PAGENO="0001" NEW ~ECONOMIC REALITIES: THE ROLE OF WOMEN ENTREPRENEURS /2~/(~ HEARINGS BEFORE THE COMMITTEE ON SMALL BUSINESS HOUSE OF REPRESENTATIVES. ONE HUNDREDTH CONGRESS SECOND SESSION WASHINGTON, DC, APRIL Z6 AND 27; MAY 10, 11, 17, AND 10, 1988 Printed for the ~ise of the Committee on Small Business Serial No. 100-53 UM. GOVEENMENT PItINTING OFFICE 88-199 WASHINGTON : 1988 For sale by the Superintendent of Documents, Congressional Sales Office U.S. Government Printing Office, Washington DC 20402 PAGENO="0002" CGMMIflEE ON SMALL BUSINESS NEAL SMITH, Iowa, HENRY B: GONZALEZ, Texas THOMAS A. LUKEN, Ohio IKE SKELTON, Missouri ROMANO L MAZZOLI, Kentueky NICHOLAS MAVROULES, Massachusetts CHARLES HATCHER, Georgia RON WYDEN, Oregon DENNIS 12. ECKART, Ohio GUS SAVAGE, `Illinois tIORMAN SISISKY, Virginia ESTEBAN EDWARD TORRES, California JIM COOPER, Tennessee JIM OLIN, Virginia RICHARD RAY, Georgia CHARLES t HAYES, Illinois JOHN ~ONYERS, JR., Michigan JAMES H. BILBRAY, Nevada JCWEISI MFUME, Maryland TLOYD H. FLAKE, New York 8. MARTIN LANCASTER, North Carolirta SEN NIGHTHORSE CAMPBELL, Colorado PETER A. DxFAZIO, Oregon DAVID E. PRICE, North Carolina MATTHEW G. MARTINEZ, California OoNaw F. tssar, Snff Dtreetor 4. Dssw }Itar, KiaaSy Staff Direfl' JOHN J. LFAL(* New York, Chainnas JOSEPH M. McDADE, Penasylvanla SILVIO 0. CONTE,' Massachusetts WM. S. BROOMFIELD, Michigan ANDY IRELAND, florida JOHN HILER, Indiana DAVID DREIER, California 0. FRENCH SLAUGHTER, tTw, Virginia * JAN MEYERS, Kansas DEAN A. GALLO, New Jersey 4. ALEX McMILLAN, North Carolina LARRY COMBEST, Texas ItICHARD H. BAKER, Louisiana JOHN ,J. RHODES III, Arizona JOEL HEFLEY, Colorado FREDERICK S. UPTON, Michigan' ELTON GALLEGLY, California 1~,YDE C. HQJMLOWAY, Louisiana lEft PAGENO="0003" CONTENTS Hearings held on: April 26, 1988 April 27, 1988 May 10, 1988 May 11, 1988 May 17, 1988 May 19, 1988 WITNESSES APPENDIX 159 160 159 169 170 176 184 188 195 `205 201 161 Wednesday, April 27, 1988 210 TUESDAY, Anit 26, 1988. Page. 1 27 59 85 118 129 3 8 13 11 4 Bergen, Polly, chairman, the Polly Bergen Co Farrar, Mary H., president, Systems Erectors, Inc Keeley, Kathryn, president, Women's Economic Development Corporation [WEDCO] Lincoln, Lillian H., owner, Cetitennial. One, Inc Rudd Gillian president National Association of Women Business Owners [NAWBOI APPENIDIX Tuesday, April 26, 1988 `,..` Bilbray Hon James H a Representative in Congress from the State of Nevada, opening statement Conte Hon Silvio 0 a Representatiye in Congress from the State of Massa chusetts, opening statement National Association of Women Business Owners [NAWBO] position papers Data and Statistics' The Changing Work Force and the Impact of Working Women WomemOwned Businesses in Federal Procurements Access to Commercial Credit Prepared Statements Farrar, Mary H . ~ Keeley, Kathryn Lincoln, Lillian H Rudd, GUlian WITNESSES W~D~IESbAY, APrnL 27, 1088 Green, Mildred A., president, Accounting Data Systems, Inc., Caro, MI Hansson Margaret S president and chief executive officer M S Hansson Inc and chairman PureCycle Corp Slater Phyllis Hill president~ Hill Slater Inc [HSI~ Lynbrook NY Stacy Carey I owner Dialogos International Coi~p and coowner, Globex Inc Raleigh NC Taylor, Charlotte president Venture Concepts Washington DC and fornter executive director of the 1977-78 Presidential Task Force on Women Busi ness Owners 28 42 35 32 45 (III) PAGENO="0004" lv Page McDade Hon Joseph M a Representative in Congress &~tn the State of Pennsylvania, opening staten~ent . 210 Prepared Statements: Green, Mildred A 217 Bansson, Margarct S .~. ~. 238 Slater, Phyllis Hill 233 Stacy, Carey I 229 Taylor, Charlotte j.... 243 Excerpt from The Bottom Line: UnEqual Enterprise in America 253 Schroeder Ron Patricia a Representative in Congress from the State of Colorado, opening statement 211 WITNESSES TuEsn~v, MAY 10~ 1988 ~Bisrman, Christine, president, C~1t Safety, Inc Boggs Hon Lindy (Mrs Hale) a Representatrre in Ccsngress fr~m the State O*~ Louisiana 60 Gentry Barbara director Women Otsinass Owners Services, Michigan De~ partment of Coinmmerce 65 eJordan-DeLaurenti, Mary Agnes, president, Jordan.DeLaurenti, Inc., Dallas., APPENDIX, Tuesday, May 10, 1988 j.... 261 &lbray Hon James B a Representatiire in (~oflgress from the State dl Nevada, opening statemEnt ~ ~... 261 Gentry, Barbara: . Building the BIDCO industry (Michigan) 281 Capital Access Program (Michigait) 223 Michigan Strategic Fund Capital Access and BIDCO Programs 283 Prepared statement .~.. . `264 Public hearings report and recommendations (Michigan) 336 Response to chairman's request for additional informatio~i 858. Levin Senator Carl, from the State of Michigan opening statement 262 Touche Ross & Co., Daniel J. Kelly, chairman of the board, Survey of Wgm~ Owned Michigan Businesses 1987 survey ~. `~ 890 1988 surrey . `.~.`.. ~ .... 421 WITNESSES MAY IL, 1988 , Bulow, I~ay, Assistant Secretary for Administration, u.a De~artrnent of Corn~ merce ~.. 101 Crockett, Carol M Director Office of Women s Business Ownership U S Small Business Administration [SBA) 87 Hager, Susan, president, Hager, Sharp & Abramson, Inc 80 Snyder, Susan, president, the Pathfinder Corporation for International Trade. 91 APPENDIX Wednesday, May 11, 1988 442 Eulow, Kay, additional material supplied at request of Chairman LaFalce 468 Crockett Carol M additional material requested by Chairman LaFalce and Mr. Price: Executive management reports on procurement for womeri~owiied small businesses for fiscal years 1985-87 . 469 Report on fiscal year 1986 total women small business prime contract awards goals 489 Trends in Federal prime contract award activity to women-owned small businesses 490 Meet the Lenders conference data 491 Prepared Statements: Crockett Carol M 442 Hager, Susan 455 PAGENO="0005" V Page Prepared Statements-Continued Snyder, Susan 459 WITNESSES TUESDAY MAY 17, 1988 Scollard, Jeannette Reddish, president, SCS Communications, New York, NY.. 119 Townsend, Bickley, director, research and education, American Demograph- ics, Inc., Ithaca, NY 114 Wray Beth president National Federation of Business and Professional Women's Clubs, Inc. tBPW/USAI 123 APPENDIX Tuesday May 17, 1988 493 Conte, Hon. Silvio 0., a Representative in Congress from the State of Massa- chusetts, opening statement 493 Prepared Statements: Scollard, Jeannette Reddish 537 Townsend, Bickley, with attachments 494 "America's New Workers" 505 "The Facts About Working Women" 512 Wray, Beth, with attachment 546 "The Best Companies for Women," Savvy Magazine, article 565 WITNESSES THURSDAY, MAY 19, 1988 Ascher, Ann, president, Ann Ascher, Inc., Los Angeles, CA 148 Fitzpatrick, Beatrice A., president and chief executive officer, American Women's Economic Development Corporation, New York, NY 132 Henderson, Laura, president and chief executive officer, Prospect Associates, Rockville MD on behalf of the National Association of Women Business Owners 145 Mayer Martin journalist/author New York NY 136 Morella, Hon. Constance A., a Representative in Congress from the State of Maryland 130 Shapiro Esther creator owner/coproducer Aaron Spelling Productions Los Angeles, CA 140 APPENDIX Thursday, May 19, 1988 578 Conte, Hon. Silvio 0., a Representative in Congress from the State of Massa- chusetts, opening statement 573 Prepared Statements: Fitzpatrick, Beatrice A . 574 Henderson, Laura 598 Shapiro, Esther . 593 ADDITIONAL MATERIAL RECEIVED FOR THE RECORD Abacus, Inc., San Francisco, CA, "The Abacus Story," excerpts 612 ComputerLand Austin TX Carol Thompson president statement 619 Executive Order 12138, May 1979 624 Executive Order 12426, June 1983 628 Hub Co ventures for Women s Enterprise New York NY Jing Lyman president, statement 630 Interagency Committee on Women's Business Enterprise, Susan E Phillips chairman memorandum on Model Training Program 635 Request of committee to 21 Federal* agencies for information on their activi- ties in support of women-owned businesses 639 Responses of the agencies and departments: Agriculture 643 Commerce 651 Defense 658 Education 674 PAGENO="0006" VI Page Responses of the agencies and departmeflts-continued Energy $78 Export-Import Bank 684 General Services Administration.... .~. .. 686 Health and Human Services ., 690 Housing and Urban Development 697 interior 701 Justice 70.9 National Aeronautics and Space Administration 717 National Science Foundation 723 Nudear Regulatory Commission . 129 Small Business Administration 139 Transportation 753 Treasury 763 Veterans Administration 773 Robert Morris Associates Philadelphia, PA William H Sayre president statement PAGENO="0007" PAGENO="0008" 2 Many of the problems are the same that face all emerging busi- nesses Addressing obstacles that hinder the success of women en- trepreneurs will benefit all other entrepreneurs as well. Let me conclude by stating that we must adopt, as a national pri- ority, the release of the extraordinary and as yet untapped abilities and resources of women. Our Nation needs the wealth that can be generated by the business talent of ~ one-half of our citizens. That wealth represents a national gold mine. We must tap it. The cli- ~nate is right; the opportunities are present; and women can and should take their rightful place in the economic mainstream as or- ganizers, managers, and employers. The majority of the witnesses who will participate in these hear- ings are women representing a broad variety of industries, demo- graphics, business sizes, ethnicity, and expertise. We will also hear from a few men during the closing hearings of this series. As we examine changes and trends in our economy, both male and female experts have been invited to assist us as we consider policies and programs for the future. I want to welcome today's witnesses who will address the special achievements of women as business owners arid the effect these women are having on our changing economy. Before we call our panelists to the witness ta~Me, I wonder it there are any members present today who have any statements they would like to make. Mr IRELANI) Mr Chairman, { would only take a few nrnrnents to say once again that your leadership of this committee, and particu~ larly your sensitivity to this area, is exceptional We are moving in the right direction. We have an obligation to make sure that we unleash the entre~ preneurial spirit in all of our citizens This is really the backbone of the success of America, and hearings such as this will Lead us in that direction I am glad you have seen fit to bnr~g tIns about Chairman L~F44icz. Thank you very much. * Mr. Lancaster. Mr. LANCASTER. I would like to commend and thank you for con vening these hearings. I look forward to the outstanding panels of witnesses we have here today and to the others in the series Thank you for the opportunity to participate Chairman LAFALCE I ha~ve prepared remarks from Congressmen Silvio Conte and James I3ilbray If there are no objections, I will insert them in the record at this time. Hearing none, so ordered. fMr conte's and Mr Bilbrsy's statements nz,y be f~iund in the appendix..1 Chairman LAFALCE I wonder if we could have the witnesses come to the table. We have your name cards at your places. Ms. Kathryn S. Keeley, Ms. Lillian Lincoln, Ms. Mary Farrar, Ms Gilhan Rudd, and Ms Polly Bergen Having introduced you from my left to my right, we will start from right to left. Ms. Bergen will be our first witness, and I want to say what a pleasure it is to have everyone here. I know the difficulty you h~ finding time to come before our committee, We look forward to hearing from you. Please proceed. PAGENO="0009" $ ~TESflMONY *OF POttY B1~ROEN, CRAffiMAN~ ~ ~OLLY ~ BERG~EN~CO. ~ ~ ~ ~ ~ , Ms. BEI~GEN. Thank you very mueh, ~ ~ ` ~ . Good morning, Mr. Chairman and members of ~the committee. M~ name is Polly Bergen, and ~ am the chairman of the Polly Bergen Co. We manufacture shoes, handbags, be1t~ ~ jewelry, and other accessories. ~ ~ ~ ~ ~ ~ ~ ~ I am here to testify on behalf of the National Assoc~iation of Women Business Owners, because I believe it is terribly important that our contribution be recognized. ~ , * ~ Women business owners are boosting the national economy. We are shaping the business community of today, and we are shaping the future workforce, . . ~ When I ~ first started in business, * 1 was 10 years. old. I had sent away for something Qalled Closrerine Salve. The ad in the magazine had promised if~ I could sell~two gross of Cloverine. Salve, I would receive a free nurse's uniform and a stethoscope~ Well, not only did i not know what the salve was, I didn't know what two ~gross were~ and, of course, my mom and dad ended up buying most of~ it, and I got my prize~ Years later; of course, 1 discovered in the basement the Cloverine Salve still in ité cartons. I guess they ~ didn't know what it was either. ~ : ~ ~ ~ ~ Years later, in ~ 1965, 1 * started anoth~ busin~ss-I invested $3,OOO-.~which was called' Polly's Folly at the time; and I began a small mail order cosmetic company called Oil of the Turtle. Before anyone asks me how you get' oil froxt~ a turtle, I will tell you, you startwith a very l~w stool. ~ * I knew very little about business, but I figured how could I faji, because I actually wore The stu1~f. Almost a decade later, having ~ worked 7 days a week, 18 hours & day, ` traveling all over the wOrld, investing every dime I had earned during my years in show busi- ness, I sold the company. We were doing over $5 million a year. It was hard work, and it w~ painful work, and I made a lot of mis.. takes. But I learned, and I was very lucky, because I h~td chosen to be in a business a lot of women had proven successful in-cosmet~ ics, fashion, businesses that were easy or easier for women to be involved in at that day and time. . (1 (Vt~- L~ V~. £. iii; ~i:~i V ~ ~ L~ V i,aiL~ LlJijflJL I~aLiL W !J1L~ ~ ~ ~lUWiL ~ my and women business owners are vitally important to the serv- ices sector. Women business owners have made incredible strides in the last 10 years. We have contributed increasingly to Federal, Stat?, and local tax coffers as we own more and more of the Nation's business- es. `It is estimated that womenown more than 25 percezit ox ~ the Nation's ~usine~ses today,'and this haè been ach!evéd in just over a decade. ~ ` ` . ` `. ` PAGENO="0010" 4 Therefqre,~women business owners must be viewed as vital to economic development, and vital to making ~ positive impact on re- ducing our deficits, nationally and i~itèrnationally. We are not just a social cause. Women business owners have always looked for opportunities, not giveaways or special programs just for women. Women have seized every opportunity available to go into business and ~to be profitable, and the record shows that we have done it with little assistance from the Government or the cot- porate sector The record shows that we have done it with the help of family and friends. Women business owners create jobs. Small business creates well over 60 percent of all new jobs today. As women own an increasing number of businesses, more than a quarter of businesses in the country, we are providing a growing number of jobs. I think it is also very important that we strike down some of the myths that surround women.~owned businesses. We are not mom and pop enterprises, we are not operated out of a basement or a garage-though I admit I started Oil of the Turtle there, but then again, so did Apple computer. Women do not start businesses as a hobby, and women rarely inherit their businesses. Millions of women~~owned businesses across this couatry are started from Scratch and are built on "sweat equity." Women business owners have shown that we can do it From every walk of life, in every type of business, We haVe done it. We have gained experience in the face of resistance, we have broken into many closed markets, and we have a track record. We are competitive, profitable, ready to do better, and to do it faster. The Nation's businesses must develop and grow for this Nation to survive economically We, as women, want to share that respon sibthty and participate in the opportunities that will shape the future of America in the 21st century.. S Thank you. Chairman L4FALCE. Thank you very much, Ms. Bergen. Chairman LAFALCE Our next witness will be Ms Gillian Rudd, president of the National Association of Women Business Owners~ Ms Rum) Thank you, Mr Chairman I have a prepared statement, and I would Lute to summarize that I would like the chairman's perniissiort to add a couple other things to my testimony. S Chairman LAFALCE. We will put the entire test of your state tn~ent in the record You may proceed as you desire Ms. Ruon. Thank ycu. S S TESTIMONY OF GILLIAN RUDD, PRESIDENT, &NATIONAL ASSOCIATION OF WOMEN BUSINESS OWNERS ENAWBOJ Ms. RUDD. My name is Gillian Rudd, I am a woman business owner in the District of Golumbia, and it is with great pride that I come today representing, as president, the National Association of Women Business Owners, which I will refer to as NAWBO from here on in. S NAWBO 5j5 a national trade assdciation that represents wOmen entrepreneurs across the country. It was founded in 1974 an4 has grown to 38 chapters throughout the United States. it Is the only PAGENO="0011" PAGENO="0012" really believe the country is at an ecOnomic crossroads and that all of our taxpayer dollars should be toward incentives to create busi* ness growth, job creation, and international trade Tomorrow we will release the findings of a major new study on women business ownership that reflects what the State and local governments are doing The study refers to women business owners ~s ~ America's hidden resource, and what the report will reveal is basically window dressing, lip service, and a mere five continually funded business owner programs around the country. That is a very unfortunate waste of a very valuable economic resource. We truly believe that this committee and the SBA should be two ~of the most exciting places to be in Washington, DC It should re- flect the entrepreneurial community, the growing business commu~ nity, the emerging business community That is where the action, the energy, the excitement, the jobs, and the innovation are You will notice that I have not used the term "small business" NAWI3O has dropped those words from their vocabulary this year It has tended to be associated with disadvantaged and nongrowth businesses, and that is not what we are about I understand you also will be asking Governtiient agencies to out line the programs they have put in place for women business owners in the last decade I don't expect much of a catalog I do ask you, when they appear before you, to query if they were a one shot deal, query the number of dollars spent, and particularly query the results, the number Qf contracts, the number of dollars that have actually gone to women business owners, and the return on the in~ vestment the Government has made I also understand that you look at the future, what our demo' graphics are telling us, and where our deficits are leading us We strongly feel that we need statistics on what our resources are in this country, and we don't have those at the moment We need policies that would allow entrepreneurs to grow That is of most vital concern to NAWBO We want to plan for our future This is a planning organization, a'id we use a quote from Casey Stengel, the basebaL legend, very frequently, "If we don't know where we are going, we may end up somewhere else" We are very nervous about ending up somewhere else. What do we want, as growing American businesses9 We want ba sically a national strategic planning commission for businesses that will bring together the diverse spectrum of interests and expertise This is what we do in our own businesses We get together, we plan for the future, we look at the resources we have. We look at our weaknesses and our strengths That is what we need to do to tackle our situation in the global economy. What do women business owners want in the short term9 The problems we face are no programs, no recognition of economic impact, no organized systems of outreach. Here are some suggestions that are focused on access, business growth, and stability and economic development We are not sug gesting new programs, but we are suggesting reallocation of re- sources, a greater private role in the public sector, the development of 3-year model programs, and an emphasis on women-owned busi- nesses across existing programs. PAGENO="0013" 7 The way that we are suggesting to do this is truly with your help. We need help from the top down. We need help from the White House, from whomever the President is in the next adminis- tration. We need it from the Congress, and we need it from each Cabinet head. This is a national economic issue, and we need* inno- vative solutions. What we are suggesting is a women business owners Federal ini- tiative that will have long-term and broad-range impact. The sug- gested mechanism to accomplish this would be a women business owner policy council that will consist of key agencies, White House representation, congressional representation, women business owners' groups, and individual women business owners. The policy council would have a good budget and staff to carry out its man- date, and that would coordinate the actions of all Federal agencies and departments, establish program goals, work with the State, city, and local planning agencies and associations, establish, moni- tor, and report progress to Congress and the President, and define the programs that are needed. Specific emphasis needs to be placed on capital, procurement, high technology, international trade, technical assistance, and training, and we particularly want to look at the Departments of Defense and Transportation. Each Cabinet officer would establish within their agency a women business owner policy task force, and they would include staff members, and women business owners, and representatives of women business owner groups. The plan is to develop a 4-year action plan and the accomplish- ments of the goals that will be built into those plans would be in- cluded in the merit increases of Federal employees, so, there would be an incentive for them to work with us. There would also be a sunset provision in these task forces so that in 4 years, if goals and objectives are reached, it will be dis- mantled. Each agency would include agency staff and women busi- ness owners, and a specific portion of program budgets would be al- located for model programs. Model programs would be funded for 3 years. The task forces would make a yearly report to the President, and Congress would review the initiatives each year with oversight hearings at the end of the 4 years. The Small Business Administration would concentrate on out- reach, directory, building a constituency, newsletters, those types of things. We want to move quickly. We always move quickly. Within NAWBO we have something called NAWBO time, so, we are impa- tient to grow and move our businesses along. We are suggesting two immediate programs, two that the Depart- ment of Commerce has in place. The Department of Cominerëe, in the last 2 years has cosponsored a program called the Mega Mar- ketplace. The main aim of that was to give visibility to women business owners and to break into the procurement process at all levels. We have less than 1 percent of Federal dollars at this point in time. With 25 percent of the businesses or more, that is a rather unequal balance. We are also suggesting we become a part of the Department of Commerce initiative to export NAWBO, and this is the kind of in- novative program we are looking for. We suggesi we have a special PAGENO="0014" 8 export program targeted to women business owners-pick a select- ed number of women business owners and select them carefully. Congress would work to develop their marketing `plans with them, and the Import-Export Bank would be the loan part of that. The businesses' accomplishments and failures could be docu- inented and could become beneficial to all Am"~erican exports, par- ticularly for growth businesses. We could develop from that a io.nger term entrepreneurial export growth strategy. As you can see, NAWBO is deeply concerned about America's prosperity in the future, since we feel we and our children are going to be living there. We feel. a false sense of prosperity exists today in the country, that our short-term, "penny wise, pound fool- ish" approach deeply endangers our future. We are calling for American business and Government to make a long-term investment in America, and in May we will issue our issue book for the coming year. it will be called, "Framework for the Future II, investing in America." We think we must invest in America in the long term We are asking for a visionary approach that truly looks at issues of corn petitiveness, quality, design, education, technology, research and development, financing, and taxes.. Our Government dollars should be spent now to capitalize our future growth. We desperately feel we need a business mission and vision statement and, with the right people, the right team and the right vision, we can make our future prosperous, and we can resume our place as a proper, active, competitive, first-class, world-class economy. NAWBO commits itself totally to working with you to achieve that goal. Thank you~ S Chairman LAFAI4CE. Thank you very much. [Ms Rudd's statement, with attachments, may be found in the appendix.) Chairman ~ next witness~will be Ms. Mary Farrar. IESTIMONY OF MARY II. FARRAR, PRESIDENT, SYSTEMS ERECTORS, INC. , ` 55, ~` Ms FARRAR Good morning My name is Mary Farrar and my company is Systems Erectors in Kansas City. Systems Erectors provides labor and equipment to erect structur~ al steel, precast concrete, and preengineered building systems for the low-rise commercial and industrial warehouse markets. In my company the only employees I have are myself, an office manager wh9 is also my youngest daughter, an4 the rest of our people are un~ ~ion iron workers and union hoisting engineers. Also, I just finished my second term as national chairman of my trade association, which is the Independent Erector Division of the Systems Builders Association. I was the only woman who has ever held office in that association. I know a lot of you are wondering what I am doing in this busi~ ness to start with, and a lot of days I do, too I don't have any ex planation for how I got to where 1 am, but I would like `to share my story a little bit this morning.' S PAGENO="0015" 9 I grew up in a large family. I was the oMest of six children. My father was a conductor for the Santa Fe Railroad, and my mother was a school teacher, but she didn't get her degree until after all my children were able to attend her graduation, so she was a rather late bloomer also. ~ I got married shortly after high school and had my family, stayed home with my children until 1972, at which time I got a job working for a cOnstruction company, because I felt that I needed to supplement our income. We were being faced with college for five kids in the near future. As I learned and grew in this construction company, the whole construction business fascinated me, and I learned most phases of the management of the company In about 1978, I made an attempt to buy into the company. When `I was denied the right to buy into the company, I left to launch Systems Erectors. I started the company with obviously no formal training, no busi- ness training, no money. I had 6 years of on-the-job training in an- other company I had the support of my husband We talked about it long and hard `before I decided to do this, and I had a contract from a general contractor in Kansas City to build three warehouse buildings. I didn't have a bankable deal at that time, and I think probably would have been laughed right out of the bank if I had gone in and said: "here I am~, I have no experience, I want to start a union erection company, I have got $500, and that is it, guys" So, I didn't even attempt to do that, but the contractor I had this contract with said that I could draw weekly against my contract, which, typical- ly, in a construction contract you bill on the 25th of the month `for labor and material that was expended during the month, and you' might get your money on the 15th to the 25th of the following month In a labor intensive organization you need a lot of capitW because your payroll, even an a very small company, is running $15,000, $20,000, $30,000 a week So, Without the contract that I had allowing me to draw every week, I could not have made my payroll and payroll taxes I made a little bit of money on that first contract which allowed us to bid more work, and by the end of 1979, which was our first full year iii business, we had billings of over $1 million. Now, 10 years later and millions of dollars in billings and mu lions of square feet of buildings later, I still have a lot to