.8 million in 1999, almost all from corporate grants and sponsorships.
Groups on the right, led by the National Legal and Policy Center, were concerned that any concessions by Toyota on the subject of diversity would lend credibility to Jackson and his cause. So the company found itself under attack from both ends of the political spectrum. Some questioned why the automaker was even listening to Jackson.
“Because of our culture, which is very responsive to our customers and our partners, we listen to all feedback,” says Hysaw. “We didn’t try to judge whether the people providing that feedback were legitimate. That’s more of a subjective analysis that because of our own feelings we might not be in the position to make.”
Diversity experts say that while some of the criticisms of Jackson may be valid, he represents a substantial constituency and often raises valid issues.
“I think the relevance of Jesse Jackson to the discussion is weighted by the need to have the African-American leadership help create greater equity and fairness,” says Kent Matlock, president of Atlanta-based advertising and PR firm Matlock & Associates, which has helped companies such as Denny’s and Coca-Cola deal with diversity issues.
  “Even if he has lost credibility, there’s still a need in the minority community for someone to look at issues of equity and fairness. The question is not how relevant Jesse Jackson is, but what does corporate America need to do to render him irrelevant.”
The company also consulted with other civil rights groups, including representatives of other minority communities, women, gays and lesbians.
“Most companies have relationships with organizations they are supporting through charitable contributions,” says Gauda. “Companies can develop those relationships so those organizations become a source of information about the community.”
Toyota saw its willingness to talk not as capitulation, but as a serious effort to gather input from all stakeholder groups. More important, it saw diversity not as an issue of appeasement, but as a strategic business imperative.
“There are very real business imperatives that make diversity make sense,” says Hysaw. “We are focused on diversity because it is a business imperative. We want to be the most successful and respected car company in America—the most successful and respected company in America—and that doesn’t just happen. You have to work at it, and you have to work at every aspect of it.”
That meant the company had to try to rise above the political debate—and the media circus that surrounded it.
“Right is not about politics,” says Matlock. “It’s not about benevolence, it’s about competitive difference. Companies now are beginning to make the business case for diversity. It’s become a matter of competitiveness. You have an increasingly diverse marketplace and an increasingly diverse talent pool. Companies are now approaching this issue with the same discipline they approach other business issues.”
Diversity programs need to be evaluated on a pragmatic basis—on whether they pay off in terms of stronger relationships and reduced friction—but also on the basis of an organization’s values. It’s no coincidence that Toyota had stepped up its commitment to diversity after going through a vision and values exercise in the late 90s.
“One place to turn to for guidance is the company’s mission statement and its values,” Gauda says. “Companies need to ask themselves how they can make their values more real. The answers will often fall right in from there. Toyota’s mission statement provided a lot of guidance.”
In August, three months after the boycott threat, Toyota and Jackson come together at the annual meeting of Rainbow/PUSH and announced a $7.8 billion, 10-year diversity program.
Toyota said it would increase spending with minority advertising agencies by 37 percent, to $50 million a year, and would hire an African American ad agency to join its two mainstream agencies. The company said it would also increase the number of its minority-owned dealerships by four to six per year during the next 10 years and increase its dealer-development financial-assistance budget by more than 67 percent, to $25 million.
The company also pledged to spend at least $700 million a year in procurement from minority-owned suppliers and said that through active supplier-development programs, the firm’s manufacturing arm, Toyota Motor Manufacturing, was on track to surpass its commitment to channel 5 percent of its procurement contracts to minority businesses next year.
Finally, the company made a $7 million commitment to a program that will train minority candidates for management and technical positions at dealerships.
Hysaw says those initiatives were “brought to the surface” in the wake of Jackson’s complaints.
“We are not a company that has been very good at tooting our own horn,” says Hysaw. “A lot of things that came to the surface, that special interest groups might take credit for, were things we already had in place.”
According to James Press, Toyota’s executive vice president and chief operating officer, the company was “re-dedicating itself to what is not just a social responsibility but a business imperative. We believe this strategic diversity plan reflects well on Toyota’s business culture and on the efforts of the Rainbow/PUSH Coalition to improve society.”
Said Press, “This is not a short-term effort nor is it a sheer numbers program. It seeks real, solid, tangible results while following a model of success and profit—a win-win situation. We fully believe we can advance diversity and business at the same time. This strategy also goes beyond our internal Toyota focused efforts. We want to create a better industry through externally focused initiatives that will expand training, management, and ownership opportunities for minorities throughout the automotive business.”
The company was happy to credit Jackson for his role in the diversity package, but was equally eager to emphasize that this was “a voluntary effort by Toyota… not a contract or a quid pro quo,” in the words of spokesman Mike Michels.
In fact, during the negotiations in May and June, Toyota suspended its donations to Jackson’s organizations to avoid the appearance of a shakedown. Michels said that the donations had been “modest,” amounting to “$10,000 here or $20,000 there to support a conference” and that when they are resumed it would probably be at the same level.
