Incentives approved for Herbalife, diversity concerns assuaged

by Jordan Green

Despite concerns about Herbalife’s diversity performance, members of Winston-Salem City Council hold their noses and vote to authorize a $150,000-incentives grant for the chance to snag a division of the multi-level marketing company from Los Angeles.

Herbalife’s reputation for employee diversity improved dramatically over the course of seven days, judging by the change in tenor of comments from members of Winston-Salem City Council.

Reviewing a report on the diversity metrics of Herbalife’s Winston-Salem plant on May 11, Councilwoman Denise D. Adams indicated she was not surprised by the numbers, adding that “it does not mirror the diversity of our community.”

Adams, one of the four African-American members of city council, said she asked Herbalife for a performance-improvement plan.

“Just like you follow a business project or business plan, I expect three, four months down the road, once they begin to hire people I expect to see some type of data that indicated to me that the quote-unquote good-faith effort that we ask them to make, that they are truly being held to the good-faith effort that they said they would do,” she said.

The finance committee elected to forward Herbalife’s request for $150,000 in incentives grants to expand its facility off of Union Cross Road without recommendation, reflecting members’ reservations about it. Mayor Pro Tem Vivian Burke abstained from the vote, complaining that she didn’t have adequate time to review the employment numbers.

Seven days later, on Monday evening, city council unanimously approved the incentives package to Herbalife.

Councilman Dan Besse, who is white, defended his African-American colleagues against charges that they haven’t been vocal enough in advocating for employment diversity, while also arguing that the company already has an admirable record in that arena.

“It is a point of continuing emphasis and it appears to me from reviewing materials and guarantees that are provided by Herbalife in response to particularly Councilmember Adams in this case that her inquiries were productive in helping to ensure that a company that does have a good record of diversity in hiring maintains and builds upon that record,” Besse said.

The numbers that had particularly raised concerns with council members were demographics of exempt management. Among the 75 managers at the Winston-Salem facility, 30 — or 40 percent — are categorized as minority, with Asians making up 25 percent, blacks 7 percent, and Latinos 5 percent. The council also took note of the number of line leaders, which indicated 10 out of 21 — or 48 percent — are African American.

“They’re not where they want to be obviously in some of these categories,” Mayor Allen Joines had said at the finance-committee meeting. “They identified to me a plan particularly with the line leads where 48 percent of the line leads are African American that those would be the group that they would be looking at moving up there, so I think with a plan in place they’ll be addressing those issues.”

A letter from Herbalife Chief Operating Officer Richard Goudis that council received just before the meeting also suggested an improved picture. “At a managerial level, 56 percent of employees are women and minorities,” Goudis wrote, “and more than 80 percent of line leaders are African American.”

Julian Cacchioli, a spokesman for the company, said Tuesday morning that the statement should be read as more than 80 percent — or 10 out of 12 of minority line leaders are African American.”

“I think the letter could be a little more clear,” he said.

On Monday, the numbers appeared to improve dramatically. Chief Operating Officer Richard Goudis reported in a letter to city council that “more than 80 percent of line leaders are African American.”

Judging by the numbers submitted earlier, considering that all 10 out of 12 of the minority line leaders are reported to be African American (the remaining two are American Indian), it would appear that more than 80 percent of minority line leaders are African American.

The letter reached city staff at 3 p.m., only four hours before the meeting, Assistant City Manager Derwick Paige told council.

Echoing her comments a week earlier, Burke said she hadn’t had time to review the new document submitted by Herbalife.

“Not that I don’t believe what’s in this paper here on this table,” she said, “but I’ve not had the chance to review it to have some discussion about it.”

Adams commended the company “for making a good-faith effort” to communicate how to make a “win-win” out of the situation.

“We asked that they put together a performance improvement plan to help make the situation better,” Adams said. “And I think we’ve reached a point right now where we do have a document where we can hold Herbalife accountable as to what it is that they can do to improve quality of life for the citizens of Winston-Salem. What can they do to improve their diversity in their facility? What can they do to be better community partners with the city of Winston-Salem? And I feel comfortable with the plan they’ve submitted.”

The company’s performance improvement plan is captured in one paragraph in Goudis’ two-page letter, which Adams read aloud from the dais.

“Our philosophy is to always ‘build it better’ and to that end, we welcome the opportunity to work with the council and other community leaders to take further steps that could potentially improve opportunities for the entire community,” the letter reads. “For example, we plan on increasing our work with local vocational schools to identify and train a diverse group of applicants as well as increasing our partnership with local colleges and universities, with a particular emphasis on HBCUs, to recruit the best and the brightest. To this end, our manager of human resources in Winston-Salem is a graduate of North Carolina A&T and is establishing a more formal recruiting relationship with her alma mater.”

Paige said after the meeting that the city’s agreement with Herbalife contains no specific benchmarks for improvement or provisions for the company to return the funds if they fail to make adequate progress.

“They’re committed,” he said. “We put together a plan. We just didn’t have time to do it before tonight.”

Adams said after the vote that she plans to continue to meet with Herbalife’s staff and to help them set diversity goals. She emphasized good-faith effort while indicating some degree of leniency if the company falls short of whatever goals are eventually set.

“You’re always continuously improving,” she said. “Just like with any corporation, if you don’t meet the dividend goals of the shareholders, you have to continue to strive to get there.”

Ultimately, the prospect of new jobs was too enticing for members of council to turn their backs on, even if some of the jobs will be filled by current employees relocating from Herbalife’s Los Angeles headquarters. Paige said the company estimated that 30 percent of the 301 jobs on the line will likely be filled by current employees. Councilman James Taylor, who represents the Southeast Ward where the facility is located, emphasized that even with incentives on the table, the project could go to one of four other cities in contention.

“There are people who cannot feed their families, there are people who need help in the worst way,” he said, “and our job is to make sure we’re providing economic opportunity. And this vote is to do just that.”