Paying the price for discriminating

December 23, 1992

Marge Schott and Raymond Danner are soul mates in a management style that has cost both their businesses dearly. Ms. Schott, owner of the Cincinnati Reds, faces a possible $250,000 fine levied by her fellow baseball owners for racial epithets disparaging black and Jewish players. Yet that's a drop in the bucket compared with what Mr. Danner's Shoney restaurant could end up paying to settle a bitter class action suit by black employees charging widespread job bias there.

For years Mr. Danner, Shoney's founder and largest shareholder, allegedly led a corporate culture in which blacks were systematically denied jobs and promotions in the chain's 1,803 restaurants. According to affidavits filed in the suit, blacks were barred from white-collar jobs at the company's Nashville headquarters until the late 1980s because Mr. Danner insisted that black applicants be identified by a special code. He once threatened to fire a restaurant manager if the manager didn't fire the restaurant's black employees.

Unlike Ms. Schott, Mr. Danner never denied making racist remarks or claiming that the sentiments expressed did not affect the way his company dealt with its black employees. A former Shoney executive said that Mr. Danner had discussed contributing money to the Ku Klux Klan, saying "Those guys are really right."

Last November, Shoney's settled the lawsuit out of court under an agreement that requires the company to set aside $105 million to compensate victims of its discrimination. The agreement was negotiated by company chairman Leonard Roberts. But last week, Mr. Roberts was forced to resign by board members close to Mr. Danner, who reportedly was furious at an affirmative action plan Mr. Roberts devised to settle the case and by Mr. Roberts' suggestion that Mr. Danner himself contribute a substantial portion of the settlement's cost.

The Shoney case should serve as a vivid reminder that systematic racial bias is by no means limited to major league baseball. It is also a clear illustration of how corporate cultures are shaped from the top to reflect the personalities and prejudices of chief executives. Ms. Schott's public repentance at least shows she is sensitive to the power of her own example in changing executive suite attitudes and business practices. Mr. Danner, by contrast, seems determined to cling to the old ways as much as possible while fulfilling the minimum legal requirements of his company's settlement agreement.

We wonder how much more protracted, costly litigation and damage to its reputation Shoney's will endure before its leaders finally recognize that racial discrimination in the workplace is virtually guaranteed to be a money-losing proposition.

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