learn, but I have learned a lot of lessons I am still struggling for expansion capital Every time I walk into the bank, it is like I was starting all over again I generally get the pat on the back I have done a good job, but they think you are doing all the work you need to be doing right now. But in 1981, in stark contrast to this kind of attitude, I joined forces with my brother, and we were going to do speculative build ing, and it was speculative, because in 1981, in Kansas City, there was no construction market The first bank I went to with this wild idea accepted it, gave us the money, and we built the building Of course, we couldn't sell the building We Qwned the building 6 years later, but that one experience pointed out to me that it helped to have a man for a partner, because it was `a much more PAGENO="0016" i0 risky venture than what I was doing with solid contracts in my hand, but it was easier to get the money. . I feel very strongly that banks need to be require4 to have stated policies about what they loan money on, what they don't loan money on, because it is so easy for a banker to-when you walk in, to look at you and make his judgments not based on what you can do or what you have done,, but based on gender, or based on maybe she is not in an area that she should be in,, those kinds of things I think we need to change. Also, if you are denied credit on any particular deal, it should be stated very clearly why you were denied the credit. I think, too often, the bankers get away with passing us off and saying that really doesn~t' fit our loan portfolio right now, and I would like to see something changed on that Also, I would like to talk a little bit about my experience with the Federal procurement programs, be- cause Systems Erectors would like to do work with the Federal Government, and I have gone to the seminars that have been held in Kansas City or at surrounding areas. They are often called How To Do Business With The Federal Government, and at these semi- nars they talk to you a little bit about how to do business, and they give you stacks of paper to fill out If you fill out these forms, it is my understanding that you are put into some kind of a data bank that is available t~ all the procurement people in the various agen~ des. But in the 10 years that I have been in business, `I have never yet received a request for quotation fOr the type of work I do or in the area I do~ Occasionally, I receive one frOm the Corps' of Engineers' offering that I could build a dam for them somewhere But I don't build dams, I don't know anything about it. So, I would like to know how we can break into that system, be ~eause there is a huge, huge marketplace and opportunity for a ~oman business owner; and I think that i~ all companies that are qualified to do the various kinds Of work that the Federal Govern~ ment is purchasing, and they want to do that work, if they are not given the opportunity not only might the Government not be get-. ting the best price for their purchases, but the small companies are not getting the advantage or the help' that they might need~ Thanks to my association with the Committee of 200, 1 have learned that most all the women that I talk to., share my frustra- tions, and just as a note of explanation, the Committee of 200 is a national organization of women business leaders who are risk-. takei s in their respective industries, but even women with much larger corporations than mine seem to be faced with the same problem of lack of credibility in the marketplace, lack of access to credit, and lack of Federal Government procurement opportunitieS~ In 1978, in the field that I chose, I was definitely a trail blazer, but now, looking back, I dor't see anyone following me, and this concerns me very much. I wonder what is stopping these people from coming behind me. There is nothing special about Mar7 Farrar. I didn't have an~ family member to model after, I didn t have any money, I didn t have any education, I didn't have any business training, and I certainly don't have a genius IQ. I ran into lots of roadblocks and barriers, I had a lot of grit and determina- tion, and despite the odds, I have made my company successful. PAGENO="0017" 11 ~ In conclusion, I would like to s~y if. `both tIi~ , public and the pri- vate sector could work toward assisting wGmen who have the drive and entrepreneurial rpir~t to achieve their goals, our economy ~v~uid benefit all the more. ~ ` `Thank you. Chairman LAFALC~ Thank you very much, Ms Farrar [Ms Parra?s statement may be found in the appendix J Chairman LAF1~LCE. We have been joinedby the Congresswoman from the State of Kansas, Representative Jan Meyers, who was the star of yesterday's Profiles, in Congress on CNN Ne*s, and also Congressman French Slaughter. ` ` ` Our next witness wfli be Ms. Lillian Linco~n. Ms. Lincoln. TESU~QNY OF lILLIAN II. LINCOLN, OWNER, CENTENNIAL ONE, INC. Ms Liwcou~1 Good morning, Mr Chairman, and members of the committee My name is Lillian Larncohi I am president and founder of ~Jen tennial One, a building maintenance service company located in Lanham, MD My company currently grosses more than $8 million in sales, and we `employ in excess'of 800 people. As I testify today, I am strongly reminded of the climate in 1976, the year I entered the entrepreneurial arena There was talk at that time of much support and encouragement to women and nu ~orities to start their own businesses, take the associated risk, and actively compete on the open market The political environment ~vas supportive, and I received lots of backup from friends, business associates, and family In December 1975, I started my company I invested $4,000 of my own money, and I employed a few people and d~ecided to go after Government work I decided that I would apply for approval under the 8(a) program~ but my initial application was turned down, be cause the Small 13usine~s Administration stated they co~ildn't pro vide enough contracts to support my business Well, I assured them that I did not really need them to provide me with the contracts As long as I had the approval, I would market Government agen cies and secure the contracts on my own So, undaunted, I reapplied, provided the SEA with names, ad dresses, and telephone numbers of agencies to whom I had already spoken and who had agreed to set aside contracts for my company In October 19 76, Centennial One was awarded its first 8(a) coatract from Vie Department of Agriculture in I3eltsville, MD That con tract was for $150,000 arid required the employment of about 20 part time people As my comp~py grew over the next few yeers, I continued to do my own marketing while controlling the growth of my coz~npany We won more Government jobs while adding a small core of pri va~ clients In addition, my 8(a) base continued to grow until the ratio~was 70 percent public sector and 80 percent private In order for my company to continue to grow, I realized that I needed greater access to capital I did not turn to the Small Busi ness Administration, because I had established a rather unique re lationship with a local bank president who had~ previously been my PAGENO="0018" 12 personal banker and who really believed in me. I have no doubt that it was because of this relationship that I experienced no real( difficulty in acquiring credit. So, in 1976~ with my accounts receiva- ble as collateral, I was granted a $12,000 line of credit from this bank. Today, the company now has more than half a million dollars line of credit, and we have unlimited bonding capacity. I am aware that my personal story is somewhat unusual when it comes to credit, but for many women access to capital is a major obstacle. In 1982, I was given a fixed number of years to remain on the 8(a) program under the new guidelines. I asked for, but was denied, a 1-year extension. So, in 1985, I was abruptly dropped from the program At the time of my "graduation," which I determine is a misnOmer, I had about $5 million in 8(a) contracts and $2 million in private-sector contracts. Clearly my. business was in danger of not surviving the graduation. Between January and March 1986, Centennial lost $5 million in sales, and the company could have gone bankrupt had I not had in place a strong marketing program which had been implemented a few years earlier. Others with less foresight have seen their compa- nies collapse upon graduation from the 8(a) program, or have had to merge with other companies, or sell equity positions. Clearly, there is definitely a. need to improve the procedure for supporting the companies during this critical transition period Many women and minority-owned businesses are unable to perse vere through such financial hardship, which makes Government contracting an extremely difficult market in which to build and grow your business. My company pulled through, prevailed, and through aggressive marketing it reversed its client base to its cur- rent level, 90 percent private-sector contracts and 10 percent public-sector. It was when I first hired my first salesman, a young aggressive white male, I was confronted with the realities of sex and race dis~ crimination in the marketplace. Previously, clients had been rather subtle in dealing directly with me, but it was through this young man that it became obvious that people were frequently dubious about doing business with a female, particularly a black female I have been blessed over the~ last 12 years, and, with hard work, I have built a fine track record. I am now taken seriously, but it has not always been that way. Credibility continues to be an issue with women in business. Clients, suppliers, and financial bankers are slow to believe in a business plan if it is submitted by a woman. She still has to prove herself, and she is put to a much more difficult test than her male counterpart. I have good credentials, I hold a bachelor's degree from Howard University in Business Administration, and I was the first black female to receive an MBA from the Harvard Graduate School of Business in 1969~ In 1981, I was selected as small business person of the year for the State of Maryland, an award which I truly value. in closing, Mr. Chairman, and members of the committee, I would like to thank you for allowing me to testify today, and I hope that my story will help support legislation to assure adequate and fair credit for women and open up avenues of increased pro- PAGENO="0019" is curernent for female entrepreneurs. I particularly would urge you - to do all that you can to make the odds better for successful women~owned business. ~ . ~ ~ ~ Thank you very much. - Chairman LAFALCE Thank you very much, Ms Lincoln (Ms Lincoln's statement may be found in the appendix] Chairman LAFALCE Our next witness will be Ms Kathryn Keeley from the ~tat~ of Minnesota. ~ - . ~tESTIMONY OF KATHR~!N KEELEY, PRESIDENT, WOMEN'S ECONOMIC DEVELOPMENT CORPORATION [WEDCOI Ms. KEELEY. Thank you, Mr. Chairman, and members of the comrn mittee. My name is Kathryn Keeley, I am president and cofounder of the Women's Economic Development Corporation, which is a pri~ vate, nonprofit Minnesota corporation that assists women to start and operate their Own businesses. We have been in existence for 4½ years, and in that time we bave seen over 3,500 women who want to start a business We have started 650 businesses, expanded another 350, and assisted some 400 that were in trouble. Over that time we account fOr some 2,000 new jobs created within the State of Minnesota and with 65 per- rent of those being what you call self employed, they are creating a job for themselves and one other person, 32 percent being small businesses, and 3 percent being the potential multimi1lion~doJlar companies. Our organization targets unemployed and underemployed women who need to create a job for themselves to support themselves and their families We have a specific focus which we have gotten na tional recognition for Women on AFDC The program was recently spotlighted on a 60 Minutes segment 6 weeks ago for work we have done with AFDC recipients A major part of our program is financing We have admimstered a loan fund with which we fund women owned businesses Our loans range from $800 up to $125,000 with an average of about ~12,000 We just did our smallest, which was $31 58, but that is typ ical for us When we do financing, we believe an owner should be at risk for their business, but we use creative lateral We take kids' bikes, couches, all the rntan~ib1es, the bankers say, that are in the business The most creative business we did was a florist, where we did a 5 day note on the roses and took the roses as collateral, which we could have sold, beoause roses had a life history of 10 days We did it on Valentines Day That owner sold $3,000 worth of roses, she had $2,500 to collateralize her business, and she was in oper ation. - - We are known for being very creative and coming up with fi nancrng schemes that will work Out of our $1 2 million, we have ~800,00O loaned out at any one time, and we have only lost $21,000 in 3 i/2 years We have a loss rate most bankers envy We are hard nosed b~srnees women in what we do We want to be repaid, ~nd we do serious business pIa~s Half the women who come to us, we talk out of the business They would be potential failures We just did a 3 year followup on the businesses we started, and ~2 percent are still in business functioning and doing well. L want PAGENO="0020" 14 to focus on capital, because that is the area we work in most. Since our 60-Minutes segment, we are getting 500 women a day calling our office. Half want to borrow money from us. We have heard from every State in the Union. We have had women call-one call from California, there were 45 women in the room wanting to borrow money. Some had ideas where they needed $700, some needed $lO~OOO~ but they all wanted to support families and had no- where to go. We tried to send them to the SBA, and, unfortunately, they tell them to go take classes. Classes do not create capital. Women face four barriers we see. One of them you heard today, about how we are stereotyped over and over. Women are seen as starting soft businesses. They are not taken seriously as business owners, and we see this all the time. Second, we don't have the personal assets often when we start the business. I am reminded only 6 percent of the women in this country earn more than $25,000 a year. That means we are not ac- cumulating a lot of cash. Second, I saw some testimony last week from Frank Swain from the SBA, and he says businesses start from family and~ friends. You better have the right family and friends. It is other women like us, who again are in that 80 to 90 percent who earn less than $25,000 a year, and we don't have a lot of cash to spare for each other. Third, is equity money, something that is harder to get if you want to expand. It is the investment dollars with a higher return, and it is a network that exists that women are not part of. Finally, the whole issue of women expanding their businesses and getting access to different kinds of markets. Again, Lillian talked about that and the need. When you have new markets, that is what produces capital and interests investors. I thiiik our organi- zation has worked actively, and we have stayed private funded over the years, because no one has taken us seriously in Government. We have a list of 100 places that. want to replicate' us around the country. We have contracts in five States to go in, but, again, it is private funding because the Government sees what we are doing as sort of soft or too fuzzy for them to understand, We have a track record now that we can explain and articulate, and wö want to par- ticipate very much as we restructure this economy. We believe women are leaders, and we want' to roll up our sleeves and do it together. You made a comment about creating wealth in this country. Frankly, women want to create wealth, but we would like to share some so we can create it together. [Ms. Keeley's statement may be found in the appendix.] Chairman LAFAi~cF~. Thank you very much. Now I will go to the question and answer period. I will ask just a few questions, myself. Just so I have a better understanding about WEDCO, how is it financed? Ms. KEELEY. We have a $6,000 operating budget that comes from corporations such as General Mills, Pillsbury, Northwest Founda- tion, it is all private money. They are grants. We are' a tax-exempt organization. We only work with women in Minnesota. Chairman LAFAWE. Most of your contributors come from--- PAGENO="0021" Ms~. ~EEELEY~. All of ~hem~;c~:xoept the `ord Foundation wo~t be the only national funding we have Thirty five percent øf my budget we do earned income, we do on consulting around the c~un try We get paid for speeches and eherge StateS to explain what we do. . ~ ~ ~ ~ I raised $600,000 a year The loan fund is primarily from Ford Foundation Chairman LAFALCE I see Are there any other corp~ra~ions such as yours in the United States'~ Ms KEELEY There are probably three in the United States Chairman LAFALCE Who~ Ms KEEL~Y In West Virginia there is a group called Women Employed, a group in new York City called AWED, and in Chicago there is the Women's Self Employment Project There are five other groups, one in Des Moines, IA, Missoula, MT, San Francisco, CA, the Range in Minnesota, and Milwaukee, WI, that are trying to start up. But none of them has loan money. I am being corrected back here We are the only one in the coun try to have actual dollars to loan out Chairman LAFALCE Are any of these organizations funded by Government? Ms KEELE~ ~ot that I know of The Chicago pz~o~ject may have some Government money AWED has some Government money Chairman LAFALCE Ms Rudd, one of the things you called for was the creation of a Women business owner's policy Council Right now isn't there an interagency task force on women's enterprise, and isn't this just a new name for an interagency task force9 Ms Runo There is e~tistmg an rnteragency task force I have never been contacted by them I think one of the major problems with it is that businesa owners are not included in the delibera tons, and we need to get that kind of input into a policy it is a little difficult for a group to design a program if they don't have the input for designing the programs Chairman LALFALCE Do you know if there is any interfacing be tween this existing interagency task force on women's enterprise ~nd any women's organizations within the private sector9 Ms RUDO I do not know enough about that interagency task force I do not know of that We are the major women business owner group I don't know if they have interacted with the Corn inittee of 200 which is the other major group Ms. FAnRAR. No. Chairman LAFALCE Weil~ on the ~ne hand, I would argue it is the z~esponsibility of the interagency task force to reach out to the private aector to include them within their deliberations, that is if I were appearing before them, or I had them before me On the other hand, I would argue to private organizations, if there is awareness of a task force not reaching out to tiem, maybe the pri vate organizations should be reaching out to the guvernmental task force In other words, I am suggesting there is a mutual responsi bility and perhaps neither side has fulfilled the responsibility of reaching out to the other; Ms Ruirn There was a report that came out from the interagen cy task force, and we asked for the report over a long series of months, and I think we finally got a report about, I got one PAGENO="0022" 16 anyway, about a month or so ago. But that was after a longer period of deliberations. Chairman LAFALCE. Well, I think it is fair to say this interagen- cy task force, if anything, could be labeled rather dormant over the past several years-- Ms. EUDD. Totally asleep. Chairman LAFALCE. That may be accurate. We intend to pursue that at future hearings. Is this women's business ownership policy council to include rep. resentatives from beth the publiô and private sector? Ms. RUDD. Yes; definitely. Our real strong push is to get the pri- vate sector within the deliberations of any program that is de- signed. Chairman LAFALCE. If we were to reach out to the private sector, who would we reach out to? Clearly, I would imagine you would suggest your organization. Ms. RUDD. I would. Chairman LAFALCE. Would there be other organizations that could be deemed representative of women that would be included in such a council mvolving both Government and public and pri vate sector? Ms. RUDD. Yes; I am sure the Committee of 200 might want to be involved, groups' like WEDCO. There are minority associations that also would like to be involved, I am sure. Chairman LAFALcE~ Do we have a list of the major organizations within the United States in some way representing or purporting to represent women business owners that could be included? Ms. Ruon. We probably have the best list in the Department of Commerce. We do those kinds of `lists together for the Mega Mar- ketplace, both to contact them, and we have very poor, I would say, individual lists. Chairman LAFALCE. Should any further focus we have-~-or the present interagency task force, or some other business council, women's business council-be exclusively for business owners or for women in business as distinguished from women' business owners? Ms. RUDD. I think it needs to b~ on women business owners. It is the ownership that brings special talents, problems and energies. The owners are the day-to-day runners and take the risk of the business, raise the capital of the business, and stand behind their capital, and it is the owners who should be included. Chairman LAFALCE. Some suggest that perhaps there is a need or concern for not just business owners but women in business and the special problems that they might have. So, I understand the distinction,' and I understand where you are coming from. In a cer- tain sense, not that it differs from something else in your state- ment, but you did emphasize what I refer to as mainstreaming, al- though I don't think you used that word. You didn't call for certain new activities designed exclusively for women. I think you were asking for greater emphasis on women-owned business, within ex- isting activities. Is this true? Ms. RUDD. We are taking, I think, a budget conscious approach. There is enough mone~r there, if it is used correctly, and our prob- - lem is access. We can t get into Government systems or financial PAGENO="0023" 17 systems. So, what we are asking for is a good deal of commitment, and the things that we suggested, like merit increases when Feder- al employees do something that achieves women business owner goals, those are the things that we are looking toward. Chairman LAFALCE. All right. Now you say that you can't get into certain types of activities, which is different from governmen- tal agencies or individuals not reaching out to women. In that con- nection, you also stated in your testimony that existing policies re- lating to procurement, credit, and tax are crippling women-owned businesses. But there was no explanation or expansion of that statement. Do you or do any of you have any information that you could share which would back up the claim that existing policies of the Govern- ment relating to procurement, credit, or taxes are crippling women or hindering women? Ms. RUDD. We can draw those together for you. We have inter- nally within NAWBO done credit surveys of our own business members. There are very few statistics within the FederEtl Govern- ment, and that is really our large problem. The Department of Commerce supplies us with a less than 1-percent figure on procure- ment, for instance. We don't know what our resources are in the women business owner community. We really need those statistics as well as the whole entrepreneurial sector looked at. One of the things NAWBO has been particularly active on is getting the SIC codes changed and expanded to fit the kind of economy we have now. What we are really looking for is a sense of economic direction in the coun- try, and we need statistics on us and every entrepreneurial entity in the country to see what we have and where we are going. Chairman LAFALCE. Fine. Mr. Ireland. Mr. IRELAND. Thank you, Mr. Chairman. I have to say, I like what you say, from beginning to end. It isn't just the women's part of it that gets me excited, it is certainly the entrepreneurial part as well. There is a book on the best seller list by Dr. Paul Kennedy of Yale that has gotten a lot of comment because the title of it is, "The Rise and Decline of Great Powers," and all of the commen- tary seems to be focused on, "Are we declining, are we following what other countries have done in the last 500 years?" Central to that discussion, except for one prominent comment in the Harvard Business Review, but absent across the spectrum of commentators, is the fact Dr. Kennedy points out in his introduction that through- out the book a central part of his thesis is that no country in histo- ry has risen to the top without being both pluralistic, and entrepre- neurial, and active in commerce and the free market; in addition to that, he points out that no country, in getting to the top of the heap, has declined without a prominent segment of that decline being the closing down of entrepreneurial activity by bureaucratic Government. I am struck in all of the testimony here by how, for the most part or almost entirely, the problems you have ticked off and allud- ed to are somewhat the same. I see similar problems in procurement. The procurement activity of the Federal Government is bureaucratic in the extreme and is, PAGENO="0024" Is by and large, a product of people who have never had tobe in busi- ness and never had to face the kinds of things you and other small business people a~e facing. The problems of banks-here, again, I spent 25 years in the banking business, and I like to think I did a lot of the kinds of lending we heard about from Kathryn. But the mentality in Amer- ica is brought about by the fact you are looking to bankers for cap~ ital. In the early 1930's, this Government, because of the Depres- sion, took commercial banks out of the capital formation business. They can't invest in your business, or they could go to jail. We have a Government-sponsored market imperfection as far as our banks providing capital, and y~tnobody is addressing it. The Government and our 0MB in particular now say efforts to solve that by having Government-sponsored entities much like what Kathryn has said-they said those are Government-sponsored entities and, therefore, are not a proper use of tax money. Yet from Fannie Mae on, we have those kinds of things, and I think it is high time we did a better job of providing capital by a Government- sponsored entity that could do it. It is certainly cheaper than the billions and billions of sorry loans that we have in our SBA portfolio that have gone to less than 1 percent of small business in America, which makes the amount of what women have gotten pale by comparison. So, having said that, and with my enthusiasm for what you are talking about and the economic denominator here, I really think there are special barriers in the women's world that we need to ad- dress. As I said at the outset, I am pleased that the chairman has focused on this area. It needs to be focused on. Ms. Rudd, you have seen what we have done with Government trying to get into this kind of business. I think yOur explanation that you are dropping "small," because in a sense Government ef- forts are to no growth and are to disadvantaged-there is some need for that, no mistake about it, but that isn't what you are talk- ing about, so you dropped the "small." You want to be something different. My real concern is, this independence and this need, if you are going to call-as some of these things that you listed should be done-if you are going to call on this Government to do it and real- ize what a miserable track record the bureaucracy has of really helping people without taking away their ability to succeed, how are you going to reconcile those? Ms. RUDD. The women's policy task force we are asking for is a planning committee, and I don't mean long-term planning. We a~n't like to plan for long times. We can do strategic planning, that is, to put in place some programs. We would like all of the sectors to work together, but we really want this to be a private sector driven front so that we can-it is true about the capital area; there must be another way. We have to come up with other solutions to the kind of bureaucratic layers, and layers, and layers that we have now. There has to be another way to get the Government dollar out through the contracting system. PAGENO="0025" 19 We will come in with some recommendations on procurement and credit. We don't have them today, but we will come in with them by the end of the hearings. We first suggested a business strategy