PRIVATE EQUITY PERSPECTIVE: The RLJ Rule
Moves in private equity and venture capital investing
February 1, 2012
To kick off Black History Month, Mergers & Acquisitions caught up with Robert L. Johnson, one of the most successful African Americans in business, about recent efforts to increase opportunities for minorities in corporate America.
Johnson is best known as the founder and chairman of Black Entertainment Television, or BET, the nation’s first TV network to provide quality entertainment, music, news, sports and public-affairs programming for the African American audience. Under his leadership, in 1991, BET became the first African American-owned company publicly traded on the New York Stock Exchange. In 2001, Mr. Johnson sold BET to Viacom for approximately $3 billion. Today, he is the founder and chairman of The RLJ Companies, which boasts a diverse portfolio of companies, including RLJ Equity Partners, a middle-market private equity firm he founded in 2006 through a strategic alliance with The Carlyle Group.
Last year, Johnson outlined the RLJ Rule for public and private-sector businesses. An adaptation of the National Football League's Rooney Rule, which requires teams to interview at least one qualified minority candidate whenever a head coaching or general manager position becomes available, the RLJ Rule encourages companies to establish voluntarily a best-practices policy of diversity and inclusion by identifying and interviewing minority candidates or vendors that, he says, are often overlooked under traditional hiring or procurement practices. In December, the Congressional Black Caucus issued a letter of support for the RLJ rule. On Feb. 1, Johnson followed up the rule with the launch of OppsPlace.com, a website that provides companies with the opportunity to find qualified, minority job seekers and minority businesses. Developed in collaboration with Symplicity Corp., a provider of online career tools, OppsPlace.com has attracted, as charter members, more than 30 companies from a wide variety of sectors, including consumer products, entertainment and financial services.
M&A: How did you come up with the RJL Rule?
Johnson: The model is the NFL’s Rooney Rule, which the league instituted in 2003 to stimulate minority hiring. Under the Rooney Rule, any owner seeking to hire a new coach or general manager must, under penalty of a fine, interview at least one minority candidate. The effect of the rule was that, five years later, the number of minority head coaches had gone from three to eight, and the number of general managers went from one to five.
M&A: What do you hope to accomplish with the RLJ Rule?
Johnson: There’s a need for large and small U.S. companies to focus on increasing opportunities for minorities as employees and small business operators. The only way to do that is to enhance best practices, and not just pay lip service to diversity and inclusion. I accomplished what I did because I was the beneficiary of someone giving me a chance. Because John Malone, who at the time was the chairman of Telecommunications Inc., invested half a million dollars in my vision, BET became the most successful minority-owned company ever created and the first to go public on the New York Stock Exchange. If John Malone backed me, and I started BET, why couldn’t Warren Buffet back a young African American or other minority? Why couldn’t Larry Ellison in the tech space back him? My life has been an example of what happens when you give an African American, or other minority, a chance.
M&A: Why did John Malone take a chance on you?
Johnson: John Malone is a fundamental believer in the merit system and a non-believer in handouts. He liked my idea for BET. This wasn’t a government grant. It was in his own best interests, because TCI needed to be in urban markets. It was enlightened self interest. BET was good for TCI.
