The benefits of diversity and inclusion in corporate America are now well-documented. Both academia and the internet alike have long been bursting with statistics evidencing the value of diversity and inclusion programs.
Diversity in the workplace has significant financial benefits. A 2018 Boston Consulting Group study found that diverse companies enjoy 19% more revenue.[1] And a study of 450 global companies by Bersin by Deloitte concluded that “inclusive” companies enjoyed 2.3 times higher cash flow per employee over a three-year period.[2]
More, the penalty for low diversity performers is growing. According to McKinsey & Company, companies in the bottom quarter for executive-team gender diversity were 19% percent more likely to underperform on profitability than their peers in the upper three quartiles.[3] This is up from 15% in 2017 and 9% in 2015.[4]
Diversity has also been reported as associated with higher law firm profits. According to the Legal Evolution blog published by Professor Bill Henderson of Indiana University’s Maurer School of Law, the most diverse law firms enjoy average partner compensation of about $260,000 more than the least diverse firms.[5]
Closer to home, assembling a diverse and inclusive team can lead to greater innovation and resulting success in your case administration. The link between labor diversity and a firm’s innovation is well documented. For instance, a 2014 study published in the Journal of Population Economics established a causal link between ethnic diversity and increased patenting activity.[6] But can we make a case that assembling a diverse and inclusive team can lead to greater recoveries in your case administration?
Anecdotally, the Johnson Publishing Company case presents an example in which a diverse and inclusive team was able produce an innovative strategy to maximize the value of the Ebony portfolio, while traditional and more homogenous marketing efforts proved ineffective.
In April 2019, Johnson Publishing Company, LLC filed for Chapter 7 bankruptcy in Chicago.[7] A native Chicago business, Johnson Publishing had for years published Ebony and Jet magazines and was once one of America’s largest and most successful black-owned businesses.[8] According to the Chicago Sun-Times, Ebony began publication in November 1945, pledging to “mirror the happier side of Negro life — the positive, everyday achievements from Harlem to Hollywood. But when we talk about race as the No. 1 problem of America, we’ll talk turkey.”[9] Jet began publication in 1951.[10]
Shortly after the filing of the case, Miriam “Mimi” Stein was appointed trustee and tasked with the very routine duty of maximizing the value of Johnson Publishing’s assets for the benefit of all of its creditors. What made the case unique was that among the assets of Johnson Publishing was what the New York Times called a treasure chest of black history – “the most significant collection of photographs depicting-American life in the 20th century.”[11]
But the Archive was pledged to secure a $12 million loan from Capital Holdings V, LLC, which company was owned by Mellody Hobson and her husband George Lucas.[12] The loan had been in default for about 3 years, during which time Johnson Publishing’s attempts to restructure, obtain alternative financing, or sell the company as a going concern had failed.[13] And the trustee had a less than three-month window to liquidate the Archive, while past efforts to sell the Archive through traditional auction houses like Christie’s and Sotheby’s had proved unsuccessful.
Yet with only three months to close the sale, Mimi Stein assembled a diverse and inclusive team who worked collaboratively to develop an innovative marketing strategy for the sale of the Archive. And, according to Mimi Stein,
What brought the eventual buyer to the table was the nature of the diverse assets and the marketing efforts developed by the diverse team.
Ultimately, the Archive was sold to a consortium of foundations—the Ford Foundation, the Mellon Foundation, the J. Paul Getty Trust, and the MacArthur Foundation— for $30 million. The foundations, which came together to buy the archive in just a week to keep it from disappearing into private hands, plan to donate it to the National Museum of African American History of Culture in Washington, DC; the Getty Research Institute in Los Angeles; and other cultural institutions.[14]
In the end, a team of diverse and inclusive professionals managed to produce in weeks a result – a $30 million sale of the Archive – that years of traditional [and more homogenous] marketing efforts could not. Is that enough of a link to conclude that it was diversity that led to the success of the case? No. What led to the success of the case, according to Mimi Stein, was the professionals’ willingness to think outside the box. But, given the well-established link between diversity and innovation, perhaps it is safe to say that the team’s diversity led to their willingness to think creatively.
Article by Luis E. Rivera II*
* Luis Rivera is a shareholder in the Fort Myers, Fla., office of GrayRobinson, P.A. Luis has served as a panel trustee in the Middle District of Florida since 2010. He is board certified in Business Bankruptcy Law and Consumer Bankruptcy Law by the American Board of Certification.
[1] Rocio Lorenzo, et al., How Diverse Leadership Teams Boost Innovation (Boston Consulting Group Jan. 23, 2018), https://www.bcg.com/en-us/publications/2018/how-diverse-leadership-teams-boost-innovation.
[2] Josh Bersin, Why Diversity and Inclusion Has Becomes a Business Priority (Bersin by Deloite March 16, 2019), https://joshbersin.com/2015/12/why-diversity-and-inclusion-will-be-a-top-priority-for-2016/.
[3] McKinsey & Company, Diversity Wins: How Inclusion Matters 4 (May 2020), https://www.mckinsey.com/featured-insights/diversity-and-inclusion/diversity-wins-how-inclusion-matters#.
[4] Id.
[5] Yvone Nath & Evan Parker, Nothing Not to Like: Diversity and Law Firm Profitability, Legal Evolution (June 27, 2021), https://www.legalevolution.org/2021/06/nothing-not-to-like-diversity-and-law-firm-profitability-238/.
[6] Pierpaolo Parrotta, et al., The Nexus Between Labor and Diversity and Firm’s Innovation, 27 J Pop. Econs. 303 (2014)
[7] In re Johnson Pub. Co., LLC, Case No. 1:19-bk-10236 (Bankr. N.D. Ill. Filed April 9, 2019).
[8] Rachel Siegel, Johnson Publishing Company, the Ex-Publisher of Ebony and Jet Magazines, Files for Bankruptcy, Wash. Post (April 10, 2019), https://www.washingtonpost.com/business/2019/04/10/johnson-publishing-company-which-produced-ebony-jet-magazines-files-bankruptcy/.
[9] Jon Seidel, Johnson Publishing Co., the Ex- Publisher of Ebony and Jet, Files for Bankruptcy, Chicago Sun-Times (April 10, 2019), https://chicago.suntimes.com/business/johnson-publishing-company-files-bankruptcy/.
[10] Siegel, supra note 8.
[11] Julie Bosman, Selling Treasure Chest of Black History, N.Y. Times, July 17, 2019, at B4.
[12] Robert Channick, Bankrupt Johnson Publishing is set to auction off its Ebony photo archives, but it still faces $5 million defamation lawsuit over gym-mat death coverage, Chicago Tribune (July 12, 2019), https://www.chicagotribune.com/business/ct-biz-johnson-publishing-ebony-defamation-lawsuit-20190712-nhykejaxu5fjrm2kjaahgg5rse-story.html.
[13] Press Release, Johnson Publishing Company, LLC, Johnson Publishing Company Filed for Bankruptcy (April 9, 2019), https://www.prnewswire.com/news-releases/johnson-publishing-company-filed-for-bankruptcy-300828430.html.
[14] Sarah Cascone, Four Foundations Team Up to Buy the Historic Archives of ‘Ebony’ Magazine for $30 Million in a Bankruptcy Sale, Art News (July 25, 2019), https://news.artnet.com/art-world/getty-wins-jet-ebony-archives-auction-1606687.