planning task force. That was the overriding thing. We want to be a part of that, and I think women business owners can be the kind of wedge that goes in to do it. We are the entrepreneurial wedge and the fastest growing wedge. So, we want to plan now a different kind of activity for the Government to do, I would say, working with business, things like Kathy Keeley's program. Why can't we put some money into ven~ tures like that? They work. You have to have the right people, the right money, the right places, and we have the commitment to do that. I know from work.. ing in Mega Marketplace that Government people also have the commitment to do it. But in the meantime they are strangled by their own regulations. So, I think in a sense we have to carve out some model program.. zning so that we can say, "This works, and we can do this.' Mr. IRELAND. Thank yc~. Chairman LAFALCE. Mr. Lancaster. Mr. LANCASTER. First of all, I want to tell you how inspired and impressed I have been by your articulate testimony. Each of the witnesses was excellent, and I am convinced that you have given us the basis for questions of the witnesses who will appear on subse~ quent panels. I really don't have questions for you, but you certainly have given me questions to ask for of the institutions, private and public, that have thrown roadblocks in your pr~ress. I thank you for providing us that. I would just conclude by telling Ms. Bergen that her first experI~. ence in business was very similar to mine, except I sold Rosebud Salve instead of Cloverine. I grew up on a farm, and so, I was used to hard work, but never business endeavor until I started on my Rosebud Salve business venture. My first compensation was a red cutglass ring that promptly turned my finger green. But your testi- mony certainly brought back those memories of that first effort to sell something door-to-door in a rural community. I do thank each of you (or coming and for giving us the arnmuni~ tion we are going to need as these hearings continue. Thank you. Chairman LAF~.LcE. Thank you.. Ms. Meyers. Ms. MEYERS. Thank ioU, Mr. chairman. Mary, it is nice to see you again, and I am ~ t~ heat your tes~ timony and the testimony of all the women~ I glanced through the testimony from Ms~ fl~rgen and Gillian Rudd. I was interested in hearing your comments, Ms. Bergen~ about the fact that women-owned businesses are not just a social program, that they are contributing enormously to. the economy, and when they contribute to the economy they also contribute to Government and help us with our deficit problems, and so, it is something that we should definitely be encouraging. PAGENO="0026" 20 I guess my question is-and I think Gillian's testimony partially answered it-specifically, at this time; what can the Government do? I know you have suggested the Cabinet policy. council, and I think that sounds like it would coordinate agency efforts here in Washington and maybe be able to cut through the bureaucracy a little bit more. Specifically, is there anything that the Government should be doing now, can do now, before this policy council is instituted? I think I heard Mary and maybe Lillian saying that it was hard to be aware of what Government programs were there, and that they were not always notified and aware. Maybe, Mary, you can address this, or Gillian. Ms,. RUDD. There could be a very swift outreach to women busi- ness owners throughout the country in terms of knowing who they. are and collecting data on them, who are the women, what are their businesses, where can they fit in. We . started that process within the Mega Marketplace system- there is a bank-beginning in the Department of Commerce, and we produced from that a directory. The most wonderful thing in the world would be to have a na- tionwide women business owners directory that could be given to Government contractors and to corporate buyers,. and that is the hook between the two. That will be very close. The other programs, it depends how swiftly Congress can move. We need the equal access to credit moved so that the banks will xrt on why we are not getting loans. It is obviously a big prob- lem for everybody across the table who just testified. I think maybe those would be major things. We can move on the export program, which Secretary Verity is moving very fast on. If we could institute that program swiftly, we could put a model pro- gram in place. It has all the ingredients: A financing arm, if we can get Export-Import to do that; technical assistance arms; a little microcosm of what American businesses can do to help solve the trade problem. So, that would be a tremendous thing to do, and it would be beneficial for the long run, I think, for the entrepreneuri- at community throughout the United States. Ms. MEYERS. Mary, do you have any comments on that? Ms. FARRAR. The only thing I think about, because I brought up the procurement program-supposedly it is there, but I am just asking why in my case it has not worked. I don't know where to go to get that answer, and that is why I brought it here with me today. Ms. MEYERS. I am glad you are here, and maybe I can work with you on that. I am very pleased that you are in my district. Thank you for being here.. Kathryn. Ms. KEELEY. I was going to comment on the financing end. We travel across the countty, doing our speeches. The hardest money to raise is money for loan pools such as we a~minister. The private sector has a difficult time doing that, and they say the ~BA does that. PAGENO="0027" 21 I would like the SBA to stand up and say what they really do and don't do. That is the first step, which would be fairly sensible, so we can stop passing it off. The second issue is the Government may have to be the leverag~ ing partner that says, OK, if you raise x amount of money, we will put this in a loan pool, and challenge communities to do some things in terms of financing. Ms. MEYERS. Ms. Keeley, I think it would be best to address this to you. Could you answer, how might this committee be helpful in promoting the establishment of other groups like yours throughout the country? Ms. KEELEY. Well, you could help fundraising in your local dis.. trict. The toughest thing is raising the money to support the orga.. nizations. San Francisco has been working over a year to help orga. nizations. On the 60 Minutes tape I said when you sit in a meeting and say you are going to help poor wOmen, put them in business, and loan them money, and they have no collateral or assets, that tends to drain the color from bankers' faces, and foundations and corporations think it is some service giveaway program, and we do enough of those; So, there is a real lack of understanding. We don't fit in neat boxes in how we do things. So, lend your credibility to some local groups to raise money. I think the other is this Government has to put out some chal~ lenge money that lends credibility to these organizations. Ms. MEYERS. Thank you. Lillian, I think it was you who said you went to the SBA, and the SBA told you to take some classes. Ms. KEELEY. I said that. Ms. MEYERS. Are you saying the SBA is prejudiced against Women particularly or-.~- Ms. KEELEY. I think they are prejudiced against small businesses right now. Back in the Midwest, we are direct, right? Out of 650 businesses we have gotten started, one is SBA out of all of that. Most of them are turned down. We don't go in anymore. We had to lose $2,000 for the points on the loan. We are fifth out in terms of collateral on the financing. We have gotten paid back our points and everybody else was paid out of this. The business is working, and it is doing great, but we see it as twice as hard as a bank to get money out of, frankly. Your collateral has to be better. Ms. LINCOLN. I would like to comment on that. That is. the major problem with SBA. If a company even qualifies for the loan, by the time SBA gets thepaper~ror~, the company has gone out of business. It just takes too long. I was on a bank board once, and we sometimes couldn't approve SBA loans, because SBA moved too slowly for the bank, and banks are slow enough. I think that is a major problem, there is too much bureaucracy and too many people passing things off to someone else. Nobody wants to assume responsibility for getting things through all the red tape. So, lots of companies are discouraged from going to SBA. I did not get an SBA loan, but I had some personal money and had bank financing, but I was tha~kful I didn't have to go to them because of the stories that I had heard about SBA funding. PAGENO="0028" 22 Ms. MEYERS. Thank you very much. I really appreciate all of you being here today, and it has been a very interesting hearing. Chairman LAFALcE. Thank you. Mr. Slaughter. Mr. SLAUGHTER. Thank you, Mr. Chairman. I would like to say to the panelists who have come here, I cer- tainly join in the appreciation of having you all testify, and I think the comments you have made have been very interesting and ar- ticulate. I certainly hope that there will be some progress as a result of your appearance. Thank you very much. Chairman LAFALcE. Ms. Bergen, I thought I saw you about to make a comment in response to one of the questions and didn't get a chance. Would you like that opportunity now? Ms. BERGEN. Actually, we were talking about Government con- tracts, and I think the thing women miss most in bills is really basic information. The unfortunate part about it, I think, for us as women, and newly entrepreneurial women over, the last 10 or so years, 20 years, is that we really don't have our network, and if we had it, the network doesn't have the information either, because we weren't brought up in that kind of society where the informa- tion was taught to us from a very early age, so that many of us miss opportunities within our businesses; whether it is building or for me making shoes for the Army, there are so many things that we could all be available for that could help us expand, enlarge our businesses, both nationally and internationally, that we aren't even aware are there for us. We don't have the input. We don't know the questions to ask to get the right answers in a lot of cases, and I think that that, if it was available, certainly for me, a handbook or something that could be passed out by NAWBO to women in business that would cover many of the varieties of business that women are in today and the advantages available to them, not as a give-away, not as anything but information for them to know, that could conceivably add to their business, enlarge their business, make them more important not only for themselves but economically for the country. It would be a tremendotis advantage to all of us who are striving t~ build our companie~ and enlarge our businesses. Mrs: MEYERS. Mr. Chairman. Chairman LAFALcE. Yes, Mrs. Meyers. Mrs MEYERS The thing that surprised me most about the testi mony today was: It has seemed to me that some of the problems that women have had in the past would be resolved just by time, and yet, I am still hearing the same conôer~s expressed today that I heard 10 years ago. Ten years ago I was in the Kansas Senate and we were also involved with business and encouraging a good business climate in the State, and I am hearing the ~same ~things now that I was hearing 10 years ago. I really believe that the policy council that you are suggesting might be an excellent idea. Sooner or later we have to make another giant step forward so that 10 years from now we won't be sitting here saying it is very diffi- cult for women to get credit. Chairman LAFALCE. Ms. Rudd, in your testimony you suggested that it was necessary to obtain better information. I forget exactly where you said itor how you said it, but, clearly, one of your points PAGENO="0029" its being use PAGENO="0030" 24 Chairman LAFALCE. It should be. The reason I asked that ques- tion is because there is so much confusion so often about what `the goals of `legislation are. For example, take minority programs. Do we create minority programs for blacks, and Hispanics, and other people defined as minorities to establish the owners of businesses as beneficiaries, or do we anticipate that the people working for mi- nority-owned businesses will also be minorities? Is it our, primary purpose to create jobs for minorities independently of who the busi- ness owners are? Then, of course, who are minorities? That is one of the reasons I wanted to pursue what the `goals' of assisting women business' owners should be. Because, as you know, or perhaps don't, there was a recent law that passed in this Congress, January 1987, the Surface Transportation Act, which, for purposes of Government contracts, included women as minorities within the set-aside pro- gram. Women business owners have obtained an unusually high percentage, I am advised, of the contracts under the minority set- aside program. Some would say this is good, some would say it is depriving other minorities or true minorities. Women are not true minorities some people would argue. It is a controversial issue, and there is no sense avoiding it. Anybody have any comments they would like to' make on that? Ms. RUDD. I have' a comment. I am never at a loss' for'words. Chairman LAFALCE. Sure. " ` , , , Ms. RtJDD. Our true goal is to open the system, and we don't' `want to get involved in special ~terest fights. It doesn't do any- body any good. Our concern is that America is at an economic cross roads, and we are having~probleins right, now. I think within the women business owner community~, we have boot'strapped what might be called our initial 8(a) program we have done for ourselves Now we want the system opened up so `~v~ can get more of the mar ketplace and get some more of the dollars, so that we are totally focused on expanding the whole system for e~trepreneuri~d busi nesses, because that is what the country needs Ms LINCOLN Could I comment on that9 Chairman LAFALCE Surely Ms LINCOLN Ideally, our system would be sa~ there would have to be no special programs, that the system is open enough that cv~ erybody can compete I know about the argument between the set asides for minorities and women as minorities Which side ~do I fall on? I fall on both. , ` But it seems to me the big argument is that this is the pie, an~l this is all of `the pie there is, so we slice it into smaller slices, and that is where a lot of the argument comes in I agree that, ideafly, we would not have to have any set-aside programs, but there are a number of barriers that Congress can work on so that access is there for any business that wants to~participate in"the free econom- ic system. ` `Chairman LAFALCE. Good. Ms. Bergen. Ms. BERGEN. I think that all of us agree that as we, I think, have said, are ~really not looking for special assistance. We are not look- ing for a give-away. We really want to be able to compete on an equal basis in an open marketplace and bid as everyone else does, and if our bid is the best, we get the job. PAGENO="0031" 25 Unfortunately, we don't know what the job is, so we can't place the bid That is where we have a problem in the marketplace It is simply a case of wanting to have the same opportunity as everyone else to try to get the job If we lose it, we lose it, because we weren't good enough, or our :bid wasn't low enough. But right now it is the initial opportunity that is the step we are in many cases / missing, because we don't know what it is. Chairman LAFALCE. Thank you. Well, if there are no further comments, I want to thank all of you for an excellent presentation in the opening hearing of what will be a series of hearings on the problems and opportunities of Women business owners You have given us an excellent departure point for that I thank you very nw~ch The committee is adjourned. (Whereupon, ~t 1.210 p m the c~nmlttee was adjeurned, subject to the cafl of the Chair.j PAGENO="0032" PAGENO="0033" NEW ECONOMIC REALITIES: THE ROLE OF WOMEN ENTREPRENEURS WEDNESDAY, APRIL 27, 1988 HOUSE OF REPRESENTATIVES, COMMITTEE ON SMALL BUSINESS, Washington, DC. The committee met, pursuant to notice, at 9:10 a.m., in room 2359-A, Rayburn House Office Building, Hon. John J. LaFalce, (chairman of the committee) presiding. Present: Chairman LaFalce; Representatives Sisisky, Hayes, Lan- caster, and Price. Chairman LAFALCE. The Small Business Committee will come to order. This is the second in our series of hearings addressing issues that affect women business owners. Yesterday we heard from a panel of witnesses representing a broad range of business activities in which these women had achieved distinction. Today, we will continue to review the considerable accomplish- ments of capable entrepreneurs who just happen to be women. We will also focus on the persisting difficulties facing women who try to gain entry to the Federal marketplace. The committee has received numerous complaints that women are virtually shut out from Government contracting activities. In 1979, women-owned small business received .22 percent of all con- tract dollars awarded by the Federal Government. Ten years later, women-owned business has become the fastest growing segment of our economy. Yet women still receive less than 1 percent of the procurement dollar. I am also happy to report that we will receive the findings of a major new study, as announced at yesterday's hearing, on the state of women business owners around the country, a survey of State and local programs for women business owners. I appreciate the willingness of these witnesses to appear before this committee to relate their concerns, and I am confident that we will benefit from their testimony. I would now like to call the witnesses to the table. From right to left, Ms. Charlotte Taylor, president of Venture Concepts; Ms. Mar- garet S. Hansson, president of the M.S. Hansson, Inc., and chair- person of PureCycle, Inc.; Ms. Phyllis Hill Slater, president of Hill Slater Engineering of Long Island, NY; Ms. Carey I. Stacy, owner of DiaLogos International Corp., and coowner of Globex, Inc. of Ra- leigh, NC; and Ms. Mildred A. Green, president of Accounting Data Systems, Inc. of Caro, MI. (27) 88-199 0 - 88 - 2 PAGENO="0034" 28 The ranking minority member of the committee would like very much to be here, but unfortunately cannot, and he has asked me to put his statement in the record at this point in time. Without ob- jection, so ordered. [Mr. McDade's statement may be found in the appendix.] Chairman LAFALCE. .1 also have a prepared statement that has been submitted by a leader in the fight for women business owners and women on all issues, Congresswoman Patricia Schroeder. With- out objection, I would now like to put in the statement of Ms. Schroeder. Without objection, so ordered. [Ms. Schroeder's statement may be found in the appendix.] Chairman LAFALCE. Does any member of the panel have any statement that they would like to make before we begin? Mr. LANCASTEE. Only on behalf of Congressman Price and myself to welcome a North Carolina woman to today's panel. Mr. Price will be here shortly. Unfortunately, I may have to leave before she testifies. But we do welcome Ms. Stacy to the panel, and look for- ward to the testimony of all of today's witnesses. I know that it will be equally as interesting, helpful, and enlightening as yesterday's panel was. Thank you, Mr. Chairman. Chairman LAFALCE. Do you have to leave relatively early? Mr. LANCASTER. I do, Mr. Chairman. Chairman LAFALCE Well, our first witness then will be Ms Carey Stacy. Mr. LANCASTER. Mr. Chairman, you might want to wait until her Congressman gets here, becaUse he is on his way~ Chairman LAFALCE. Then we will wait a little bit. Why do we not gO from left to right. Ms. Green, would you like to go. first? Ms. GREEN. Thank you. TESTIMONY OF MILDRED A. GREEN, PRESIDENT, ACCOUNTING DATA SYSTEMS, INC., CARO, MI Ms. GREEN. Mr. Chairman and esteemed members of4he House Small Business Committee, I want to thank you for the opportunity to share a few of my achievements arid challenges as a woman business owner in the Government procurement market~ J am president, chief executive officer, chair of the board, and major stockholder for Accounting Data Systems, which is a full sys- tems house for computerization. My target market is the Govern- ment. I would like to have that be a larger market than it is right now. But last year, we did $2.5 million in goods and services for the States of Michigan and Tennessee, as well as for the Federal Gov- ernment. As a woman who~ started four businesses in the State of Michi- gan, I can say that Michigan has been an excellent place to start a business. I think that istruer in the last 5 years than it was prior to that, because now there is an Office of Women Business Owners Services which is sponsored by the Department of Commerce to help women-owned businesses, to help us see the road, and find the* way. PAGENO="0035" 29 I still believe that perseverance, openness, and a niche in the market is what makes any business successful, but particularly women-owned businesses. All four of the businesses that I started were started with less than $10,000 in capital and these were from my personal savings. The way that I obtained my abilities as far as bidding on Goverrf- ment contracts is concerned is that I worked for a bridge contrac- tor who bid on bridges in five States, and I think that I helped to make his business very successful. I took that into my own busi- ness. The four businesses that I have started are a piano school, a retail bridal apparel shop, two intermediate care facility homes for developmentally disabled adults, and an accounting service bureau for nonprofit corporations which subsequently became Accounting Data Systems, Inc. [ADS]. We are right now in the process of moving into manufacturing of computers as well as manufacturing of software and franchising my business. All of the contracts that ADS won and has maintained to this present date were awarded in an open market with no set-asides, no incentives, or any other type of equal opportunity access pro- grams to procurement. I do appreciate the fact that there is a new 5-percent access to procurement offered by the Federal Department of Defense. Some States, such as Michigan, currently offer set-asides to women- owned businesses. However, these are discretionary funds, and sometimes do not provide access or encouragement to procurement opportunities. Usually, the contracts for women-owned small busi- nesses are awarded after the award, not prior to it. The Office of Women Business Owner Services was started in 1983, about the same time that I started my business. It has been a great encouragement to me. My 5-year old company's expansion into the manufacturing and franchising environments is significant, because it means that we have struggled and won against all of the odds and against all of those who said that it could not be done. When I started Accounting Data Systems, 5 years ago, I was ashamed to be a woman-owned business. When I decided to at- tempt to sell products and services a~ the State level, I walked around in the purchasing office in Michigan, in Lansing, until 20 minutes before closing time before I got up the courage to go in and tell them I wanted to sell goods and services to the State of Michigan. An Office of Business Owners Services is urgently needed at ,the Federal level and in each one of the States to encourage the fastest growing segment of our Nation's economy. Some of the successes that I would mention to you is that I have two multi-million dollar contracts with the State of Michigan, one with the Department of Mental Health, and one with the Depart- ment of Corrections, and I have several other small contracts. I have two multi-million dollar Federal contracts right now, one with the TVA and one with the Federal Trade Commission. PAGENO="0036" 30 I am in the process of finding, and I heard this morning that we are a little closer to being successful on two GSA schedules, and `I am very excited about that. It is my firm belief that local, State, and Federal Government agencies should be thought of as any other customer, and that is, that we give the very best quality that we can to those people. However, I do have a couple of horror stories, and I would like to share one with you this morning. After our first Federal contract was working smoothly, Accounting Data Systems received an op- portunity to bid on a second one, and it was a bid for 180 to 360 PC computer expansion boards. After the p~eaward evaluation step was completed ~on that bid, we contacted the distributor and. asked him to then prepare to start providing this product to our custom- er. What we found out was* that the manufacturer had also bid on this contract, in competition with the people that he had given prices to, and was now removing and changing his pricing to us. Number one, he said that we had to provide chips on the boards ourselves. I subsequently looked into Japan and tried to retain chips. At that point, and this was approximately 1 year ago, sanc- tions were going to be put on Japanese imports, particularly com- puter products. Sometime later, I would tell you my fish and chip story. Because I believed that the manufacturer's access to information, and I subsequently found also that the manufacturer had commu- nicated with the buyer on this and that he knew not only my pric- ing but the pricing of the other people who were bidding, and, in addition to that, he was now raising his price on the products that he was going to sell to me. When I questioned him on this, he said that he was the only manufacturer and that I had no choice, that I would have to buy from him. At that point, I said I do not think so. I subsequently planned for a prototype, and did call the buyer and told the buyer and his supervisor that we would manufacture the same board subsequently, and that it would either meet or exceed the specifications, and that we would produce it within the allotted amount of time. I thought that would answer the problem. The supervisor said that I should list my ,protest in writing. I did do that, and the bid was withdrawn. My problem with this is that I lost money, because it cost a lot to prepare the bid, it cost me a lot of money to find the chips, and it cost a lot to manufacture the prototype. Now, everyone knew my pricing. The manufacturer subsequently came in, and rebid it under my cost, and because he had only paid 50 cents apiece for those chips while I `had to pay $2.50 for them, and those chips today are $12 each. At that time, I did not know, and no one had told me that I could go back to that department and ask for a re- dress on my costs. There is a need for change. The current procedures are discour- aging small businesses, much less women-owned small businesses, from entering the procurement market. When I talk to other women-owned businesses, encouraging them to be dealers for nly company for our products, they look at me with skepticism and PAGENO="0037" 31 say, "Why, with all of the struggles that you have had in the last 5 years and just barely survived many times, why should we want to?" When the Federal Government indicates publicly that it will place a sanction on products, it invites manufacturers and distribu tors to stoclçpile and raise prices beyond reasonable markets, and WBO's, women business owners, just do not have the inside track to get ahead of this game. This is especially harmful and discouraging to women owned businesses. I have struggled and won the right to provide quality goods and services on some proportionately small Federal con- tracts. I know and believe that there are women-owned businesses who are interested in doing the same. Since I believe that it is in the best interest of the Nation's econ- omy to support the courageous efforts of women small businesses, I would like to make the following recommendations, and these are my opinions solely. I would like `to recommend that there be commissioned a Federal study to determine what percentage of American businesses are women-owned ~small businesses. Some informal ~statistics today show that is approximately 46 percent. Second, what percentage of new jobs these businesses would pro- vide. Those same informal statistics say four out of five. Third, what dollar amounts of revenue are currently being gen- erated by women owned businesses in contributing to the American economy Those same informal statistics today say $250 billion in revenues. The second thing that I would like to recommend is a federally mandated 10-percent access to procurement for women-owned small businesses on all contracts involving Federal moneys, and that this be certified at a Federal level, and monitored by a Women Business Owners Services in each State There is a model certification process right now in the Michigan Department of Civil Rights, and also the city of Philadelphia It is a very stringent process, I might also say The last thmg