Look Under the Skirt for the Truth About Suppliers

Last Updated Oct 20, 2010 8:37 AM EDT

Here's what gives women's business advocates nightmares: yesterday's New York Times story charging that a hedge fund apparently run by women is actually controlled by a male investor who lurks in the shadows scooping up buckets of profits.

The story alleges that Pacific Alternative Asset Management Company - PAAMCO - has made much of the fact that two women partners own 51% of the company, while S. Donald Sussman, a "hedge fund mogul" with a less-than-sterling reputation actually funded the start-up; retained the right to convert his shares to a controlling interest; and captured 40% of its profits.

"With its two female partners officially majority owners, PAAMCO appeared to qualify for a cornucopia of programs intended to benefit women-owned businesses. Verizon Communications, for instance, hired Paamco as part of the Verizon Diversity Managers program, which was established in the late 1990s to attract funds managed by minorities. Ms. Buchan's firm [ PAAMCO] oversees a small part of the communication company's $28.6 billion pension fund. In recent state budget and presentation materials, public pension funds in California and Pennsylvania highlighted Paamco's status as a firm owned by women," wrote the Times.

While trumpeting its female leadership, PAAMCO apparently never bothered to get certified by the Women's Business Enterprise National Council (WBENC) or any of the state or municipal programs that take a peek under the corporate petticoats and certify that they see corporate lady parts, not corporate boy parts.

The entire point of certification is to prevent this exact scenario from happening. Verizon is a member of WBENC, which runs the biggest and one of the most demanding certification programs. Why didn't Verizon require PAAMCO to get certified? Isn't that why Verizon is part of WBENC? To uphold WBENC standards and adopt them consistently? I'd sure like to know how many other exceptions Verizon made in its supplier diversity program, wouldn't you? I'd also like to know what proportion of Verizon's annual expenditures with women-owned businesses are with PAAMCO. Does PAAMCO account for 5% of the amount that Verizon spent last year with women-owned businesses? Or 50%?

I don't really expect Verizon to divulge those numbers. Verizon, like most companies, talks big about its supplier diversity commitment without revealing the most basic metrics about how much it spends, with whom. You can bet that if Verizon doesn't bother to adhere to its own supplier diversity standards,
other companies don't either.

Let's look on the bright side. Certification is a pain for women business owners, but now we know it's worth it. S. Donald Sussman scooped up $55 million from PAAMCO in just five years. That's a pretty nice payoff for hiding behind some skirts.

Image courtesy of Morguefile contributor aleks.