11601: Fade To Black In Chicago.

From Crain’s Chicago Business…

Why Chicago’s history of black business success is fading

By David Mendell

Looking at the history of African-American business success, Chicago has no equal. Unfortunately, the past has not been prologue.

Chicago was the incubator for such significant black businesses as Johnson Publishing Co., Johnson Products and more than a dozen other nationally recognized black-led companies. No other city has birthed black business icons as notable as John Johnson, Ed Gardner and, of course, Oprah Winfrey.

But as those success stories fade into history, prominent black business professionals are raising unsettling questions about the current state of black entrepreneurship: Where is the next generation? Why do so many executive suites and corporate boardrooms lack minorities? And is Chicago’s mainstream business culture institutionally biased against promoting African-Americans into the upper ranks?

Chicago has more than its share of nationally recognized African-American politicians, entertainers, musicians and sports figures. But the decreasing visibility of major black business leaders is stark in comparison to the region’s sizable black population and its storied history. A Chicago Urban League survey released this year showed that only 6.6 percent of corporate board members in parts of four Great Lakes states are black.

“It used to be that Chicago was the mecca of black businesses, but there’s no doubt that we have gone backwards substantially when it comes to successful African-American entrepreneurs,” says John Rogers Jr., founder and CEO of Chicago-based Ariel Investments LLC.

Tapped by Mayor Rahm Emanuel in 2011 to lead a task force on business diversity, Mr. Rogers has delivered numerous speeches citing the bleak statistics. But he wonders just how many corporate leaders have been listening. There are few black-led companies among the top 25 national firms in many important sectors—banking, construction, law, finance. When Don Thompson was named CEO of McDonald’s Corp. last year, he became just the sixth active black CEO at a Fortune 500 company. Loop Capital Holdings LLC’s James Reynolds and Mr. Rogers also are among the few exceptions that prove the rule.

“The reality is, we are not being included in the lucrative, fast-growing parts of our economy—the sectors where long-term, real wealth is created: hedge funds, private equity, investment banking,” Mr. Rogers says. ”The state of diversity in the finance industry is appalling. Ninety-nine percent of leaders talk a big game, but in places like Chicago, we have gone backwards. We’re just not fighting hard enough.”

Black leadership is equally hard to find in other key Chicago industries, such as commercial real estate development, futures and options exchanges and the burgeoning technology sector. If Mr. Rogers’ statements have merit, and the dismal statistics suggest they do, how did this happen? Why are blacks still so behind the curve, 50 years after the March on Washington?

Experts point to a complex array of reasons.

For one, cultural and consumer-buying patterns have changed. Larger, mainstream companies now market products to black consumers, and African-Americans are less likely to look solely at black-owned companies for their needs. Thus, it’s harder for a black entrepreneur to market products or services primarily to blacks and achieve success.

“Johnson Publishing and Johnson (Products)—those companies grew and thrived when there was real segregation in the market,” says Andrea Zopp, president and CEO of the nonprofit Urban League, which advocates for African-American causes. Today, that segregation is waning. The business model that John Johnson and Ed Gardner pursued—dominating the black market because the larger white consumer market was closed to them—no longer exists.

The recent economic crash also cannot be overlooked. Anecdotal evidence suggests that Chicago’s black business community has taken an even greater blow than white-owned businesses. Before the recession, Chicago had 17 banks either owned by minorities or focused on lending to minorities. Six failed. And as banks have failed and credit has tightened, minority entrepreneurs have found working capital harder to come by. In addition, when companies begin struggling for mere survival, efforts to diversify often are shoved to the back burner.

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