that I would like to recommend is that there be a federally mandated waiver for women owned small businesses to allow contract prices to increase according to increases for products listed on contracts, and that is when the price increase is directly attributable to any Federal or State sanctions or legislation causing that increase. Thank you very much for the opportunity [Ms Green's statement may be found in the appendix] Chairman LAFALCE Thank you very much for your testimony, Ms Green I tend to agree with your recommendation for a study I have some serious qualms about any 10-percent set~aside, or a fed- erally mandated certification procedure, or a federally mandated waiver for women owned small businesses We want to remove all barriers and all obstacles, and any form of discrrnination however subtle, and we want to have affirmative outreach and affirmative action But those initiatives would go way beyond that I would have to be convinced of that We see Congressman Price here I was about to call upon the representative from the State of North Carolina to testify. PAGENO="0038" 32 Ms. Stacy, before I do, Congressman Price, do you have any state- ment that you wish to make? Mr. PRICE. I would like to welcome Ms. Stacy to the hearing. I appreciate her participation, and I look forward to her t~estimony. Her business is an exciting one and crucial to our country's inter- national competition and ability to break into new markets. Chairman LAFALCE., All right. Thank you. Ms. Stacy. TESTIMONY OF CAREY I. STACY, OWNER, DIALOGOS INTERNA- TIONAL, CORP., AND COOWNER, GLOBEX, INC., RALEIGH, NC Ms. STACY. Thank you. Mr. Chairman and members of the committee, I am Carey Stacy, and I am from Raleigh, NC. I appreciate not only the opportunity of being here, but seeing two people from my State sitting on this committee. I am much encouraged by this. Chairman LAFALCE. You are very, very well represented, by the way. Ms. STACY. I am assured of that. Mr. LANCASTER. We are neighbors, also. Ms. STACY. I am the owner of DiaLogos International. People ask me what it is, and I can only say that it is an international lan- guage enterprise. I started out ii years ago, dissatisfied with the university that I was teaching. I tried to work through the system, and I wanted them to put in a more practical language learning track! Not to do away with the great books and the great literature of the world, but to put in an alternative for people who needed to carry on con- versations with their neighbors across the world in foreign lan- guages. I was unable to accomplish that through the system. So, like so many business people, or like so many people, I said I will make a business out of it. I opened my doors, and said you all come, and they did 11 years ago. DiaLogos now has grown to where we provide, for language train- ing. We provide translations, interpreting, cross-cultural training. We have the joy of being the first instance in the United States whereby a public school system has contracted out teaching hours to a business. This is significant to us not only because of business, but because of what it is doing for our country in terms of making it more com- petitive in international trade. Our teachers teach beginning in. kindergarten through the twelfth grade in the magnet schools in White County, NC. They teach not only Spanish, French, German, and Italian, as you might expect, but they alsG teach Chinese and Japanese. We have the contract already signed for next year, and we are looking to adding probably Russian and Arabic. If we are going to compete in the international world, we have to be able to speak the language. The most important language in the world is always the language of your client. That is what we want our Nation to be able to speak. PAGENO="0039" 33 I do not appear here befàre you to lament the inequities which women in business and women business owners so often suffer You know in your hearts that those inequities exist, Or we would not be here today, and you would not be listening to us. I am confident that you are aware of that, and that you are working on programs and possibilities for redressing those wrongs I lament, however, the loss to the country of the talents, the skills, and the vision of a significant sector of our population I believe that the vision, the talents, and the skills of all of our small businesses needs to be harnessed for this country to prosper, especially in international trade. I ask you for increased opportunities. I have some difficulty in asking for special programs for women alone. I want to see pro- grams where all of us have the equal opportunities, and then we survive if we are competent. If we do not, then, like everyone else, we drop by the wayside. When I opened DiaLogos in 1977, 1 was told by everybody that a foreign language center had no possibility of surviving Sometimes, I am a little irreverent, and I said, "But I only have this competi- tion, Duke University, the University of North Carolina, and North Carolina State." I really did not mean it as it sounded. What I really meant was that we are doing different things, and we are doing them differ- ently, and there is room for all of us, and there is a need, there is a growing need. But this was in Chapel Hill, NC in 1977. We have found 5 years later, that North Carolina has indeed come into the international arena It has consistently been listed in the top two or three States in the country in terms of foreign investments Three additional language enterprises have begun there. The universities proudly proclaim their international language offerings American Airlines will next month begin international flights out of the Raleigh.Durham Airport, and a world trade center is under discussion. I am simply saying that this was a vision, that it has come to pass, and we need to nurture small businesses and businesses coming along that are going to be there and be ready when other people have not seen what was happening. It is not only women who have this vision, and it is not only srnal~ business people But whoever has it should be encouraged, and it should be nurtured as we move along !n 1985, 1 was selected as one of 18 delegates nationwide to go on the all female trade mission It was the first all servlce8 trade mis sion ever to go out from this country Now, I ask you, what is a foreign language ei~terpnse gorng to sell in Europe? I did not know, but I was willing to take that chance and to rely upon my own ingenuity and say if I can go and if I can be seleeted to go, I can find some way to sell I was the first person to si~n a contract, the first person to get paid, and my con- tract is continuing. What happened? I found mformation there The information was that the common market is absorbing almost all of the professional translators and interpreters that Europe is producing Therefore, they were delighted to find that they could FAX materials to me in PAGENO="0040" 34 North Carolina, have half the turn-around time at about three- quarters of the cost that they would have there. So, today, I have the majority of my work, I would say, coming from outside of this country. That is good and that is bad. That is good for my business, but it certainly does not say anything posi- tive about the way that we do international business. Europeans know that if they are going to succeed in internation- al trade that they need to put it in the other man's language. Americans still believe that anywhere in the world if you really want to do business with us, that they ought to speak English. It is not true. We must take steps to correct that. After the 1985 trade mission, I was asked by the National Asso- ciation of Women Business Owners to organize and take out the next trade mission. I did so. Let me first say that the whole idea of taking out trade missions for women came from two women in the National Association of Women Business Owners, Tommy Tarsell of Baltimore, MD, and Janel Landon of Chicago. They had the idea that we should be able to do something that is good and productive for individual businesses within our member- ship, but that at the same time did something positive for our country. The idea is very simply that small businesses need to get into export, if this country is going to regain first place in international trade. We do not enjoy first place. I do not enjoy going out through- out the world and hearing people snicker at the made in USA label. Many years ago, we snickered at made in Taiwan or made in Japan. It hurts now to go throughout the world and to hear those same tones of derision on made in USA. We need to use the talent of all segments of our population, our business population, to succeed in international trade for the United States of America. Back to the trade missions. I organized a trade mission to go to Japan in 1986. This trade mission, like the first one, was under the auspices of the National Association of Women Business Owners with great cooperation and great support, from the U.S. Depart- ment of Commerce and the U.S. Small Business Administration. One of the ways that we differed from other trade missions going out was we did our homework, and we found that it paid off. In deciding where to go, we researched a number of different coun- tries. We tried to find out what products and services that they were likely to buy. Then, because we have a wide range of services without our organization, we tried to solicit participation in compa- nies that we felt were strong enough to truly market international- ly. * We chose health care services. We wanted to focus upon .services, because we think that offers the new opportunity in international trade for the United States, We sent a list over to the overseas post in Japan, and we asked them to give us the benefit of their knowl- edge of what would be marketable there. They sent back to us that yes; that health care services would be great. Chairman LAFALCE. Ms. Stacy, I would ask you to attempt to summarize your remarks in about 2 minutes or so. PAGENO="0041" 35 Ms. STACY. I will; yes. We went to Japan, and we found that health care services indeed was a market. But when we got there, they told us that the things that we were bringing were not the things that they had meant by health care services. We meant seri- ous health care services, and they meant things like physical fit- ness and diet. We did do some research, some extra research, and when we got there, we were well received. The Japanese told us that they pre- ferred doing business with us, because we had done our homework. Our homework meaning that we put all of these women through a training course prior to going. They each spoke a little bit of Japa- nese. They knew the business customs, and they knew the culture. They were told that yes, indeed; the Japanese like doing business. Some of the signed contracts led later to contracts. The headlines in the newspapers were, "The American Women Businessmen Are Coming." After our trade mission, the U.S. Department of Commerce said they had learned a lot of things about the health care industry in Japan that they did not know before, and they are now putting to- gether a health care services mission. On the heels of that, we hosted a number of buying missions coming back; people we had met in Japan who decided, yes; that they would come, and they would try to buy from United States. One of those missions came to North Carolina only 4 months after our trade mission. I simply want to say that as I see the problem, the problem is that business as usual in international trade is not doing us any good. There is nothing to lose and everything to gain by allowing new perspectives. I would ask you to work together with groups such as NAWBO and other international groups to help open opportunities for not only women, but for small business to get into international trade. International trade is the new frontier. There are new prospectives out there, and we are willing to help. Thank you so much for the time. [Ms. Stacy's statement may be found in the appendix.] Chairman LAFALCE. Thank you very much, Ms. Stacy. And now the person from the State of New York, Ms. Phyllis Hill Slater. TESTIMONY OF PHYLLIS HILL SLATER, PRESIDENT, HILL SLATER, INC. [HSI], LYNBROOK, NY Ms. SLATER. Thank you. Good morning Congressman LaFalce, and distinguished members of the Small Business Committee, ladies and gentlemen. My name is Phyllis Hill Slater, and I am principal of Hill, Jen- kins, Gaudy Associates, Engineer and Architects, and president of Hill Slater, Inc., an engineering and architectural support firm. Both firms are located in Lynbrook, NY on Long Island. Hill, Jenkins & Gaudy Associates is a 100-percent minority- owned- and operated-firm. My father, Philbert D. Hill, and two other pioneering black men started HJG in 1969. Since its incep- PAGENO="0042" 36 tion, HJG has maintained a diverse engineering and architectural practice. Hill Sláter, Inc. is 100-percent women/minority-owned firm of which I am the president and sole owner. Since 1984, Hill Slater, Inc. has served the architectural and engineering community and related enterprises. I am presently the president of the National Association of Women Business Owners, the Long Island Chapter. We are 2 years young and 85 members strong. We also have a mailing list of over 500 women business owners on Long Island. I am also a member of the National Society of Professional Engi- neers, and I sit on the National Minority Business Council. I was a delegate to the White House Conference oil Small Business in 1980 and in 1986. I was also a delegate to the New York State Confer- ence on Small Business in 1982. I also participate in a program, a role model program for the 100 black women of New York where I have engineering students coming to my office twice a year from Speilman in. Atlanta, and from City College in Manhattan. They come to the office. They are usually in their third or fourth year, and we show them just what we do, and try to interest them in coming into electrical engineer- ing, mechanical engineering, lighting, power and design type of en gmeering as opposed to electronics communications I shall attempt to outline, some of the pros and cons that I have encountered as a black woman business owner. For 8 of the past 19 years, HJG has been involved with MBE/WBE/DBE processing. Certification as a minority firm seems to come after producing all sorts of information, just short of a blood test. Up until 8 years ago. most of our work came from referrals given by other black minority architects and/or engineers. Ifwe received~ work from the Government, be it Federal, State, or local, then the work was 9 times out of 10 in a minority neighborhood and consist- ed of mostly rehabilitation, very seldom new construction Since MBE goals have been established, our services are now being solicited by majority engineering and architectural firms for 10 to 25 percent of their intended contract. Some of the problems I have faced as `a result of this process are: We have been overlooked by the soliciting agencies for prime con- tracts. In some cases we have even been removed from the regular list of engineers and architects and placed on the minority lists. We therefore receive this information and notices directed only to minority firms. This ~is what I consider being "black listed." We are not consid- ered as capable as majority firms, even though our architects and engineers went to the same schools, took the same licensing tests. We are not exempt from the State licensing procedures becausewe are minorities, and likewise do not take a different or easier ver- sion of the test. A popular misconception among Governmeilt agencies and busi- nesses in the private sector is that minorities enjoy a position of privilege and, are making truckloads ~f money. As a result of this, there are many businesses posing as minority owned and operated, so-ôalled fronts, trying to get on what they perceive to be the MBE/WBE type gravy train. What iliinority business detractors PAGENO="0043" 87 fail to realize is that not only do we have to be certIfied as a minor- ity or a woman business owner, but we also must be capable of seeing a contract through its completion The term "Disadvantaged Business Enterprise," DBE, does not enhance the professional standing of a licensed professional firm or any other business for that matter. Also, there is a ceiling placed on the amount of money a compa- ny may earn. When the firm reaches said amount, they are no longer eligible for the MBE/WBE/DEB program under the U.S. Transportation Regulation 49. As a result of disqualifications, there are now firms facing cash- flow problems, subsequent reductions of staff, or even closing their doors and taking down their shingles Let us keep in mind that women hire other women, minorities hire other minorities, so, these layoffs are hitting an already economically depressed sector of society. We have subcontracted some of the largest engineer and archi- tectural firms in the country. However, if we are not providing or satisfying a goal, they do not call us back. We have only had two cases where these firms have called us back to do repeat work. They have called us back to do repeat work, but only two. firms have ever called us back to do work when there were no goals in- volved. I feel I should mention those firms, because one of them does a lot of work nationally and internationally, and that's Voll- mer Associates, and the other one Was a woman owned architectur al firm by the name of DiGerommo Architects in New Jersey They have called us to do work only because they were pleased with the work ~e had done before for them It had nothing to do with goals I believe that so long as discrimination exi~ts against minorities and women that there will be a need for affirmative action pro- grams. I feel very strongly that this program may only be disband- ed once this Nation truly becomes a melting pot where neither race nor sex is a determining factor for success. My other point is about women make being thrown into the pot of minorities. Women make up the majority of the population, and, therefore, women should not be considered a minority group Minorities and women business enterprises should be kept as separate entities with separate goals to be outlined in each con tract and/or a statement of intent for each agency's goals Women business owners ar~ discriminated against in a way that is unique to women Their inclusion in affirmative action agendas lends credence to the need for special consideration on their behalf Minority business owners are discriminated in a way that is unique to minorities. Let us keep in mind that given a choice, this is my opinion, a majority firm would choose to subcontract to a nonminority women rather than select a minority woman Also, if the course was women versus minority, the majority prime contractor would be in cluded to choose a women business enterprise The other concern I have is prompt payment and ensuing rights for subcontractors is a major cause of contention As a subcontractor under the MBE/WBE process, we have to be qualified, certified, and follow the same rules ai~d regulations. Ex- PAGENO="0044" 38 ample: I even carry the same amount of insurance that my prime does, as set forth in the governing agency. In this situation, our contract is with the prime and not with the agency. Therefore, we are at the mercy of the prime and can only hope that they submit our invoices on time and pay us in a timely fashion. Timely payments are the greatest problem. We are left to act as the banker for the prime and/or the agency waiting 30, 60, 90, or 120 days for payment. The subcontractor should be notified when payment has been made to the prime. I should have the right to know whether or not the prime has been paid. Better yet, the agency should make pay- ments directly to the subcontractor as well as to the prime, rather than leaving the subcontractor to fight for their approved pay- ments for services rendered. I thank you for the opportunity to be heard. [Ms. Slater's statement may be found in the appendix.] Chairman LAFALCE. Thank you very much, Ms. Slater. Before we continue with our next witness, two things. I notice that we have in attendance now, Governor of the Federal Reserve Board, Ms. Martha Segar. Martha, I want to thank you for coming here. I hope you will be coming to testify before us at some point in the future on these issues. Ms. SEGAR. Thank you. Chairman LAFALCE. Do you accept? OK, great. I know that Congressman David Price has some questions he would like to ask, and I also know he has a commitment where he was supposed to have been a short while ago. So, I am going to ask Congressman Price if he would like to ask some questions right now, and then we will go back to the panelists. Mr. PRICE. Thank you, Mr. Chairman. I appreciate the chance to break in here and ask a couple of questions. I apologize to the re- maining witnesses that I do have to leave, but I very much appreci- ate the testimony that we have heard already. The chairman took the Small Business Committee to North Caro- lina last year., and we had extensive hearings on procurement mat.. ters. The question we took to those hearings was a very simple one. It was focused on North Carolina, of course, but the same question could have been raised in a number of areas of the country, and that is, with a substantial Federal presence and a substantial mili- tary presence, why was it that local businesses, small businesses, minority businesses were getting such a small share of the procure- ment dollar? We were partially able to answer that question, and we have seen some improvement in the ensuing months. For example, a couple of our major Federal agencies have stepped up their out- reach programs, have held workshops, have brought in, I'm told, well over 200 firms, and have made an increased effort to let firms know what they need to do to compete. Of course, we need to do a great deal more along these lines. We need voluntary efforts on the part of these agencies. We also need, I think, more activity on the part of the Small Business Adminis- tration and other agencies. PAGENO="0045" 39 Ms. Green and Ms. Slater, your testimony sheds further light on this problem, and I would like to turn to Ms. Stacy, and ask her to comment on the problem as well. Your testimony did not deal with procurement except in passing, but I wonder if you could shed some light on that subject since it has been raised by the other witnesses. Of course, you have had some experience in dealing with the Government, and perhaps also with the military. I wonder if you could elaborate your testimony along these lines. Ms. STACY. Thank you; yes. Number one, I did not have any horror stories, not because I did not have any, but because I dO not remember them. I have been too busy out there trying to go on from one step to the next. There were some horror stories. In terms of procurement, I have found that for the most part it is lip service. When you have all of these conferences, which we have in North Carolina, and they have throughout the country, people really want to open the doors and to help us know how to work through the process. The simple truth is, they do not know themselves how to do it That has been my experience. I do ~not go to any of those procure- ment conferences any more because I have heard most of those sto- ries. I have heard most of how you go thrciugh things. I tried to go through sothe, and I found in my particular business what happens is that a large company, who may not even be in the business of translations, will go out after a Government contract at a lower price and use that as a loss leader to obtain other contracts. So, I found that it has not been that worthwhile. I wish it were. I wish that I felt encouraged and felt like going to some of these opportunities that are provided for us. Mr. PRICE. You have experienced that kind of competition from larger firms that have underpriced their services, you feel, so as to--- Ms STACY Yes, indeed They do it under what it costs them, and they use that because they are not even in the business, and they subcontract it out to someone else. They take that loss because they know that they can get in for other areas of business con- tracts. Mr PRICE Well, does this experience lead you to any sense of what ought to be done or what might be changed? A~e there flaws in the way the procurement process is carried out? Ms STACY I cannot suggest changes there I would certainly be happy to think about it, and with your permission send some infor mation in to you. I have been away from that for a considerable amount of time, because I did not find it worthwhile, and, frankly, it was taking too much of my time to run after all of these programs that never pro- duced any results. Mr PRICE Ms Green, I notice you are nodding your head Do you have something to add? Ms GREEN Do I need this microphone? OK, I guess the one thing that I would address that Carey is talking about is that conference, after conference, after conference PAGENO="0046" 40 is given, and it is all philosophy. What I am offering to the dealers who want to work with accounting data systems is the hands on, walk out the door, you have the certification in your hands, and that is the reason I am franchising my business, because it is not available out there right now. The only problem that I run into with it as far as talking women into doing this is that they take one, look at everything that has happened to me, and most of them know about it, and say why would I want to do this, and that is the reason why I suggested some kind of incentives. I think some type of good faith opportunity for women..owned businesses to give them a little incentive to get in. It is like any other water-when you get in, it is not that cold. It is a matter of providing good quality goods and services. It cannot be a front situation, and I do not think there is that much of that out there. I really believe that the women who are in this area are in it because they have the tenacity to stick to it, and be- cause they have quality goods and services, and they go on just as Phyllis Slater just told you. In order to stay, you might get one con- tract that way. But in order to stay in the business, you have to deliver quality goods and services. What happens with the larger manufacturers is just what hap- pened to me with that manufacturer that I told you-well, maybe you were not here* to hear that, but the manufacturer who came in and bid under my cost, and took a contract away from me. After the fact, there was no way that I could-because he already had the-well, obviously having a Government, a Federal Government contract gives you a lot of credibility. Mr. PRICE. This was after the process had been reopened. Ms. GREEN. That is right. Mr. PRICE. Yes. Ms. GREEN. So, once his product was in there, this is now en- dorsed by, or used by, or given by the Federal Government, and so, we did not go on and produce that board. There was no point in it. Mr. SIsIsKY. Will the gentleman yield for a moment? Mr. PRICE. Yes; certainly. Mr. SI5I5KY. Did any of you deal with the advocates of these agencies like the military? I know the military, in particular, have advocates for small business. The Army has a one-star general that is just assigned to get small business involved. I know the Navy has a department to do that. Were any of you involved with the advocates in these agencies? Ms. GREEN. I guess the only thing that I would tell you is that the only agency that-the only department, the only person that has ever been of any help to me was the Office of Women Business Services in Michigan. Even in other States where I have contacted and found out that they had some people who were-well, I will tell you one example. I was trying to help a lady in Tennessee to become involved with the Department of Transportation. We went into an agency to talk to the people and saw a sign on the door that said Women Business Services. We went down the hall trying to find this person, and fi- nally talked to a lady who was there, and she said, "Where did you see this sign?" PAGENO="0047" 41 We said, "Down the hail." She said, "Oh, that's me." Mr. PRICE. My time is limited. I would like to pursue this. I am sure it will be pursued later in the hearing. I do have just one fur- ther question with a slightly different focus. Ms. Stacy, you refer to various trade missions that you have as- sisted with, and you refer, in passing, to a trade mission of Japa- nese buyers who came to North Carolina in 1986, specifically to search out products for import to Japan. You do not elaborate on how that mission went or what the pur- poses were. Can you elaborate on that for the benefit of the com- mittee-what form the Commission took and the role you were able to play? Ms. STACY. Yes; I