(Bloomberg) – Netflix Inc. will spend up to $ 100 million on lenders serving the black community, making it the largest company that has yet promised cash to underfunded financial institutions.
The online TV giant will begin by transferring $ 25 million to the Black Economic Development Initiative, a new fund that will invest in black-owned financial institutions serving low-income communities, and $ 10 million to Hope Credit Union. Going forward, the company will direct 2% of its available cash, which currently totals about $ 5 billion, to financial organizations that directly support African-American communities.
News of Netflix’s engagement caused shares of black-owned banks to soar Tuesday. Carver Bancorp Inc. rose as much as 173% in New York trading and Broadway Financial Corp. gained as much as 83%.
Large American companies were quick to show their support for African Americans after the death of George Floyd, one of several blacks killed by police in recent months. Many wealthy companies and individuals have pledged money for civil rights causes, including Netflix CEO Reed Hastings, who has spent $ 120 million of his personal fortune on historically black colleges and universities. But his company wanted to propose a solution that addresses the most systemic causes of inequality.
Hope Credit Union serves more than 1.5 million people in states like Alabama and Louisiana, but it does not have enough money to fully meet the financial needs of its communities, according to its CEO, Bill Bynum.
“We are hungry for capital, as are the people in the communities we serve,” Bynum said. “Having a global voice like Netflix says it is important to invest in financial institutions like Hope is tremendously important, not just for the capital that we will use to make home loans and small business loans, but for what it says.”
An employee
Netflix executive Aaron Mitchell came up with the idea of transferring money to black-owned banks after an April dinner with leaders of different underrepresented groups. Netflix has been hosting these dinners since October in an effort to enhance diversity at its highest levels and inform its top executives.
Mitchell proposed the idea to CFO Spencer Neumann and began researching, contacting banks, and reading “The Color of Money,” Mehrsa Baradaran’s book on the racial gap in wealth. After Floyd’s death, he sent his proposal to Hastings, who expedited the project.
“I have spoken to many companies, but this is the first company that really did something about it,” Baradaran said.
Netflix hopes the move will inspire other large American companies to do the same, Neumann said. The streaming service has a small amount of cash relative to Silicon Valley peers Apple Inc., Facebook Inc. and Alphabet Inc. If each company in the S&P 500 transferred only 1% of its cash to Black-owned financial institutions , would translate to more than $ 20 billion, Netflix said.
Netflix registration
Netflix has a lot of work to do alone. The company has no black executives among its eight top officials, adding its first black board member in 2018. Last year it ranked last among Hollywood studios in terms of hiring female directors, according to the Directors’ Guild of America.
But the guild ranked the company as the first to add people of color, part of the progress it has made since hiring Verna Myers as its head of diversity and inclusion in 2018. She helped shows like Strong Black Lead, which highlights projects with African Americans in Leading Roles Black employees now make up 7% of Netflix’s overall employee base, up from 4% three years ago. The number of black vice presidents has tripled to nine in the same span.
“We have been on this journey now for at least the past three years,” Mitchell said. “We still have a lot of work to do, but we are making significant progress.”
(Updates with actions in the third paragraph. An earlier version of this story corrected a reference to the momentum of the Strong Black Lead program.)
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