A study found that more than one-quarter of reported corporate and federal spending with minority and women-owned businesses is being channeled to companies run by white men and large public companies, according to Trumbull-based BJM Solutions.
Minority and female entrepreneurs are paid a commission to create front companies, called “minority passthroughs,” the study found. However, most of the revenue goes to white-owned and public companies.
According to the study, 28% of spending by supplier diversity professionals was attributed to minority passthroughs.
“This was an amount larger than we had expected and significantly larger than the amounts thought to exist,” said the author of the study, Fred McKinney, an economist and co-founder of BJM Solutions.
“Front organizations were a major problem in the early days of programs designed to promote minority and women businesses,” McKinney said. “With both federal and corporate dollars flowing to address equity issues in communities of color, this unethical practice is growing rapidly.”
The survey was conducted in February 2022, when McKinney sent a survey with a link to 14 questions to more than 400 supplier diversity professionals. Thirty-eight supplier diversity professionals completed the survey. The results are available here.
BJM Solutions is an economic consulting firm and is certified by the state of Connecticut as minority owned and operated.