organized the entire trade mission on this side. I organized their meetings with Government officials in North Carolina, here in Washington as well, and meeting with business people who might be able to sell products, move products to them. The mission went very, very well. They were impressed with North Carolina. They were disappointed in a couple of things. They were not able to find very many products other than agricultural products that they could import. Mr. PRICE. Why was that? Can you explain that? Ms. STACY. Yes; number one, the quality was not there that the Japanese were looking for in a number of things. The other thing is in textiles; they were there with check books in hand to make big purchases of terry cloth. We called all of the major terry cloth manufacturers in North Carolina, and despite the fact that this was a group of, I think, about 15 Japanese buyers, they are ready to buy terry cloth. They were told that they could not see the terry cloth in North Carolina; that they would have to go to New York to the showroom to buy it. The Japanese were appalled. They said the United States makes such a commotion about trying to export, and then you come over, and you try to buy, and you cannot even buy from them. This did not sit very well with the Japanese. Consequently, they did not buy the terry cloth. They did make some purchases of agricultural products, and the process is open enough now that I am convinced that more pur- chases will be made. Mr. PRICE. What sorts of agricultural products? Ms. S'rACY. They were interested in fish, seafood primarily. They are also interested in perhaps starting a sea farming operation themselves in North Carolina, and I am working with them on that. They do not, of course, produce enough sea food, or cannot fish enough, and a part of that is because of the way we negotiated the fishing rights, which is fine for us But seafood~ and seafood products, and processing. One of the things that they would be interested in is various types of seafood processing plants, and they are looking to North Carolina. Mr. Puics. Thank you very much. Mr. Chairman, I appreciate your indulgence. PAGENO="0048" 42 Chairman LAFALCE. Thank you. I would like to point out that we have been joined by Congressman Charlie Hayes and Congressman Norm Sisisky. We will go to our next witness, Ms. Margaret Hansson. TESTIMONY OF MARGARET S. HANSSON, PRESIDENT AND CHIEF EXECUTIVE OFFICER, M.S. HANSSON, INC., AND CHAIRMAN, PURECYCLE CORP. Ms. HANSSON. Good morning. Thank you for inviting me here, Congressm.an LaFalce, and the rest of you. I note that there are two Colorado congressmen. I am from Colorado, incidentally, and own a business there that also works nationally. We have two con- gressmen on this committee, Congressmen Ben Nighthorse, and Congressman Heffley. Also, thank you for Patricia Schroeder's wel- come. She is a star in our firmament, women's causes, and a good friend of mine. My major thesis is that we start small businesses, but we also grow businesses to very good and very large employers, and large taxpayers, and we do not just, or hope we do not just sit as small, little businesses that we are commonly thought to be. I am going to say that I am a myth-buster. I am a myth-buster because I founded one, two, three, four companies as an entrepre- neur. I built the first company from a garage, not in a living room. It was really in a garage where we were bending metals, doing riv- eting, and a lot of other things that are really not too hard for women once you just simply decided to look and see how it is done. It grew from 3 to 350 employees, two overseas ventures, publicly traded, and always profitable. I have been listening to things from Ms. Stacy and Ms. Green this morning that I have been through. We have developed good exports. We have had some extremely profitable years in the export. Probably one of our largest accounts, other than Sears, turned out to be a Stuttgart account, and we feel that it took a lot of work to do this, and I would have to say here, parenthetically, that part of the problem is definitely us in the United States, rather than the barriers that are erected against it. It has been so easy for us to gain business in our large markets that we really have not thought of the ease with which, or it has not been opened for us to do export easily~ There are some good Government programs, but that is an aside. Chairman LAFALGE, For so long we have effortless superiority, domestically and internationally, and now we are finding that we do not have superiority, and that competition is not effortless at all. We do what is easiest to do. We blame the" opposition or. the competitors rather than look at ourselves. Ms. HANSSON. Agreed that this statement-- Chairman LAFALCE. Something that I have attempted to point out for-- Ms. HANSSON. I had a secretary that would be of interest to Ms. Stacy who is a Ph.D. German professor at the University of Colora- do, and she decided to work with me. She was really an assistant, as are all of my secretaries, because she needed to know what to do with her super language abilities.. So, she was learning all of the PAGENO="0049" 43 business terminology, and methods of doing exports, and doing let- ters of credit, and all of the kinds of things that she needed to know, and subsequently went into being a German translator and a business expert in this field. It is clear that I have lived long enough so that this expertise has gradually developed over a period of years. I became a director of mutual funds, director of first a local bank, and then director of the largest bank holding company in Colorado; a director of four more publicly traded companies in com- pletely different industries: Medical technology which exports; media; a national chain of children's day care centers; and water recycling. I really understand business and its many ramifications. I am doing consumer products, high technology, and heavy industry. Boulder is in the center of a very fast developing high-technology area, and, as such, offers to many of us and many women if you can grab the opportunity to first start small in a garage or wherev- er, and go on to be a much larger company. I know banking. I am a modern manager. I understand mathe- matics, engineering, and data processing, and I am extremely inter- ested, as I have said, in the global economy. If this sounds as though it is some sort of a paragon, I am not. If I were a man, I would be telling you a success story, but only one of thousands. As a women you often find it hard to believe that we have done all of these things. But there are many of us myth-busters. Personally I know at least 300 of these. They are all members of the Committee of 200, which many of you have heard about. The Committee of 200 was formed when it began to-- Chairman LAFALCE. The Committee of 200 is going to have to change its name. Ms. HANSSON. It has gone to 300. It really does need to. These are extremely interesting women with patterns of success and a whole litany of areas that I have listed here, but I will not go through it right at this moment. This group was founded to put some money out to let the NAWBO, the National Association of Women Business Owners, get organized and going. We started in 1982. Really, what I am saying is that we make thousands of jobs. We are contributing to the corporate culture of success and innovative companies. We care, we invent, we profit, we share, and we suc- ceed. We might even do it in spite of all the barriers that are in front of us. I see it growing, and I see the women networking in helping each other, and it is just possible that they will make it without a lot of help. However, I do have a good number of recom- mendations. My first company was Gerry Designs, which many people, women particularly, know. It was one of the best known trade- marks in the juvenile industry that makes all the back carriers, almost all the back carriers for babies. In the front ones, they all have cute, little names like Snuggles, and Cuddlers, and things. The Gerry carriers are known worldwide, and I would say have the single most worldwide recognizable product. PAGENO="0050" 44 I faced all of the same problems that most of the women here have faced in terms of banking, with insulting comments about going home and taking care of my family. Why do I not do some- thin~ that is really going to make some money like get a secre- tary s job and so forth. I am somewhat luckier than most. I had a uncle wh~ was a presi- dent of Bankers Trust. Chairman LAFALiE. I would imagine that could be helpful. Ms. HANSSON. One of the things he did not do was lend me money. One of the things he did do was teach me how to approach bankers in a business-like fashion, how to do a business plan, what they wanted to know, and what would be impressive to a banker in spite of the fact that I was a women. I think this kind of help is extraordinarily important, and I think that one of the recommendations that I would have is that this is one of the technical kinds of assistance that should be set up for women. This would, of course, apply to minority, any kind of group that is facing obstacles. I have sold almost all the ones I have been involved with at a certain point since I reach a point in entrepreneurism when I really do not want to deal with the growth of the shelf space of an item, or trying to push it beyond somewhere to $3 to $5 million in sales. I find it more interesting to start with the next company. But one that I. have stayed in touch with a long time and is be- coming a very, very important part is called PureCycle, and Pure- Cycle is probably going to be one that you hear of very importantly in the next 10 years and certainly into the next century. It has processes for recycling water completely. In the West, we think about this as water shortages. In the East, there are places where you have no place to put the water, espe- cially if it is dirty. They are call septic systems, all kinds of sys- tems like sewage and so forth. We have systems for completely re- cycling this water which gives you a source of~~ water and a place to put it. This also has the ability to cure lots of contaminations that are stack gases and various kinds of real hazardous substances. What I am really saying here, again, is that this started as a very small business. It is publicly traded now. It probably will have, if our business plan is realized, $100 million in assets by the end of this year, by January 1, and it will make jobs. It will be an important importer of capital into Colorado that we will make use of, and it will be an exporter. Therefore, I am saying that we are of basic importance to this country's economy. [Ms. Hansson's statement may be found in the appendiz.} Chairman LAFALCE. Thank you very much, Ms. Hansson. Ms. HANSSON. You are welcome. Mr. SisisKy. Mr. Chairman. Chairman LAFAI4c~ I am afraid we are going to have to recess. Mr. SIsIsKY. Yes; I know we have to. But I cannot come back, be- cause we have a little bill on the floor that I played a part in devel. oping for $300 billion. But I would just like to reiterate that almost every witness testi- fied today that export is that area that we need to approach, and I PAGENO="0051" 45 would remind the chairman that I do have a bill' that may offer some incentive. I put a bill in that was developed in the White House Conference, which is designed to stimulate small business export. Ms. HANSSON. We used to have something called DISC that ~ras great for small business. It was somewhat subverted by very large businesses, but it was very helpful to our company~ Chairman LAFALCS. Very good. We are going to have to recess. We will come back in approxi- mately 10 minutes or so. I would encourage whoever can to come back and advise other Members. Our next witness is Ms. Charlotte Taylor, and she directed the Presidential Task `Force of Women Business Owners for a number of years, and has conducted a study that I think will be especially interesting to the Members. So please try to spread the word to our other members of the Small Business Committee, and we will look forward to hearing your tes- timony, Ms. Taylor. [Recess.] ` Chairman LAFALCE. The Small Business Committee will come to order. Our next witness, with rather extensive testimony, is Ms. Char- lotte Taylor. Charlotte. TESTIMONY OF CHARLOTTE `TAYLOR, PRESIDENT; VENTURE CONCEPTS, WASHINGTON, DC, AND FORMER EXECUTIVE DI- RECTOR OF THE 1977-78 PRESIDENTIAL TASK FORCE ON WOMEN BU~INESS OWNERS Ms TAYLOR Thank you, and good morning and thank you for inviting me here I will deviate from my testimony in order to make this brief. Chairman LAFALCE.We will put. the entire text of your testimo- ny in the record.., . ` ` ` ` " . Ms. TAYLOR~ `OK.~ Chairman LAFALCE You may abbreviate and make it brief, but please do not omit anything particularly important Ms. TAYLOR. I certainly will not do `that. My name is Charlotte Taylor. I am the president and chief execu~ tive officer of Venture Concepts, a Washington, DC based manage ment consulting firm which specializes in economic development and small business policy I was asked to testily here today for two reasons, basically One is to provide a historical perS$ôtive~on this very important issue, and the second is to provide ~ curi~ent perspective on what is hap pening nationally in terms of Ihe status of women owned business enterprise m the United States. The historical perspective comes from the fact that I directed the first task force that looked at this issue in 1977-78 when people were still saying, show m~ a women business owner I had never seen one That task force ware~tablzshed by President Carter and led to the current national policy that exists in Executive Order 12138 which set up the framework that is now operating in the Federal Government. " . PAGENO="0052" 46 Chairman LAFALCE. That Executive order is still operative, cor- rect? Ms. TAYLOR. Yes; it was put into force again by President Reagan, re-signed, but Carter did establish it initially. Chairman LAFALCE. So, theoretically, we still do have a national policy for women business owners; is that correct? Ms. TAYLOR. That is correct. Chairman LAFALCE. That is supposed to be implemented. Ms. TAYLOR. That is correct. Chairman LAFALcE. Whether it is implemented or not is another question for---- Ms. TAYLOR. That is the subject of these hearings. Chairman LAFALCE. Yes. Ms. TAYLOR. So, there is a policy. We, as women business owners, feel that it is dormant at best, and has not been implemented in the fashion that was intended. Chairman LAFALCE. I said dormant. Somebody said asleep. Ms. TAYLOR. Right. I have attached the recommendations of the task force to my testimony, which numbered over 60 in 1977-78, for your use in questioning the Federal sector when they do appear before the hearings. Chairman LAFALCE. That is going to be very helpful. By any chance, has anybody such as yourself or anybody else at- tempted to give a score card rating on the various recommenda- tions? Ms. TAYLOR. No; not that I am aware of. Chairman LAFALCE. Well, that might be an interesting assign- ment for some group. It is certainly something that we should be interested in. As a matter of fact, I think it would be an excellent idea if we asked the Federal Government to give us a report card on how they accomplished all of those recommendations, but it might also be a good idea if the private sector gave us their own independent report card so we might compare. There might be different grades. Ms. TAYLOR. True. The task force developed those recommendations, after over a 9- month study that included all eight agencies. So, they were well thought out a decade ago. I am sure you will find that if work has happened at the Federal level, it has been surface at best, and window dressing without major action. The current perspective, which is the real reason I was asked to testify here, is that my firm, Venture Concepts, performed last year the first nationwide study, the first look at the subject of what States and cities were doing for what we saw was a very important economic development issue. At question here was if women were streaming into business ownership at two times the rate of men-sometimes you hear five times, depending on the year-if we were starting enterprises at an incredibly high speed, what were State and city governments doing to channel this entrepreneurial energy into job creation, tax feve- nues, and economic prosperity. The study was funded by the U.S. Department of Commerce's Economic Development Administration. It spanned over 11 months, PAGENO="0053" 47 and we looked at every State and over 100 cities. We were only funded to look at 50 cities, but we found so few programs that we extended the program to try to see if we could get a more compre- hensive look at what was happening out in the State and city level for women business owners. Quite frankly, Mr. Chairman, the story we found was different than the one we expected. We expected, given the high visibility to the subject of women as the new entrepreneurial wave, as the new immigrants, if you will, who are taking to the streets to risk their fortunes for the rewards this country can present. We expected to find a great deal of action at the local, city, and State level given the current philosophy of decentralizing programs to that level. We found something vastly different. We found that, indeed, women were almost invisible when it came to public policymaking at the State and city level. The pivotal finding of the study was the surprising degree, if not an amazing degree, to which there were no programs for women business owners that specifically looked at the barriers they face and tried to look at creative mechanisms for helping them over- come those barriers. While it is true that many State and city governments have now awakened to the fact that small businesses and not smoke stacks create jobs, what we found was that when they looked at small business they did not define a women as being in that population despite the fact the figures show we own 25 percent of Main Street U.S.A., and will own 50 percent later. We found three major findings. One, there was relatively little action at the city and State level, which is one of the reasons I think it is important for the Federal Government to take a role. Second, where the programs did exist, they were poorly funded. I will not even say poorly designed. I will s'iy they were not designed at all to overcome barriers that women address, some of the ones you are hearing here. Last, but most often, they were viewed as affirmative action pro- grams and social cause programs, not as an economic development issue. I think if one message comes out loudly through the message we are bringing at these hearings is that we, as women, want to be viewed as an economic development issue that just happens to be female, and that we believe that we are caught in-- Chairman LAFALCE. Well, I suspect there is some difference of opinion about that. I have listened to witnesses whose emphasis is primarily affirmative action, and some whose emphasis is some- thing else. Now these are not exclusive one to another. They are all complementary, but would lead down different paths, too. So, you are suggesting economic development should be the pri- mary thrust of any Federal policy. Ms. TAYLOR. Well, what we are dealing with is, unless we have affirmative action, we cannot get in the economic development ballpark. In this sense of the economic development, pohcymakers are not viewing women who are over here. So, they are linked. But we found, and the U.S. Conference of Mayors studies on mi- nority programs found also, that the better programs at the State and city levels existed where they were integrated with economic PAGENO="0054" 48 development strategies, but not over in an office of civil rights, let us say, as an affirmative action goal program. So, what we are looking at is, how can you creatively create poli- cies that will create affirmative action mechanisms that will then move women into becoming more of an economic development force? I believe that is what I am trying to say, if that clarifies it. Chairman LAFALCE. All right. Please proceed. Ms. TAYLOR. Where the programs existed, as I said, we found that few were designed for women business owners, and that, in the sense of overcoming barriers. The two key barriers that women mention over and over again is access to capital, and technical as- sistance. We found almost no programs designed that would give a woman access to capital, and relatively few technical assistance programs that provided the kind of sustained hands-on technical assistance of the type that Kathy Keeley mentioned yesterday where you are ac- tually helping the woman get the business launched. It is true that there are plenty of workshops. There are plenty of 1-day how to start a business, but no one is addressing the critical issue of how do you grow a business, how do you get this business into the economic mainstream. There were a f~w States that were doing that. Your own State, New York is one of those. But for the most part the approach that was being taken to the women business ownership effort was to print a brochure and say, here it is. As a research team, we found one of the hardest problems was to find the information. We had researchers looking for the Office of Women Business Owners, and it would often take us three to four phone calls. We figured that was not a very visible or effective women-owner business program even though the State or city called it that way. Oftentimes, as a check, we sent letters to Governors and mayors stating that we had found there was no program, and we get con- flicting information from the Governor or mayor as to the exist- ence of a program from the program people. So, there was, to put it mildly, a little bit of confusion as to whether programs did exist, and if so, what they were. In large part, we found that there were no substantial programs for women business owners. Only five States-Louisiana, Illinois, Michigan, New Jersey, and Ohio-had programs specifically target- ed to women business owners, and the rest of the States, there were 17 others, attached women business owner programs to exist ing programs for small businesses or minorities Only 1 city out of the more than 100 we looked at had a specific program targeted to women business owners. However, there were 21 cities that had some kind of affirmative action program. Of most interest to you here was the high degree to which pro- curement drove the women business ownership programs at the local and State level, and the high degree to which Federal policy was linked to those procurement policies at the State and Federal program. I mention that today, because I want to emphasize the impact that Federal policies have at these State and city levels in terms of the types of programs that are being created. PAGENO="0055" 49 As you are aware, masses of moneys are spent by the Depart- ment of Transportation, highway construction, environmental pro- tection, urban redevelopment. Moneys flow to cities and States to carry out and implement the programs that the Federal Govern- ment needs. What happens is we find that the criterion, rules, and regula- tions that the Federal Government sets are then mirrored in the State and city procurement programs. Procurement was, by and far, the largest, most prevalent program we found. All 21 of the city programs that we found were procurement programs and of- fered very few other services outside of certifying, monitoring, and enforcing procurement regulations to women business owners who might be trying to access that system. The same emphasis on procurement held true at the State level where we found that over half of the 22 programs for women busi- ness owners had a procurement component. Chairman LAFALCE. When was your study conducted? Ms. TAYLOR. It was finished in October of last year. Chairman LAFALCE. When did you start? Ms. TAYLOR. We started it in December the previous year. Chairman LAFALCE. I wonder if it was at all influenced by the fact that women became eligible as of January 1987 for the 10-per- cent minority set aside in surface transportation. Ms. TAYLOR. The procurement aspect of it? Chairman LAFALCE. Yes. Ms. TAYLOR. No; these were programs that had been in place before. In fact, the major portion of the research was conducted up until March, and then we did field visits for the rest. So, most of these had been in place, though I do think that act will have rami- fications on all of this. We found, as I was saying, that there was little evidence that they were working well. Indeed, what we found was that procure- ment programs were being used as a red herring to show that a State and city were doing something for women business owners when, in fact, relatively few women knew about the program, or were provided with technical assistance that could allow them to access the program. This situation is not dissimilar to the Federal Government where the majority of the emphasis is on teaching us that the market is out there, but not giving us the skills and helping us learn how to access it, or working with the system to make access easier. What also surfaced in this effort was the degree to which lump- ing women business owners with minority business owners is a dis- service to both sectors. Often, the women business owner program was added to a minority program, and it was overshadowed by the efforts for minorities that were already ongoing. If anything surfaced in our interviews with State and city offi- cials, it was not only the lack of commitment to the intent of such women business owner targets, but the degree of skepticism and re- sistance which existed in allowing women to have an equal oppor- tunity to compete even in targeted programs that said when busi- ness owners had goals. A prevailing assumption appeared to be that the majority of women-owned businesses are not legitimate. At first I thought that PAGENO="0056" 50 they were just talking about husbands in this sense, and I would say, welir that excludes the 50 percent .