Said Jackson, “Toyota is beginning to recognize that diversity truly can enhance business growth. This plan embodies the idea that inclusion maximizes the potential of business. Just like we didn’t know how good baseball could be until everybody could play, we won’t know how good business can be until we guarantee equal access.”
But not everyone was happy to see Toyota and Jackson shaking hands and making nice. Said Peter Flaherty, president of the National Legal and Policy Center, “If the past is any guide, it is a fair assumption that Mr. Jackson’s friends and associates are slated to benefit financially from the $7.8 billion. Toyota should not have given in to Jackson’s threats. Toyota’s minority-owned dealership rate is already the second highest among automakers.” Matching Jackson hyperbole for hyperbole, Flaherty charged that, “Jackson’s approach is akin to that of yakuza and other classic protection rackets.
“In our society, where race relations have become such a supercharged issue, companies are so fearful of the dreaded ‘racist’ label they will do anything to avoid being tagged with it, regardless of whether they have done anything wrong. Jackson has discovered that exploiting this sentiment translates into a bottomless pit of money for himself, his family, his friends and his organizations.”
Toyota dismissed the charges. Says Hysaw, “These were things we were already planning to do. No single interest group gets credit for what we are doing. We didn’t cave in to anybody on anything.
“The only thing that emerged as a fresh idea from our discussions with the Reverend Jackson was the establishment of a North American diversity advisory board. That was something we had not considered, but came out of criticism of the make-up of our board. Since our board is in Japan, it seemed more relevant to us to create a board here in the U.S.”
On January 16, Flaherty appeared on The O’Reilly Factor on Fox News Channel and cited two instances in which he alleged Jesse Jackson associates had received business from Toyota after the deal was announced.
And in February, Flaherty wrote a letter to Toyota CEO Yoshimi Inaba—and issues a press release—demanding that Toyota “cease financial support for Rev. Jesse Jackson’s organizations and cease participation in Jackson-organized events, such as his annual Wall Street Conference,” after Toyota vice president of group vice president of corporate communications Irving Miller spoke along with Jackson at the keynote session of this year’s conference on January 16.
Flaherty also demanded that Toyota stop making misleading public statements about its relationship with Jackson and that the company designate an executive to serve as a liaison for minority leaders who would like to participate in the diversity plan but who are not allied with Jesse Jackson.
In response, the company challenged what it called “three prevalent myths” regarding Toyota’s 21st Century Diversity Strategy.
The first myth was that the diversity strategy was put in place to avoid a boycott by Jackson’s forces. According to the company, “Reverend Jackson questioned our level of commitment to diversity leading Toyota to take a fresh look at its initiatives. The company decided it could do better and wrote its own plan, which far exceeded anyone’s expectations. Although Reverend Jackson endorsed Toyota’s plan, the company was prepared to implement it regardless of his views.”
The second myth was that money from the diversity strategy would be channeled to Jackson and his organizations. Says Toyota, “No finances from the diversity strategy have been earmarked for Jackson or his organizations. Five percent of procurement spending by Toyota is for minority business enterprises. All of the 10-year, $7.8 billion diversity initiative spending will go to good, qualified minority-owned businesses and suppliers; will help prepare more minorities for dealership management and ownership; and will provide job training for unemployed and underemployed urban youth.”
The final myth was that minority suppliers seeking to do business with Toyota would have to first go through Reverend Jackson or the Rainbow/PUSH Coalition. Said Toyota, “No one needs to go through the Reverend Jackson or the RPC to do business with Toyota, nor is Toyota seeking RPC approval of its minority suppliers. Any supplier that meets Toyota’s standards and wants to do business with the company can contact Toyota directly.”
Toyota’s response did not quiet its critics, especially with a new book about Jackson, Shakedown: Exposing the Real Jesse Jackson by Kenneth Timmerman, about to hit the shelves. Last week, Toyota executive vice president Jim Press was a guest on The O’Reilly Factor, after host Bill O’Reilly said he would never buy a Toyota because the company had given into to Jackson.
Press reiterated the company’s position: “There’s no cave-in, there’s no payoff. And there is no pressure. Toyota has a long-standing relationship with diversity. We’ve had it in our culture for many, many years and it will continue. It makes good sense. We sell cars to everybody.”
Says Hysaw, “We are not averse to the addressing these issues head on,” says Hysaw.
If there’s a lesson to be learned from all this, it’s that diversity is not an issue that companies can address with a static program. It requires an ongoing commitment, it requires sensitivity, and it requires companies to rise above the clamoring of rival demagogues and understanding that diversity, in all its aspects, is a pragmatic issue—one that like every other business issue needs to be evaluated in terms of its long-term impact on business objectives.
However companies decide to tackle diversity, “The most important thing is transparency,” says Matlock. “That means conducting diversity programs in collaborative way, in the open. It means your values have to be obvious, and your strategic intent has to be obvious. It means you have to communicate all along the way.”
That’s the approach Toyota is taking.
“We want to make sure interest groups have input,” says Hysaw. “That means working with groups that represent different ethnicities, African-Americans, whites, Asians, Native Americans, Hispanics, lesbians and gays, women’s organizations. We will have a presence in those communities.”