Texaco Case Raises Red Flag For Companies Over Racism

It could become the corporate equivalent of the Rodney King beating case.

The public airing this week of tape recordings of top executives at Texaco Inc. - berating minority workers with racial epithets and planning to destroy documents related to a discrimination lawsuit - is reverberating throughout corporate America.

The tapes offer a rare, unfiltered look at senior executives of one major American corporation. However typical or atypical the comments may be, they highlight a problem of racism that many minorities believe remains deeply ingrained in the business world.

Coming at a time when affirmative-action policies are under fire, the Texaco case could embolden more minorities to file class-action discrimination suits against companies. At the least, analysts say, it will force a broad reevaluation of polices on diversity in the workplace.

"This is almost like the corporate version of Rodney King," says Lawrence Otis Graham, an expert on workplace diversity and an author of several books on the topic. "It shows how deep bigotry still exists in corporate America."

Texaco officials have moved swiftly to try to still the storm surrounding the tapes, in which corporate executives at a meeting in 1994 referred to black employees with racial slurs, mocked Kwanza and Hanukkah celebrations, and discussed destroying the documents on minority hiring, according to an affidavit filed with the court.

Texaco, based in White Plains, N.Y., announced Wednesday that it suspended two employees and cut off benefits to two retirees said to be recorded on the tapes. It has also outlined steps to review company policies on discrimination and to better educate workers about the problem.

"The statements on the tapes arouse a deep sense of shock and anger among all the members of the Texaco family and decent people everywhere," Texaco's chairman Peter Bijur said in a statement. He said the four executives on the tape made comments that "represent attitudes we hoped and wished had long ago disappeared."

The racist statements were caught on cassette tapes by an executive, Richard Lundwall, who attended meetings of the company's finance department. After his position was eliminated, he retired, then later turned over the tapes to a lawyer whose clients had sued Texaco for discrimination.

The tapes raise the stakes in that suit, brought against Texaco in early 1994 by six African-American employees on behalf of as many as 1,500 other minorities with the firm. The $520 million suit claims that Texaco systematically discriminates against minority employees in promotions and has fostered a racially hostile environment.

In June, the federal Equal Employment Opportunity Commission (EEOC) issued a finding that Texaco had granted significantly fewer promotions between 1992 and 1994 to blacks than to other workers.

Many agree that a lot is riding on Texaco's response to the allegations. Already a group of San Diego clergy and business leaders has called for a national boycott. Mr. Bijur has received numerous calls and e-mail messages from outraged customers.

Some diversity consultants contend that the petroleum industry lags behind other industries in addressing discrimination in the workplace. Shell Oil Corporation is also facing a lawsuit filed in March on behalf of five black employees alleging a pervasive pattern of employment discrimination based on race.

There have been other high-profile racial discrimination lawsuits in the past - most notably those against restaurant chains Shoney's Inc. and Denny's Inc. Both companies had to pay multimillion-dollar awards.

Analysts say it's the threat of such damage awards that gets companies to reform. After Shoney's paid a record $134.5 million in 1992 to settle a racial-discrimination suit, the Nashville-based company changed its ways. Two of 24 vice presidents are black, and an African-American now sits on the company's board. There are now at least a dozen black-owned Shoney's franchises compared with two before the suit.

"It's a totally different company - no question," says Thomas Warren, a lawyer in Tallahassee, Fla., who helped press the class-action suit against Shoney's.

While corporate America has made some strides in eliminating discrimination, many minorities or women have not moved into the upper ranks of management. A 1995 Federal Glass Ceiling Commission report found that white males make up about 43 percent of the work force, but still hold about 95 percent of senior management jobs.

In addition, race-based charges comprise the highest concentration of cases filed annually with the federal EEOC, making up 34 percent of all charges filed in 1995. African-American men and women accounted for 86 percent of the more than 30,000 racial charges filed last year, a trend that has held steady for the past decade, the EEOC reports.

"[Texaco] is a good-old-boys' network," says Gary Brouse of the Interfaith Center on Corporate Responsibility. The New York-based group researches companies for its 280-member religious organizations. At a recent Texaco shareholder meeting, he says, an executive used language similar to that recorded on the tapes. During these meetings, Texaco employees, he says, would pass him notes that read: "You're on the right track," and "It's worse than you think."

The fact that senior executives would say such things "speaks to the tone that existed [at the company] - that they would feel safe and secure in making these statements," says Dennis Hayes, general counsel for the NAACP. "We still have a long way to go," he adds. "Someone is telling a racial joke in a boardroom right now."