~oi us who are not married~ But, no; we could have fathers, brothers, sons, and lovers~ So, the issue is that until the front issue is dealt with, we will be locked out of the procurement market. The second assumption was that women business owners were not technically qualified to perform the work. The last assumption was that we were not in the goods and serv- ices that the governments needed. I think if you have heard the types of businesses women are in today, that assumption is a myth. The Government buys every- thing from pencils to planes, and we do not just make pencils; we also make planes now. In some cases, it was even stated when there was a program that included women with minorities, that there was less active out- reach and assistance to women than for minorities because of the belief that ri~ orities needed programs more than women. We do not, as women, want to get into a "who needs anything most." We think that this ~s an economic development issue; that there is talent out there that is not being utilized~ But what we do not want to have is for people to pit us together against each other so that all we both do is lose. In general, it appeared that as much time was spent in certifying women out of programs than in trying to find qualified women to get into programs I do not believe this is much different than it is at the Federal level as well. Certainly, little or no attention was given to programmatic responses of how you solve problems of bonding, how you work with cash-flow problems and slow payment, how you teach people to be involved in the bid process, and how you can outreach and educate people so they can have access to the considerable amount of contracting that is. done at the Federal, State, and city level. Certainly, two of the key issues that appeared and places that I do believe there is serious need for Federal guidance is the need to deal with this question of community property laws in States, and also one that I had never heard of before until I took to the field interviewing, which is the impact of commingled family funds on ownership of a business. In some places, a woman who owns 100 percent of her business and operates it daily could not be certified as a legitimate WBE be- cause she had not. put her own money, sole money in to buy the assets of the company. I would point out that the majority of American families com- mingle their incomes and certainly have joint checking accounts, and it is difficult at best to distinguish who owns what in American families. Such strict, interpretations severely . limit the ability of married women in the United States to participate in the procurement system, and the intent was not to keep out women who live or are married to men, but to keep out fronts who were not legitimate businesses. I think that we have taken this front issue to a degree, quite frankly, that is sometimes ridiculous. Yet, procurement programs can work with a proper commitment. Cleveland's program, which was an FBE program and not mixed PAGENO="0057" 51 with minorities, did an outs~tanding job. They set a goal for $3 mil- lion for 1986 They exceeded that goal for $5 5 million with not too much difficulty. This~was totally different than the story I got from people who were saying how difficult it was to meet women busi- ness owner goals, usually which are set at the 2-percent level, not the 16 percent that women-- Chairman LAFALCE. Ms. Taylor, what laws are we talking about that women business owners could be fronts for9 What are the laws that would be operative? There is no Federal law, to my knowledge, is there? Ms. TAYLOR. There is a Federal definition to use to determine le- gitimate women business owners, and. that definition is 51 percent ownership, and owned and operated by women. Chairman LAFALCE. For what purpose? I mean Tor what pro- gram? Ms. TAYLOR. For procurement programs and procurement goals. That is to make sure that there is, I will call it a "legitimate chief executive officer" operating the business The issue that has come about is how the regulations are inter preted in terms of looking at ownership and looking at control and management In some cases, if you own a painting contracting firm that paints bridges or something like that, there is the question of have you ever painted a bridge in terms of the operating and con- trol issue, and then the control of assets is the issue on who funded the actual capital to start the business that makes the 51~percent ownership. But what we are talking about is the 51-percent ownership is for the few percentage of women `who do not own 100 percent, and many women own 100 percent of their companies As I was saying, there are programs that do work I pointed to Cleveland's as an example of one that works. We found a need for more recognition of the importance of the women business owner's contribution to the economy. The latest data we had was 1982, which only looked at sole pro- prietorships, and which indicated that women owned businesses generated $98.3 billion revenues. Today, the level is probably closer to $100 billion, and if we take the impact of what that dollar does in the local economy, we esti- mate that the actual contribution of women~owned. firms equals $250 billion a year in national income Of the $250 billion, if you use the ratios that normally go for Federal and State taxes~ about $37 billion is paid to the U S Treas ury in Federal taxes, and an estimated $13 billion to local and State governments. ` With that kind of economic implication at hand, and these are not counting corporations These are just counting sole proprietor ships My question to the committee is, is it not a good investment to spend some of that money that we are ourselves generating in the types of programs that are needed to help us move up the en trepreneurial curve into bigger and larger businesses9 I think I would like to close with saying that the question at hand here is not a question of funding programs, but really making an investment If we could look at the funds that are utilized to stimulate' women business ownership as an investment in a capital PAGENO="0058" 52 resource of this country, which happens to be female, and look at the return on investment, I think you would find it is good busi- ness for the country, and I think that the time has come that some- body looks at it as a business issue. Thank you. {Ms. Taylor's statement may be found in the appendix.] Chairman LAFALCE. Thank you very much, Ms. Taylor, and I thank all the panelists for their fine contribution. I am only going to ask a few questions. Unfortunately, the Banking Committee is having a meeting right now, and we are considering changes, and I really should be there, too. Ms. Taylor, you gave, primarily, a synopsis of the report that you prepared for the EDA. When will that be issued? Ms. TAYLOR. The fact sheet is available, and the report will be available next week. Chairman LAFALCE. Next week. Ms. TAYLOR. The entire report, which is a directory of programs. Chairman LAFALCE. This is a bit of a preview then of that report. Ms. TAYLOR. Right. Chairman LAFALCE. Fine. But most of your testimony dealt with that, and I was very interested in it. But if you would go back to your position as director of the task force on-what was the title of it, Women Business Owners? Ms. TAYLOR. Right. Chairman LAFALCE. Or Women in Business? What was it? Ms. TAYLOR. Women Business Owners, President's Interagency Task Force on Women Business Owners. Chairman LAFALCE. Right. And look at the national policy for women business owners, would you have any assessment right now of where we have fulfilled the promise, fulfilled the charge, or where we have been most grievous in not fulfilling the promise and the charge? Ms. TAYLOR. I would say that, if anything, it is a broken promise; that there has been surface effort. The original funding at the SBA and the position of the Women Business Ownership Office was at a much higher funded level, and a much higher programmatic level than it currently is. Chairman LAFALCE. At one time there was a set-aside of a cer- tain dollar amount of guaranteed loans for women business owners. Ms. TAYLOR. No; that program was done away with. It was a miniloan program that would allow the lower amounts of money that went in without collateral. III can run through the areas in the recommendations. Chairman. L~FM~cE. Sure. Ms. TAYLOrR. In the area ~of data assessment, we called for serious data collection on the subject of women business owners that would correct for the undercounting of our effcrt iii the economy, because it is limited to : sole proprietorships. That has not seriously been dealt with in terms of it The question of seriously collecting and monitoring goals and performances of Federal agencies, I believe, has not been done in a way that is affirmative-action oriented rather than just data collec- tion. PAGENO="0059" 53 The Interagency Committee on Women Business Owners did not meet for a long period of time, and you can question them on the number of reports that they have done. I believe that they were re- quired to report to the President every year. This is off the top of my head. I have not made a study of this. Chairman LAFALCE. Surely. Ms. TAYLOR. And off the bottom of my heart as well, as you can see. We directed the Women's Bureau of Labor to be a clearing- house We made recommendations in the area of education, so that little girls in America could grow up knowing that this was a viable career, and that we would not have these problems later We made specific recommendations in management training and technical assistance, and some rather formidable ones in credit and capital formation Let us just say that nothing in the credit and capital formation has happened at all. It has only been under the direction of Congress in trying to get this legislation passed that we have begun to get some movement i~ the area of capital. Under marketing and procurement, which I know, is the area that you are most interested in today, if you look closely at the sta- tistics that come out `on not the dollar volume of contracting, as it has grown but the population of women business owners has grown, you will notice that the proportion grew heavily after the task force put in the Executive orde" and then it decreased I think that is an indication that monitoring and persuasion, if we can say, has not come on; and certainly no creative programs have been done that can help women get into this. We are 10 years later, and I want to point out that. Many of these recommendations may not be relevant today. What we are looking for is a new look at creative and innovative solutions, so that we can move forward~ and move women into the economic mainstream. I think that it is time, as Ms Rudd pointed out, for a new serious look at the ways that this can happen I think that since Congress, and actually this committee, led to the first task force on women business owners, that it would be a service to the country as a whole, and to the women business ownership community, and, cer tamly, the minority business ownership community if it could im plement more thorough thoughts and recommendations that we could bring forward to the new administration in January, be it Republican or Democratic. ` The issue is an important issue for the country, and the reSson that we have come to Congress with it is just because of that, that there has been no actioli at the Federal level Chairman LAFALCE Let me clarify a few things There was a task force on women business owners in 1977 and 1978, and you di rected that. That differs from the interagency task force, does it not? Ms. TAYLOR. Right. ` ` Chairman LAFALCE What was the difference between the task force on women business owners and the interagency task force9 Ms TAYLOR The task force on women business owners was a study commission that was mandated for a short life to look at the barriers and to come up with recommendations, and we went out of business once there was a report. PAGENO="0060" 54 Chairman LAFALCE. Mandated by what? Ms. TAYLOR. By the President. It was a presidential commission signed into law or whatever, created by President Carter. Chairman LAFALCE. OK. Ms. TAYLOR. It was to look at the issue of why there were so few women business owners, and what we could do to stimulate the economic resource, and to identify if there were barriers, which we found there were, and to identify recommendations to overcome barriers. If you remember at that time, we had a woman Secretary of Commerce, Juanita Krepps. It was Secretary Kreeps' suggestion. Chairman LAFALCE. These recommendations that you are refer- ring to are the recommendations of that task force? Ms. TAYLOR. That task force. Chairman LAFALCE. As opposed to the interagency task force. Ms. TAYLOR. The presidential task force. One of the recommenda- tions of the presidential task force was that there be an interagen- cy task force which would be mandated to be the oversight mecha- nism to make sure that the agencies carried out the plan. Chairman LAFALCE. Did you direct the interagency task force? Were you the executive director of it? Ms. TAYLOR. No; I am purely the task force. Chairman LAFALCE. Fine, good. The presidential task force as opposed to the interagency led to Executive Order 12138, which has been repromulgated by Presi- dent Reagan, and that created a so-called national policy for women business owners. Ms. TAYLOR. Yes, sir. Chairman LAFALCE. Now, is there a document entitled the Na- tional Policy for Women Business Owners? Ms. TAYLOR. I believe that is usually referred to as the Executive order. Chairman LAFALCE. The Executive order and the national policy are one and the same document? Ms. TAYLOR. I believe so. You could ask whether SBA has a na- tional policy written. But the Executive order instructed the agen- cies to do certain things. Chairman LAFALCE. Did the Executive order encompass some of the recommendations of the task force, and in a certain sense su- persede the task force? Ms. TAYLOR. Yes; the Executive order created the interagency committee as an ongoing operating mechanism to make sure that the recommendations were in place. It set goals and targets for Federal agencies. Chairman LAFALCE. Is this interagency task force charged with the responsibility by the Executive order of issuing reports periodi- cally? Ms. TAYLOR. I believe that they are required to do a report once a year to the President'. Chairman LAFALCE. Have you seen any reports, or have there been any reports recently by this interagency task force? Ms. TAYLOR. I believe that there have been none up until recent- ly. I could stand corrected by SBA. [Pause.] PAGENO="0061" 55 Chairman LAFALCE. Only one has come to our attention appar- ently, and that was after we made it known that we were going to have these hearings. That was a quick eight-page report. Apparent- ly, nothing preceded that for the past 8 years Now that may be inaccurate But if it iS inaccurate, the burden of presenting those reports is on the preparers of the reports. I am Curious. If I were to óontact GAO and ask GAO to render a report card, what would be the basis of that report card? Would it be recommendations of the task force, or would it be the implémen- tation of the E~ecutivé order; if I were to ask GAO to make a study of the progress that has been made over the past decade, what would be the most appropriate yardstick to use for the GAO report card? Ms TAYLOR Well, I do think that these recommendations were well thought out by the mteragencies 10 years ago, some of them Chairman LAPALCE You were director Ms ~I'AYWR There was an interagency committee of Assistant Secretaries who actually did it, who came up with the recommen dations. I was merely staff director. Chairman LAFALCE. Who was on this task force? Ms. TAYLOR. It was at the Assistant Secretary level of the major agencies that impacted on women business owners. I am. not sure that I can remember all of them, but the Department of Com- merce, HEW, DOD. Chairman LAFALCE. The interagency task force was the successor to that task force. Ms. TAYLOR. Right. Chairman LAFALCE. So, it is almost one of the same. Ms. TAYLOR. Right~ So, I would think that the recommendations would be a good starting point. I think that what you want to query on carefully is was the program ongoing What we are talk ing about here is not just a one shot confe~rence, but a philosophical commitment to the issue, and how you ask questions in that way Chairman LAFALCE We are going to take a look, and I have not done it yet, at the Executive Order 12138, and see if that might be a good yardstick If that is the national policy, let u~ see if GAO can do a study of how that national policy has been implemented But we will take a look ~.t it a~d make a comparison to see what would be an appropriateyárdstick; Ms. TAYLOR. Excellent. Chairman LAFALCE Representative Hayes Mr HAYES Thank you, Mr Chairman I just want to commend you first for having put together this hearing on this very, very troublesome problem of women entering into business I do not see too many of them listed in the Fortune 500 publication Unless we change our course, that will not happen. I am a supporter of programs to assist the development of women-owned businesses. I am conscious of your time, Mr. Chair- man The testimony that I have heard from these witnesses has been invaluable to me, both interesting and informative I, too, have a time pi'obiem. I have to leave. You know how we. get jammed with commitments. . ~ PAGENO="0062" 56 Chairman LAFALCE. I know that you have a time problem. But if you do not talk about the 10-percent set-aside and surface transpor- tation, you are not going to be happy. Mr. HAYES. I have to talk about some of the testimony that I have heard here. There have been some troublesome developments recently in relation to Federal contract and policy. Adding to women and minorities as a single Federal contracting goal has caused considerable trouble in the Federal highway program. What you have said here goes beyond this Federal highway pro- gram. Particularly as it relates, to the improvement of the Federal highway in Chicago. I would like to know what are your views on the probability of separate goals for Federal procurement for women and minorities. I noticed, Ms. Slater, that you said quite candidly, I think, if I understand it, on the fourth page of your testimony, I think in the sixth paragraph. First you start off by saying, "Women make up the majority of the population. Therefore, women should not be considered a minority group." But then you go on in the next para- graph and say, "Minorities and women business enterprises should be kept as separate entities with separate goals to be outlined in each contract and/or `a statement of intent for each, agency's goals." Could you elaborate on that. Because in this situation that I, al- luded to in relation to Chicago, aside from the fact that women period have been short, we find out that white women have been used as fronts in order to satisfy the minority compliance request. We find no black women being awarded any contracts or subcon- tracts or anything at all. Do you think that this would change with your suggestion? Ms. SLATER. I do. I think that would give everyone a fair chance. Women would not be infringing on goals set for minorities, and women would also have their slice of the pie. I really believe that if they cannot put it in one contract, then there should be some kind of overall agency goal, a dollar amount. If there is going to be $10 million worth of contracts given out, then a certain percentage should be going to women business owners, and a certain percentage should be going to minority busi- ness owners. Separate, not thrown into the same pot. As a black woman, and I say black woman because nobody ever calls me woman black, because they see that I am black first. So, if it came down to a choice, if a majority firm had to use someone, if they had a choice between a woman business owner and a black woman business owner, they would take the white woman business owner. It is mere fact. It is just the way that it is. Until that changes, maybe you can group us all together. But as long as it is not going to change. It is just like if I came into an office. If I walked into an office, the receptionist would go and tell her boss that there is a black woman here to see you. If another woman came in, there is a woman here to see you. This is a fact, and this is how people think, and we cannot change how people think right now. It is not going to happen in our lifetime. So, I really believe that there should be some kind of separate goals in there, instead of throwing them into the same pot PAGENO="0063" 57~ and pitting them against each other, and giving legitimate woman business ownerS a chance at the surface transportation money, and legitimate minority business owners a chance I have done a lot of transportation work I would say that about 95 percent of my work is transportation now, because of all of the moneys that are out there I do a lot ~f work for New York City Pransit, New Jersey Transit, DOT for the State I had no problems, up untjl I just got notification that DBE's and women would be considered minorities also in the same pot Before, there was always a separate goal It was either 5 percent for women Mr. HAYES. In the RFP? Ms. SLATER. Yes; it came in one of my RFP's. I knew this to be, but they put it on the front page of the RFP from the MTA last week. They clarified it. Mr. HAYES. Ms. Taylor, you mentioned, too, this whole problem. Do you share the opinions that have been expressed? Ms. TAYLOR. This is my personal opinion. I do not know the opin- ion of them on this, but yes, I do I believe that separate tracks create better programs I think that there is no question that there is racism in the country In what we are highlighting here, there is also sexism And that they are different things, and need different mechanisi~is~to accomplish goals. Mr. HAYES. Have you got any suggestions that might be helpful for us to rectify such things? Ms TAYLOR I feel, as Ms Slater said, the idea of separate goals I also feel that there needs to be separate track advocates, because I do not believe that minorities know how to outreach to women business owners. Not because they do not want to, but we are in different segments of the population I think that there ha~ to be serious monitoring of it. Mr. HAYES. How many employees do you have? Ms. SLATER. Twenty altogether. Mr. HAYES. Thank you, Mr. Chairman. Ms SLATER Which is considered a medium sized engineering ar chitectural firm. Mr HAYES I notice that you talk about the separation, that a regular list of engineers and architects are placed on a minority list, and that is tantamount to a black list Is that what you are saying? Ms. SLATER. Yes. Mr. HAYEs.~Ali right. Ms SLATER It is a good pun, but it is not fun Chairman LiLFALCE Ms Slater, let me ask you a question How do you feel about that Federal law that came about through the Armed Services Committee under the Small Business Commit tee jurisdiction that imposes a limit of, I believe, $85,000 on the amount of architect and engineering contracts that can be set aside for smell business It is right now the only operative law that limits by dollar amount the contracts that can be set aside for small businesses. Ms. SLA'rEn. I think that I touched on that also in my testimony. I do not like it at all My father started this firm back in 1969 I can tell you who the black engineers and architects are in New PAGENO="0064" 58 York. I can just name them. There are not that many, that sur-. vivéd any of this. Some of them have built up. The one firm comes to mind, E.W. Finley. He was a very progressive* man. This man went walking all over the country. He has built up his firm to a very large size, and he is doing a lot of work down in Atlanta. He has an office here in Washington, and one in Boston. He was doing a lot of good work, and he was doing work as part of the minority set-aside. Now, when they put this dollar value on him, he had to cut his staff, and he lost a lot of work. They were pulled out. They do not need him anymore. He had to cut his staff. Like I said, minorities hire minorities. Of my 20 people, they are all minorities. Whether they be Indians, or Chinese and other Asians, black, or Hispanics. This is what makes up my firm. I had one Caucasian engineer, who did not come with us when we moved, because he is in a wheelchair. I guess that in some sense that you could say that he is a minority. Nobody wanted him either. This is who we hire. Back to your question about things, I see another firm, Leroy Calender. He moved up very well and had a nice-sized firm going for him. He has cut his staff by 30 percent, because of the dollar amount put on the work. Just like myself. I am now getting a lot of transportation work, because it is sought after. I would like to make another point. One of the reasons that I started Hill-Slater as a paraprofessional firm was because of the outrageous cost of liability insurance. I think I mentioned that as a subcontractor that I have to carry the same amount of insurance as my prime does, but I am not treated the same. Chairman LAFALCE. All right. Thank you very much. Do you have any further questions, Congressman Hayes? Mr. HAYES. Do you have trouble getting liability insurance and bonding? Ms. SLATER. No; we do not bond in my business. Mr. HAYES. You do not have a bond. Ms. SLATER. We have never had a claim in almost 20 years of op- erating the business. It just went up, because it went up, and we were caught in there. Mr. HAYES. Thank you, Mr. Chairman. Chairman LAFALCE. Well, thank you. I want to thank all of the witnesses. We will be having further hearings on the entire subject of the problems and the potential of women business owners in future weeks. I thank you very, very much. ~Whereupon, at 11:15 a.m., the committee was adjourned, subject to the call of the Chair.] PAGENO="0065" NEW ECONOMIC REALITIES: THE ROLE OF WOMEN ENTREPRENEURS TUESDAY, MAY 10, 1988 HOUSE OF REFRESENTATIVES, COMMITTEE. ON SMALL. BUSINESS., Washington, DC. The committee met, pursuant to notice, at 10 a.m., in room 2359- A, Rayburn House Office Building, Hon. John J. LaFalce (chair- man of the con~mittee) presiding. Present: Chairman LaFalce; Representatives Hayes, Bilbray, Lancaster, Martinez, Hiler, Slaughter, and Meyers. Chairman LAFALCE. The Small Business Committee will come to order. Our hearing this morning is the third in a series of hearings on the special problems facing women business Owners. The desire to seek economic independence by starting one'S own business is not limited by gender. The ability to achieve this goal, however, is often dependent upon factors unrelated to entrepre- neurial skill. Equality of access to business credit is vital for business forma- tion and development, and in spite of advances in achieving equah ty of opportunity, women still face subtle discrimination in credit transactions for subjective reasons unrelated to creditworthiness The Equal Credit Opportunity Act of 1974 prohibits cliscrimma tion in credit transactions on the basis of race, color, national origin, sex, marital status, or age While we have achieved moder ate success in providing equal access to consumer credit, women business owners insist that a business exemption from key provi sions of the ECOA for business and commercial credit has creat'~d a climate in which discrimination is likely to occur Access to capital ha~ often been cited as one of the two most vexing problems of women-owned small businesses The second is management and technical training. Many such businesses remain dangerously undercapitalized Our hearing today will examine this issue as we seek to remove barriers to the achievement of commer cial success for women and for all sectors of the small business community. Our witnesses today include two small business owners whose stories will illustrate the particular problems women face in seek mg business loans We will also hear from Ms l3arbara Gentry of the Department of Commerce for the State of Michzga~, and from Representative Lindy Boggs, who is well known and respected for (59) 88-1990-88-3 PAGENO="0066" 60 her tireless efforts on behalf of women who seek the American Dream. Are there any statements the ather members have? Mr. BILERAY. I have one I would like to submit for the record. Chairman LAFALCE. So ordered. [Mr. Bilbray's opening statement may be found in the appendix.] Chairman LAFALCE. I have a statement from Senator Carl Levin, who would have liked to testify, but cannot. He asked that we submit his statement in the record. Without objection, so ordered. [Senator Levin's statement may be found in the appendix.] Chairman LAFALCE. Before we call the entire panel, I thought it would be appropriate to have as our lead-off witness, Congresswom- an Lindy Boggs of Louisiana. Lindy, I assume you would like to testify and then go to your other business, as opposed to remaining with the other members of the panel. TESTIMONY OF HON. LINDY (MRS. HALE) BOGGS, A REPRESENT- ATIVE IN CONGRESS FROM THE STATE OF LOUISIANA Mrs. BOGGS. I am happy to testify as you wish. I am grateful to you and all the members of the panel for allowing us to have this hearing today. It is an extraordinarily important hearing. Not only am I here to express my personal appreciation, but also that of the Congressional Caucus for Women's Issues, for your lead- ership in holding this series of hearings to focus on the problems, successes, and prospects of women who are, or who seek to become, entrepreneurs. As you well know, entrepreneurial enterprise has long been much admired in our society and has represented a key component of our Nation's economic vitality. The burgeoning entrepreneurship of women represents an impor- tant national resource. I commend the members of the committee for your recognition of this source of new dynamism and for your commitment to examining ways in which Government can con- structively assist women entrepreneurs and remove impediments to their success~ Problems with equal access to business or commercial credit have been identified as a key area of concern by the National Asso- ciation of Women Business Owners, other organizations concerned with women in business, and individual women business owners. It is a distinct honor for me to address that subject today and to speak in support of legislation introduced by Chairman LaFalce which is designed to clarify the application of the Equal Credit Op- portunity Act to commercial transactions. I have been pleased to work with and support you, Mr. Chairman, in this legislative effort. Chairman LAFALCE. You have done more than support me in that effort. You have led me in that effort, Mrs. Boggs. Mrs. BOGGS. The Congressional Caucus for Women's Issues has included the bill, H.R. 1897, in the Economic Equity Act, a package of legislation which constitutes the Caucus' l~gis~ative focus. You will be hearing, this morning, from others who will shed considerable light on the nature and extent of the continuing prob- PAGENO="0067" 61 lem ofdiscr~rni~ation against women in commercial credit transac~ tions Because we lack reliable stahstical information about credit problems of women, it has been difficult to document the extent of the problem, Evidence has been largely anecdotal, but we have some statisti cal evidence, especially that obtained by the National Association of Women Business Owners when they conducted a survey of their membership in 1985, which indicated that two out of five respond ents felt that they had been the victim of discrimination when. ap- plying for commercial credit. Three out of four women who responded had applied for some form of credit within the past 5 years, and one of every three was denied credit. The SBA sponsored a study of women entrepreneurs, hut, unfortunately, it focused on well-established businesses and ig- nored the important area of concern: Credit problems of young businesses and would be entrepreneurs Difficulties in credit access for women in those categories were found and studied by the SBA's Task Force on Women's Business Enterprise in 1978 and 1979 and published man important volume entitled: "The Bottom Line: Unequal Enterprise in America." Mr. Chairman, I have to tell you and other members of the panel that I have some strict notes from my staff saying I can't give away these copies, because they are the only ones we have. But it was this important document, which led to the establishment of an autonomous Office of Wo'men's Business Enterprise within SBA and to the establishment of a miniloan program, among other `ini- tiatives, specifically in response to access-to-credit problems. Those initiatives have been almost entirely eliminated since 1981. The majority of "women-owned businesses tend to be service based and lacking sufficient collateral to secure a loan. Our econo- my has become more service based and lenders have had to adjust. Yet, individual savings are the major source of capital for women entrepreneurs and joint savings of husband and wife rank second, according to the Women's Equity Action League. The Census ,Bureau finally issued 1982 data on women-owned businesses in 1986 after considerable pushing by many of us who were concerned that we had only data from the "1977 Economic Census to rely on. So, you see, it is not always easy to get accurate, up-to-date information about the status of women in our economy. The evidence we do have indicates that, 14 years after passage of the Equal Credit Opportunity Act, there has been considerable im provement with respect to consumer credit, but problems continue to crop up with respect to commercial credit. Mr. Chairman, and members of the panel, I was a member of the Financial Institution Subcommittee that helped to write the Equal Credit Opportunity Act in 1974, and I can assure you there was no difference in our minds or in the congressional intent, the legisla tive intent, between consumer credit and commercial credit Key aspects of the problem, other than outright denial of credit, are the discouragement of applicants before they even file a formal application, and the granting of credit on less favorable terms than might be expected and appropriate The very informality of the discussion and negotiation process that is an accepted and important part of business credit transac- PAGENO="0068" 62 tions offers particular opportunity for discouraging applicants and for leading them to actually request less favorable terms in the formal application. In business transactions, the filing of a formal application is often the culmination of the process as opposed to consumer trans actions where the filing of a formal application tends to take place at the outset. Therefore, the nature of the discrimination problem with commercial credit is more subtle and difficult to pinpoint. The. Equal Credit Opportunity Act of 1974 prohibits discrimina- tion in both consumer and commercial transactions. An amend- ment to the act in 1976 gave the Federal Reserve Board flexibility in drawing up the reguiations and, as a result, the implementing regulation, regulation B., now reflects a distinction between com- mercial and consumer credit, based on the differing nature of the types of transactions. Commercial credit transactions are specifically exempted from provisions of the act relating to: One, notification of adverse action regarding a loan application, including a written statement; two, retention of records requirements; and, three, information concern- ing marital status. At the time the Federal Reserve initially crafted these regula- tions, it is understandable that these exemptions for commercial credit were deemed appropriate in recognition of the greater amount of negotiation and subjective judgment typically associated with commercial transactions. I am confident there was no intent to make it easier to discriminate. But there is ample evidence of continuing discrimination and of a view on the part of many lenders that the ECOA doesn't really apply to commercial credit. As you know, Mr. Chairman, the legislation that you and I intro- duced would remove those exemptions for commercial .credit. The bill does provide . for the possibility of legitimate exceptions which could be approved by the Federal Reserve Board through an ad- ministrative hearing process. When the Federal Reserve Board acted to change some aspects of regulation B, about 2 years ago, it chose not to alter the portion pertaining to business credit because of insufficient evidence of need. While the Board acknowledges that continuing discrimination does exist, as indicated by the testimony of Governor Martha Seger before the House Banking Committee's Subcommittee on Consumer Affairs and Coinage in August 1986, it maintains that the problem is primarily one of education of bank officers, minorities, and women to the rights already guaranteed by the act. In an effort to assist in the education of these groups, the Feder- al Reserve Board has produced an excellent pamphlet. Those of us involved in efforts to rectify the problems are very appreciative of the Fed's responsiveness to the concerns raised, but we question how successfully the pamphlet can be distributed to all lenders and applicants, and whether or not it would be read. If recordkeeping and written notice of denial were requir'ed, it would, at the very least, ensure that both bank officers and appli- cants are aware of their guaranteed rights. PAGENO="0069" 63 Clearly, women-owned businesses already form an important component of the business sector To assure that these promising contributors to our national economic vitality can prosper, it is critical that we heed the signs of continuing disQrirnination in their access to credit and act to remove impediments to their success. Thank you allowing me the opportunity to share these observa- tions with you as a part of your hearings on women entrepreneurs. I congratulate you and thank you for holding the hearings, and for the heavy attendance we have among the committee members this morning. Chairman LAFALCE. Thank you very much, Lindy. I think the at- tendance here is testimony to the affection and respect in which we all hold you, in addition to the interest that the members obviously. have in the issue. Since the introduction of our bill, we have heard from some indi- viduals or organizations who oppose it, for one reason or another, the National Commercial Financial Association, for example, and the National Association of Credit Managers. I think the time has come for us to do tWo things To sit down with Mr Annunzio and try to get hearings on this bill in this Con gress before his subcommittee, and then tO see if we can work with these groups who oppose it to see if we can amend it without weak- ening it to accommodate their concerns in return for their support Now, of course, if there would not be some quid pro quo, some support to accommodate their concerns, our disposition to accom- modate those concerns might not be as great. Would that generally be your disposition? Mrs. BOGGS. It certainly would be. I think you have to recognize that some of the groups that are in doubt about the bill or opposing the bill, have very little outright experience with the kinds of ôredit that we are really talking about. If I may say so, when we first started the Equal Credit Opportu nity Act for all credit, including consumer credit, we had great op position from many of the groups Of course, that was finally over come I remember the testimony of the immediate past president of the American 13ank~~ng Association, who came to testify in favor of the bill But he was immediate past president when he did so When the bill was completed, the legislative history of it is such that different persons, the minority interests, the interest of the aging, and so on, were all reflected in suggestions to the Federal Reserve Board for regulations When the first regulations were-or the preliminary regulations were published, all of them were very pleased that their feelings and their experiences had been included Of course, when the corn ments began to come in and the people who had to, in practicality, carry out the purposes of the act, you began to get some negative comments and some suggestions for change. When those changes were reflected in the permanent regula tions, the women's organizatipns, the minority organizations, and others really thought that they had been taken in. They had failed to comment on how wonderful the proposed regulations were, you see. We, the women Members of Congress, which included several mi- nority women, asked the Federal Reserve Chairman-Arthur PAGENO="0070" 64 Burns at the time-to come to meet with the leaders of these women and minority organizations, which they did. So, there has been difficulty in the interpretation all along. I think we have been able to meet all along the requirements of the people who feel that they are still discriminated against and are still having trouble, and the requirements of the groups that are charged with the application of the regulations. So, I think there is no reason to assume that we cannot satisfy those needs in this instance as well. Chairman LAFALCE. Good. Well, I look, forward to working with you more closely. I would like to do something in the next month. Mrs. BOGGS. Thank you. Chairman LAFALCE. Do other members of the committee have questions or comments they would like to make? Mr. HAYES. I would just like to commend my colleague for having introduced this much-needed piece of legislation. I want to let you know I fully support it. There is no question abQut the diffi- culty that women entrepreneurs have in trying to seek social fi- nance, particularly among minorities. Thank you very much, Mr. Chairman. Chairman LAFALCE. Thank you. Any others? Mr. Lancaster. Mr. LANCASTER. I would like to add my welcome and thanks to Mrs. Boggs for her leadership and testimony this morning. Mr. MARTINEZ. Mr. Chairman, I would like to add my commenda- tion to Mrs. Boggs. It surprises me when people in a position to use* common sense don't. Women in business who want a commercial lOan are going to have substantially the same kinds of collateral and situation as a male. Why someone in a position to make that loan would deny a woman under the same set of circumstances is beyond my wildest imagination. It never ceases to amaze me that these situations have to be cor- rected by law when they should be corrected by common sense. I commend you and the ëhairman for introducing this bill. I think we have to make it known that there is no distinction between a commercial loan and regular credit. Chairman LAFALCE. Based upon the comments of all the mem- bers, I would assume all wish to cosponsor our bill. So ordered. Mrs. BOGGS. Thank you. Chairman LAFALCE. If there are no further comments, Lindy, thanks a million. Mrs. BOGGS. Thank you very much, Mr. Chairman, and all the members of the committee. I may mention that my colleague from Kansas has been a leader in these regards as well. Thank you so much. Mrs. MEYERS. Mr. Chairman, may I say that I may be a cospon- sor of the bill. I am not sure, because of my participation in the Congressional Women's Caucus, but I do congratulate you for intro- ducing the bill and for working so hard on this, in this area. Thank you. Chairman LAFALCE. Mrs. Meyers, I am sure that you are, and if you are not, you are retroactively. Mrs. BOGGS. Thank you very much. PAGENO="0071" 65 Chairman LAFALCE. We will now hear from a panel on business owners or individuals involved in Government with respect to women in business Ms Barbara Gentry, director of the Women Business Owners Service, Michigan Department of Commerce, Ms Christine Bierman, president of Colt Safety, Inc., St. Louis, MO; and Ms. Mary Jordan-DeLaurenti, president of Jordan-DeLaurenti, Inc., Dallas, TX, It surely is a pleasure for us to have the three of you before us today. What I will do, without objection, is put the entire text of your remarks in the body of the record at this time~ If you wish to read them, fine. If you wish to summarize them, fine. Whatever you do, I hope you can do it within, ~ no more than 10 minutes each Thea we will have time for questions Without ob jection, the testimony of the three witnes~es will be included in the record. First we will hear from Ms. Gentry. TESTIMONY OF BARBARA GENTRY, DIRECTOR, WOMEN BUSI- NESS OWNERS SERVICES, MICHIGAN DEPARTMENT OF COM- MERCE Ms. GENTRY. Mr. Chairman and esteemed members of the Small Business Committee, as the director of Women Business Owners Services in Michigan's Department of Commerce for the last 5 years, and also as a business owner for the past 13 years, I want to thank you for this opportunity. Chairman LAFALCE. Ms. Gentry, when Jim Blanchard served in Congress, he served with us on the Banking Committee with Lindy Boggs and myself. He brought a good many of his staff at that time from Michigan with him. Were you on his Washington staff? Ms. GENTRY. No; I was not. Women Business Owners Services has recently been recognized by the U.S. Department of Commerce as the most outstanding pro- gram in the United States providing the most comprehensive eco nomic development initiatives for women entrepreneurs It is from this experience that the following testimony is presented. Our free enterprise system is based on the premise of equal op portunity for all. But for small businesses in startup or business growth stages, access to capital is not a level playing field There is definitelya problem. Women's business startups are experiencing a growth rate of 94 percent annually Yet, this growth is being restrained by the un availability of capital due to systematic discrimination in the lend ing practices The impact of this discrimination is causing women to start businesses undercapitaiized.~ Systematic discrimination impacts a women's traditional experi ence in the workforce and limits her income This affects the amount of collateral and assets she has been able to gain A well known rule of thumb is in order to get money, you must have money. Women traditionally do not have sufficient assets~ access to fi nancial markets, or access to family assets. PAGENO="0072" 66 Perceptual discrimination further limits access to capital. In July 1986, Michigan held four public hearings concerning access to cap- ital for women business owners. Testimony given by the 435 women business owners identified one overriding concern. In their opinion, women do not have equal access to credit and are discrimi- nated against in the business and loan process. Lenders perceive women-owned businesses as high-risk invest- ments due to misperceptions about women's ability, experience, and commitment to operate successfully. Women are, therefore, charged excessive amounts of interest and collateral, up to five times the amount of the loan, and cosignatlires are required for husbands, fathers, or sons when women have attained personal credit in comparable amounts. Traditional banking lending policies have a discriminatory impact on young companies which have not accumulated sufficient assets or resources to meet the loan criteria. This is especially true for serve sector businesses, because they possess few tangible assets which banks require as collateral for most loans. This has an impact on women business owners because in Michi- gan, 84 percent of all businesses owned by women are in the cate- gory of service, wholesale or resale. In 1987, a Touche Ross Michigan study surveyed 3,400 women business owners and received responses from 18 percent, 62~1. This survey showed that while 69 ~percent of these women business owners approached banks and lending institutions, only 14 percent of the capital used to start their enterprises came from lenders, with more than 70 percent coming from savings and earnings, and another 15 percent from friends, relatives, and private investors. This reliance on their own earnings and savings, despite the tra- ditionally low earning power of women in the workforce, resulted in 80 percent of the businesses being capitalized at under $20,000. Only 5 percent of the women in the survey started their businesses with more than $75,000. These Michigan businesses were not part-time ventures or home- based enterprises with no plans. for expansion. The survey showed that 66 percent of the respondents are corporations, 86 percent op- erated full-time ventures, and that 80 percent leased or owned space. Most important, from an economic development perspective, was the fact that almost half, 47 percent, were considering expand- ing in 1987. It is critical to point out that the data collected from IRS about the revenue of women business owners is incomplete. The $100 bil- lion to $200 billion annual revenues represent sole proprietorships, partnerships, and subchapter corporations only. The data does not reflect the U.S. corporations owned by women. In Michigan, in 1983, IRS reported that 111,620 women-owned nonfarm businesses created $1,087,487,000 in sales. The recent Touche Ross survey, polling the top 50 women business owners, in- dicated that their corporate revenues for 1986 exceeded $867 mil- lion. Therefore, the actual economic impact of just these 50 addi- tional corporations would almost double the gross revenues report- ed by IRS in 1983. As a result of these barriers, the area of greatest risk for women business owners continues to be the necessity to start undercapita- PAGENO="0073" 67 lized businesses which significantly reduces their ability to be com- petitive. The impact of undercapitalization and lack of capital from tradi- tional sources limits the potential of growth for women-owned busi- nesses. As businesses expand, growth capital, the permanent work- ing capital needed to sustain growth, is not available either inter- nally or externally. Data gathered in the Touche Ross survey indicates that 31 per- cent of the companies that started with less than $20,000 in capital were grossing over $100,000 in 1986. While 65 percent of the com- panies that started with $20,000 or more in 1983 were grossing over $100,000. In the Michigan Touche Ross survey, over half, 52 percent, of these Michigan business owners were operating with a bank loan of any kind. Yet, these were not new businesses. Only 8 percent of the survey respondents had been in business for less than 2 years, 64 percent had been in existence for at least 5 years, and 32 per- cent of these more than 10 years old. In terms of size, 41 percent of the respondents indicated that their businesses grossed more than $100,000 a year, and 54 percent employed more than four full-time and part-time employees. This is all large. When bootstrap financing is necessary, when a company has to rob Peter to pay Paul continually, the growth is slower and more cautious. It is as if these companies must save their money in order to afford the luxury of growth. Some States have addressed the issue of capital, and the State of Michigan has implemented two major initiatives: The Capital Access Program and the BIDCO Program, to increase access to cap- ital for small- and medium-sized Michigan businesses. It is important to point out the greatest challenge of our office has been to get State and local economic development policy and decisionmakers to include this existing growing segment of small business. The issue is not only systematic and perceptual discrimination, it is even more serious. Women business owners are not even thought of, let alone considered, in policy decisions. It is one thing to be dis- criminated against. It is another to not even be thought of or in- cluded in decisions. Without the specific intervention of Women Business Owners Services, our office, I doubt many of our programs would have worked. Attitudes change before behavior. Someone must be there to advocate on behalf of women business owners to raise conscious- ness and seize opportunities. This is a challenge ahead of us throughout the United States. In conclusion, I want to stress the market value of women busi- ness owners. Savvy profit-oriented companies in Michigan like Touche Ross Accounting Agency have recognized it. Their commit- ment is not the least* bit altruistic. It is about growth potential, theirs as well as their client's. It is imperative that public national policymakers, such as your- selves, think strategically in our changing economy to maximize this resource, the fastest growing segment of small business. PAGENO="0074" 68 Women sole proprietors contribute between $100 billion and $250 billion to the national economy in spite of all the restrictions men~ tioned earlier in this testimony. What kind of growth and impact could be created without the hindrances? The strong participation of this vigorous segment not only con- tributes more -diversity and resilience in our economy, it vests even more actors with a vital stake in staying competitive and an inter- est in making our national -economy strong. To conclude, I have eight specific recommendations. Their enact- ment by Federal regulatory agencies would do much to open doors now closed to women business owners, and -unlock their potential for job creation and economic growth. One, adopt a specific affirmative action program to help women business owners overcome traditional lending practices that limit their access- to financing. - - Two, support the present legislatIon introduced by Representa- tive John J. LaFalce and Representative Lindy Boggs regarding the Equal Credit Opportunity Act of 1974. - For women-owned businesses, the Equal Credit Opportunity Act of 1974, ECOA, is a missed opportunity. It had - the potential to eradicate barriers that have limited the ability of women-owned businesses to acquire business credit. Although the act requires fi- nancial credit institutions -to make credit available equally without regard to sex or marital status, many of its provisions have been interpreted not to apply to business transactions. Three, expand the bank examination process to examine for com- pliance with the ECOA's prohibition against sex discrimination in business lending and to include data coliec~tion. on commercial loans granted or denied to women business owners. -~ - Four, develop a rating system to be inc~orporated into the exami- nation and implementation of the Community Reinvestrr `nt Act to measure the impact of the lenders' loan practices toward satisfying the -credit needs of women business owners. Five, sponsor educational programs instructing lending institu- tions how to review loan packages for soft asset companies based On cash-flow analysis, rather than asset-backed financing. Six, reverse the conservatism of the SEA 7(a) guaranteed loan program and develop new pOlicy that reflects the borrowing r~eeds of today's economy to include soft asset loans, particularly for women business owners. - Seven, improve the quality and information about small business growth in the United States by expanding the County Business Pattern data - to include women-owned status and business type, sole proprietorship, partnership, or corporation. - - Eight, enact legislation authorizing the implementation Of .a Na- tional Capital Access Program, and a National BIDCO Program for women - business owners, based on the models being developed so successfully in Michigan. - - - - I look forward to the day when women entrepreneurs are free to focus their energies and talents on growing their businesses and creating jobs, instead of pushing the rock of systematic~and- percep~ tual prejudice up the hill aga-in and again. With your help, we can give women -business- owners the tools they need.- Thank you.. - - PAGENO="0075" 69 Chairman LAFALCE. Thankyou, M~. Gentry. lMs Gentry's statement may be found in the appendix I Chairman LAFALCE Our next witness will be Ms Christine Bier man from St.. Louis, MO TE$TIMONY OF CHRISTINE BIERMAN, PRESIDENT COLT SAFETY, INC. Ms. BIERMAN. Mr. Chairman, members of the committee, I am honored to be here today to tell my story, my struggles, my success, my passion, and my dreams with you I would like to introduce my businesses I am 100-percent share holder. This is on your last page. You have a copy. Three corpora- tions. Colt Safety, Inc., founded in 1980, to warehouse and distrib- ute safety products such as hard hats, respirators, safety glasses and goggles, steel boots, and gas detection produôts, We distribute to local industries in about a 200-mile radius of St. Louis. My second company is GFG America Gas Detection, Ltd. We are the exclusive U S importers of gas detection products of Gesell schaft fur Geratebau These products are sold nationally through safety products distributors. Projected 1988 sales are $500,000. Number of employees are three. * My third company is Safety Technologies, Inc. We incorporated in October 1987 to* maintain, calibrate, and repair all GFG electron- ic gas detection products, all Enmet gas detection products, and all Survivair respirators. Projected 1988 receipts; are $50,000. Number of employees are two, one full-time technician and a full-time engi- neer. I have been approached to purchase my fourth corporation I don't know if I am going to be able to get the banking for that But a safety house in Fort Worth, TX has approached me. They want me to buy them out: So, we will see how that goes. Today, I will be focusing on Colt Safety, Inc., the oldest of my companies and the one also in need of money and all kinds of work. I want to be a business owner, not a woman business owner I would prefer to do business without taking special account of my gender I am one of less than a handful of female safety products distributors in this country I started this company in 1980 at the suggestion of my husband, who offered me office space and a telephone in his machine tool dealer business. I have never expected anything to be handed to me on a silver platter I realized that starting a new business would be a constant uphill struggle, and I was willing to sacrifice a lot to make it work. My roots are from a small southern Illinois town and a middle- class family I have a BS degree in education I taught high school journalism, English, and physical education for 6 years, and then founded Colt Safety, Inc. * * I brought nothing to this business, no family money, no MBA, and no expertise in the safety field The only thing I had was a pas sion to succeed. I am a strong believer in the "American Dream." I PAGENO="0076" 70 believe any person can do anything they set their body, soul, and mind to. With this philosophy a part of my life, I refused to fill out woman enterprise business forms. I never solicited that kind of business and certainly never expected it. But over the course of 8 years in this business, I found out I could not be as good as my competitors, I could not be anyone's equal. I had to be better. My metropolitan industrial area is a $40 million~ marketplace. A major defense contractor in St. Louis spends $1.5 million a year on safety products. In 8 years, I have done $2,000 worth of business there. I have been tefused bid solicitations by this company, and the excuse has been that all they need are three bids, and since there are six safety houses in St. Louis, they do not need me. So, there are no Government set-asides or what I call "token business" waiting to drop in my lap. In many cases, I am not even given a fair chance to bid as an equal, which is all I have ever asked for. In spite of negative and uneducated attitudes of people in my in- dustry, Colt Safety, Inc. has grown. In 1987, we doubled our sales, making it our first million-dollar year, and we are currently on target for tripling those numbers for 1988. We employ 14 people. In 1987, I paid $61,144.20 in combined withholding, sales, and unem- ployment taxes. I have taken 3 of those 14 people off of unemploy- ment rolls, and that makes me feel proud of my American Dream. An inevitable evil with a rapid growth is cash-flow problems. I have been turned down for a loan by every bank in St. Louis. It always got down to the question of personal assets an4 can you bring your husband back to sign? This, to me, is blatant discrimina- tion. Through some political connections, I met the owner of a minori- ty bank in my town, and made my appeal to them on a very human level, accompanied by a loan package that showed definite growth and assets. That banker introduced me to MO BUCKS, set up by the State of Missouri to help small businesses at a low interest rate. Neat idea, but most banks didn't want to deal with it because it entailed a lot of paperwork and less of a return on their money than if they were dealing with the real corporate world. With my banking relationships finally in place, we grew more. By the way, my husband did have to sign for my MO BUCKS loan also, but I was not in a position to argue. A year later I went back to my minority bank for more money and was informed that I grew too much-evidently they had a commercial lending limit, and I had reached that limit. They said they would give me glow- ing referrals to any bank I chose to solicit. So, once again, after a year of comfort, I will be forced into beg- ging bankers and proving to them that I am for real and that, yes; I really do sit at the helm of this safety supply company. On a more positive note, in January 1987, I was told about Southwestern Bell Telephone Co.'s aggressive policy on procuring from minority and women-owned business. I did fill out their forms. I was asked to bid on their safety glass contract for their five-State area. PAGENO="0077" 71 We won that contract and have gone on to win a contract for their protective clothing and respirators for asbestos removal at their facilities Because we are a woman owned enterprise, they gave us a chance to earn their business. It is my goal that through this testimony I can help to humanize the process of allowing women enterprises to do their jobs as equals in the business world~ Chairman LAFALCE. Thank you very much, Ms. Bierman. Our next witness is Mary Agnes Jordan-DeLaurenti. TESTIMONY OF MARY AGNES JORDAN-DELAURENTI, PRESIDENT, JORDAN-DELAURENTI, INC., DALLAS, TX Ms. JORDAN-DELAURENPL My name is Mary Agnes' Jordan, also known as Mary Jordan-DeLaurenti, and I am the president of Jordan-DeLáurenti,' Inc., [J..DL'j. Jordan-DeLaurenti, Inc., is a man- agement company specializing in training and contract services for the Government. I started J-DL on January 5, 1975, as one `employee embarking on a management consultant career. At that time I knew one thing-that I wanted to see what I could accomplish, on my own. I had been laid off by General Motors the previous May and decided that if there was no security with such a large company as General Motors, then there was no such thing as security with any compa ny That recognition produced a sense of self dependence Fears of marching off on my own with no financial resources or `backing and with only the moral arid financial support of my husband of 2 months-his salary fed and sheltered me-were reduced. After 2 years of building my training capability with Govern ment and business, I was ready to hire a second employee In order to accomplish my marketing plan, I needed financing of $10,000 I was denied by several banks because I was female, so I just put my nose to the grindstone and worked harder and longer without the employee. The following year, I put together another business plan for a loan of $10,000 to expand the business Aga~ I was rejected The laws were only beginning to take hold for Women's personal credit, and there was no protection for business credit for women. .1 decid- ed to fight. The reason given to me for the first rejection was that I was a woman7 and the bank had no loans to give to women The second rejectioti by the same bank had a different, more subtle, reason My business plan was not sufficient When I asked what I could add or change, the president indicated that my husband needed to submit a personal financial statement. When I indicated that my husband had no financial or personal interest in the business, the president asked me, "What kind of marriage do you have, anyway?" Very calmly and sweetly, I said, "Now, Curtis, you know you can't ask me that question." The Equal Employment Opportunity Act at least made him aware and gave me the courage to persist. I finally asked him to humor me I wanted to dramatize some thing for him. I told .him I would leave his office, and I would close the door, open it again and reintroduce myself as Mary Agnes PAGENO="0078" 72 Jordan, single woman, owner of J-DL, Inc., and would he please review my application and my personal financial statement, and see if I qualified for the loan. I did exactly that. My drama worked. He reviewed the appliça- tion as I sat there. Having completed the review, he raised his eyes in amazement, and said, "I know this loan committee isn't a bunch of male chauvinists." I told him he was probably right. At this point I just wanted my money. Getting that $10,000, even if it did take 2 years, proved to be easier than getting $100,000 when I needed it 2 years later. I sub- mitted my request for a loan with my business plan to several banks. Again I got the same story, I was too high a risk. It was 1979 and our sales were $220,000. They had grown 120 percent since 1978 and at least 100 percent every year since 1 started the business. I applied for an SBA guaranteed loan. I was rejected. My credit record was excellent. I had not missed a single payment on the $10,000 loan. My marketing of Government contracts and the sup- port of a wonderful woman friend encouraged me to pursue SBA 8(a) certification. I was rejected by the SBA for the certification because I was a nonminority female. Disadvantaged nonminority males had been accepted into the program. At every level of appeal to the SBA, I was rejected and insulted. This led to 3 years of litigation, partially supported by the Women's Legal Defense Fund. Persistence tainted by controlled anger and frustration resulted in a successful settle- ment 2 days before the final date for a court trial. Now the work began. I again was rejected by the banks, but this time I was able to use the SBA guaranteed loan program. and suc- cessfully borrowed $100,000. That was the beginning Of J-DL's ex- p~insion. It was the year 1980. I would not be testifying for J-DL today without this loan. It gave J-DL the basis to engage in large Government cotitracts. Although my experience with gaining credit happened 8 to 10 years ago, they are not outdated. It is still happening to women in emerging busi- nesses. Growth depends on capital. Banks are in the business of providing this capital, but it appears that with nearly 30 percent of businesses owned by women in 1988, the banks are not in business to loan to this large portion of the economy. Banks in Texas, as you all know, are having their own problems. I am not asking them to take unreasonable risks. I am asking them to apply the same criteria for loan approval to emerging business- es, whether they be male- or female-owned. I am asking Congress to assure that this is done. ECOA, the Equal Credit Opportunity Act, does not cover equal access to credit for women business owners, and almost every banker knows this. We need laws that will provide access to credit and access to cap~ ital. I would also like to add some testimony on procurement for women-owned businesses. Being SBA 8(a) certified was a business issue for me, not a social cause. Jordan-DeLaurenti, Inc., is a successful business today be- cause we market heartily. I pursue business. My staff is extremely competent and dedicated. We watch our cash-flow and our business PAGENO="0079" 73 and accounting practices carefully. We are proud of the work we do for our customers. 8(a) was not a gift. The contracts do not come as gifts. What 8(a) has done for J-DL is to provide it with equal access to do business with the Federal Government. It is no different than the equal access laws Congress has created for personal credit for minorities and women, nor for equal access to education. SBA 8(a) certification has given me an opportunity to create a business and to nurture that business into a $5 million operation. Mr. Chairman and members of the committee, respectfully I submit that the 8(a) program does not cost the American people money. It contributes money to the public coffers. J-DL supports 175 families. All of them pay taxes. This year alone J-DL and its employees paid $729,182.94 in Federal taxes. Had I not been successful in my legal pursuit of 8(a), I guarantee you I would not be head of a company that does defense contract- ing with the Army, Navy, and Air Force. Women-owned businesses have very little opportunity for equal access to defense business. The barriers are too great. Very few women have had military ex- perience, therefore, few understand the internal workings, nor do they have the credibility with defense procurement or program people. But they have services and products that defense uses, and they can hire people who understand the military, as I did. There are no programs for women-owned businesses that work. There is much talk but very little action. The programs have no force of law. There is no requirement for Government agencies or prime contractors with WBE's, in spite of all the legislation. We need these requirements. Women must have equal access to con- tracting. We are not asking for a gift, we are asking for equal access. This access must be in the form of either the 8(a) program or a new pro- gram for all women. I believe your records will indicate that access to the 8(a) pro- gram for women of all races is next to impossible. Although the large portion of nonminority women who have 8(a) certification obtain it after some form of litigation, it is not much easier for mi- nority women to gain 8(a) approval. I support a Federal Government access program for women- owned businesses, and I urge you to pass the legislation to obtain this goal. I want to thank you for the opportunity to testify before you today. Chairman LAFALCE. Thank you very much, Ms. Jordan. Let me ask a few questions before we turn to the other members of the committee. Ms. Gentry, your first recommendation was to establish offices for women business owners in each of the 50 States. About how many States right now have such offices? Ms. GENTRY. According to Charlotte Taylor's report, there are approximately five offices that are specifically designed to deal with the economic development issues of women. Most of the of- fices that have been established have to do with the procurement or set-aside programs. They deal specifically with that and not nec- PAGENO="0080" 74 essarily the issues that affect the economic development policymak- ers. In my region, Michigan,. Ohio, and Illinois, those are the three I know of. I believe there is one in Louisiana and another in another State. So, there are five. None of them have the staff nor the finan- cial resources that we have. They are one-person operations. Chairman LAFALCE. Is there any Federal role that you might en- vision, any catalytic role that we might have in establishing or helping to establish these offices for women business owners in the States? Ms. GENTRY. I contemplated this. On a Federal level, I think it is crucial to point out that we have within the State of Michigan begun to see that our customers are really the fastest growing seg- ment of small business. They just happen to be women. On a Federal level, I think something needs tO be addressed about the existing market that is growing and growing and impact- ing the economy. When you talk about this fastest growing segment in small busi- ness and then say it is women, that is when the perceptions are askew. . On the national level, I would like to see a policy that addresses that existing growing segment. There is nothing you have to do. We don't have to spend our time encouraging women to start busi- nesses; they are doing that. So, the opportunity that is here is to take advantage of it. * To encourage on, a national level, specific programs for the fast- est growing segment of small business, I think that would address that issue. Chairman LAFALCE. Your first recommendation would be to adopt a specific affirmative action program to help women business owners overcome traditional lending practices that limit their access to financing. Can you flesh that out a little?, Have you done that in Michigan? Ms. GENTRY. What we have begun to do in Michigan is work on a county-wide basis. In Michigan, when we began this program, one of the things we found out was that within the banking industry there is not only a problem in the area of lending, but there also is a problem in the area of management hiring practices. YOu will find a predominant amount of females working in the banking in- dustry; you will not find them in commercial lending. Over the past few years, the management experiences in com- mercial loans to women have grown. You will find women in~ charge of trust accounts, personal accounts. In 1983 in Michigan; 3 percent of all commercial lenders in Michigan were women. I was going into communities where there were no women commercial lenders. Today, that number is about 10 percent. .1 would venture to say that probably holds true around the United States. Chairman LAFALCE. I am not saying. that this would be adequate or fast enough, so don't misunderstand me But do you think the problem that women have in accessing capital will be self-correct- ing in part by virtue cf the fact that more women will become in- volved in commercial finance, and more women will be decision- makers? * PAGENO="0081" 75 When I graduated from law school there was one woman in the graduating class, and today it is not just one, it is 50 percent in virtually every law school class across the country. In the future, in 5, 10, or 20 years, aren't 50 percent of the com- mercial loan officers going to be women? I know that is going to be much too slow, but don't you think that is going to happen eventu- ally? Ms. GENTRY. I don't know. It is as if the banking industry is the opportunity for economic equality. I would hate to wait and see what happens. I don't know how many bank presidents of the United States are women, but I would bet we can count them on both hands. Chairman LAFALCE. Presidents are one thing and commercial loan officers are another. I am sure that day will come with respect to bank presidents. We had a seminar in my district in December. I wanted only women as participants in the seminar. I had a tough time deciding which loan officers and vice presidents of banks to pick, because there were so many women in very, very high ranking commercial lending positions. I wonder what type of affirmative action program we might try to suggest to help women business owners to overcome traditional lending practices that limit their access to financing. This is your realm. Ms. GENTRY. Not only looking at the hiring practices of the bank- ing industry, but also the loan practices. There seems to be an overriding attitude about women in the banking industry. In Michigan, we have been able to encourage banks to hire more women commercial loan officers. That has speeded up the process. Attitudes change. When you begin there is an enormous reluc- tance. There is a lot of fear. When all the change happens-some- times it is forced and sometimes it is not-most people then say it is not as frightening as they thought it was going to be. We now have commercial lenders who are women, in counties where they never had them before. It has enormously helped the process itself. What I am talking about is not only the management and hiring practices of women in the banking industry, but it also has to do with the perceptual discrimination that women experi- ence. If they begin to work with ~women, they will begin to experience the creativity and talent that is there. Lenders come to the table with their experiences and that is how they make decisions-and also their biases, so it is an opportunity to heal those biases. Chairman LAFALCE. Well, I agree with you regarding the bill I introduced. Now, the bank examination process-~--what is that right now? Does it not examine for compliance with the Equal Credit Opportu- nity Act prohibition against sex discrimination? Ms. GENTRY. Not necessarily. When women go in for commercial loans, there is no record. As you know, when a lot of women who go in and talk about loans, that is not even recorded. They are dis- couraged before they have an opportunity to make a loan applica- tion. So, we don't know how many women even make applications. PAGENO="0082" 76 I have had conversations with bankers who say we wish more women would come in for loans, but today we hear testimony that women are continually asking for loans. There is no way to prove loan applications. There is no way to prove how many loans were neither granted nor denied. Chairman LAFALCE. I have a few more questions, but I think I will defer my questions until after the other members of the com- mittee have had an opportunity to ask questions also. Mr. Ireland, do you~ have any? Mr. IRELAND. Thank you, Mr. Chairman. I would like to pursue some questions concerning access to cap- ital. Before I came here 11 years ago, I had been in the banking busi- ness for a long time, and 25 years ago in a rural Florida town I made a conscious effort to have women vice presidents, much to the horror of my competition. These women ran circles around other banks. We grew from an $8 million bank to a $108 million bank in about 5 years. I say that only to say that I agree with you. The record in lend- ing to women and having women making the loans certainly was a very big part of. our large success. It does concern me about access to credit. I know that there are bankers out there, I know them, I have seen them-they get all nervous and don't know what to do and their lawyers tell them that they have problems in not having husbands, on the loan. That has nothing to do with the credit operation; it has to do with if somebody doesn't pay, how do you get to court to get the. money back. Truth to tell, women are just like other people, sometimes they can't pay also. Leaving that part aside, I think there is a lack of enlightenment out there that needs, candidly, a kick in the fanny from time to time All of this is to lead up to the fact that I was struck by the DeLaurenti testimony "Banks are in the business of providing this capital, but it appears that with nearly 30 percent of' businesses owned by women in 1988, the banks are not in business to loan to this large portion of the economy." Do each of the others of you believe that banks are in the busi- ness to lend capital? Do you agree wIth the statement that banks are in the business of providing capital? Ms. GENTRY. They are in the business of making money, and one of the ways they do that is to lend money~ Mr. IRELAND. For capital. . Ms. GENTRy. Yes, sir. ` Mr. IRELAND. Do you agree with that? ` Ms. BIERMAN. Yes. Mr. IRELAND. When our banks were separated as a result of the crash of 1929 and the Depression, investment banking was taken away from commercial banking, and a banker who makes an in- vestment per se is violating the law. So, we have told our banks historically that they should not be making capital loans. If you are a banker, you can make a certain number `of long-term loans,. but the examiner will say you. are not in the business of making capital loans, you are in the business of making commercial loans Investments are for the SEC. PAGENO="0083" 77 I bring that up before you beat up too badly on bankers. This country, in its wisdom, took capital lending away from our com- mercial lending system. There is limited awareness that bankers are restricted from making capital investments of any kind as an investment, and, as to loans, they are greatly restricted in making long-term loans and can be severely criticized if the proportion of those `loans goes up. So, with all that in mind, I have been quite céncerned that we are doing so little, not just for women business owners, but for all small business owners, by creating a market imperfection by our laws. In other words, taking banks out of the investment business and not providing anything to fulfill that market imperfection. I think in Missouri you referred to something similar to Michi- gan, a State-run operation? Ms BIERMAN MO BUCKS was set up by the State of Missouri I don't think we have an organization other `than the SBA that does what her organization does. If they do, they are not as aggres- sive as her organization. They would be in Kansas City or St. Louis, and I would know about them. MO BUCKS is a State-run program. I had to make a trip, an hour and a half through country roads, to get to the State Treasur- er and tell him no one knew about it in St. Louis, and I asked him how we could get it known that this $20 million was available for small businesses, not just women. Mr IRELAND Did your husband have to sign the loan, as well9 Ms. BIERMAN. Yes. Mr IRELAND Did you think differently about that, from a legal standpoint? . Ms BIERMAN I understood since he owns half the personal assets, and I own the other half, that he had to sign. 1 know the wives of many male borrowers do not have to sign when the houses are put up. Wives don't have to, but husbands have to. because of this~ Mr IRELAND In the Touche Ross report, there were two ques tions that stood out to me "Does your business have a business plan9" 48 percent said no That sounds like something that might need correction within the ranks. The other says, "How do you feel you were treated at the lending institution? Were you treated fairly?" 67 percent said yes How do you reconcile that7 Ms GENTRY In the back there was a place for comments In the comments section, 85 percent complained about the banking rela tionships, which eschewed what they said It was conflicting testi mony We could not figure it out either We recognized later that we did not frame the question correctly We have changed the question to get the point we really want So, we hope to have clear information about that When they responded in writing in the back, they talked about the same things we are talking about today, the figures that are required and continue to be required I~ven though the women have been in business for 5 or 10 years, every time they go to the bank the husband has to sign for the loans That testimony is available. I can submit that for the record. PAGENO="0084" 78 Chairman LAFALCE. Thank you. [The information may be found in the appendix.] Chairman LAFALCE. I want to point out that whenever you ask a question about capital, there are different ways of defining capital. Mr. IRELAND. I think she said the right thing, get the money. Chairman LAFALCE. If you go to a bank and say do you have legal ability to give me legal working capital, you might think they have the legal authority to do that. Mr. Hayes. Mr. HAYES. Let me explain to the panelists that my pursuit is quite different from the ex-banker down there. I do want to make it clear that I would like to know from all of you, currently how many employees do you have? Ms. JORDAN-DELAURENTI. J-DL has 175 employees. Ms. BIERMAN. I have three corporations, 14 in one corporation, 2 in another, and 3 in my third corporation. Ms. GENTRY. At the present time I own my real estate invest- ment company, and I am the small owner. Up to a year and a half ago, I owned a small manufacturing company and employed 8 people. Mr. HAYES. Am I correct that all three of you are supporters of H.R. 1397, the proposed legislation? Ms. JORDAN-DELAURENTI. The Boggs-LaFalce legislation bill? Mr. HAYES. Yes. Ms. JORDAN-DELAURENTI. Yes; definitely. Mr. HAYES. You mentioned, Miss Jordan, that you are supporters because you have been a benefactor of the SBA (8a) program. Ms. JORDAN-DELAURENTI. Yes; that is correct. Mr. HAYES. Do you have any specific suggestions as to how you think it would be improved? Ms. JORDAN-DELAURENTI. Yes; they don't happen to be in the bill that happens to be pending. I don't know the status. Has it been passed in the House? Chairman LAFALCE. There was one bill that was initially intro- duced, and that went through many, many changes. We did pass, through the full committee and the House of Representatives, a bill to reform the SBA 8(a) program~ I don't know whether the bill we passed will be the bill that you are knowledgeable about and are now going to comment on. Ms. JORDAN-DELAURENTI. Yes; I think that is the one. There is also one in the Senate at this point. Mr. HAYES. There is one in the Senate that is somewhat similar, but there are some dissimilarities. Ms. J0RDAN-DELAuRENTI. One of my difficulties, Mr. Hayes, is that I believe the whole point of SBA (8a) is to look at people who violate the, rules of SBA (8a). There are so many good, good con- tractors who are doing very well, and I think they are forgotten about. I really believe that bill was made for those people who vio- late, as many of our laws are, rather than to support the people who are abiding by it. I believe one of the things that needs to be changed is that the category for women, not totally women but women who qualify for small and disadvantaged, needs to be opened up. That is not hap- pening and does not happen now. So, in response to that, I think PAGENO="0085" 79 that is one of the thiflgs that needs to be changed. Sometimes the violators are not necessarily the SI3A (8a) companies There are * some changes that you did ~make in response to the way the act is being administered that needs to be changed also. Mr HAYES I happen to be the husband of a female business owner My wife is a certified small business operator who has been struggling for survival, so I know particularly what you are saying I actually think she has more strikes against her than you do, as a black woman. Ms JORDAN D~LAIJRENTI Definitely Mr. HAYES. What did you use as collateral to get your first $10,000 which you struggled so hard to get? Ms. JORDAN-DELAURENTI. I had contracts and tried to assign those contracts to the back at that point, and they would not accept them. That was high risk. That even happened to me last year. I had Government contracts, and I needed ~for those for at least the first 90 days You all know how long it takes to get some thing going and get paid by the Government We say we need 90 days of financing when we pick up a Government contract I had to talk a long time to a banker who I have done business with for a long time tb get them to accept assignment of note. Part of it is that they don't like to be involved in the paper work. As far as I was concerned the best collateral they could have was a Gov- ernment contract. We had total performance on everything we had done. They still would not accept it immediately. They did later, but I had to bring them some people who convinced them I could do it, et cetera. I know what she is going through. Mr. HAYES. Ms. Gentry you mentioned in your list of recommen- dations on number six "reverse the conservatism of 78 guaranteed loan and develop a new policy that reflects our needs in today's economy that reflects soft asset loans particularly for women busi ness owners" Are you suggesting an expansion of the program? Ms GENTRY No, the women who have been able to use SBA (7a) guarantee progratnmmg have had very positive experiences In Michigan, some bank lending officers have said to us that the SBA Government program has become So conservative that there are loans they would do They are not considered risky loans Mr HAYES You are conscious of the fact that the surVi 1ral is in ~jeopardy? * Ms GENTRY Yes, I do, and I believe by expanding~-- Mr HAYES Do you have any influence with the administration at all? Thank you, very much~ Chairman LAFALc~E Mr Hiler Mr Holloway Mr. HILER. Not at this time~ Mr HOLLOWAY I just want to make a brief statement to say that I think everyone who is in business, it doesn't take them long until they wish they were a banker, because so much of the time you are worrying about the banks It seems like the only person who can get credit is the person who doesn't need it There is a tremendous need in America I don't know my feeling toward what the Govern ment role is in trying to lead on to entrepreneurship I think some time we need to .fightthat battle. I started with a small business and worked On my own to build it up. There are many things we can do to encourage it, and I think PAGENO="0086" 80 there is a role that we can play to help small business. I think we need to proceed with extreme caution when our role is trying to be paid in business life. Too often we jump into things in the business life, and we run into more problems than we solve. I think all small businesses have a problem with credit, and we should look into it. Chairman LAFALCE. I agree we have to proceed cautiously. but with great speed, because we are basically simply attempting to deal with the discrimination that has existed and built~ up since 1776. That is a rather slow progress. We are trying to give the Equal Credit Opportunity Act some application as it was originally intended so that we can have some documentation with respect to our personal observations regarding real, although subtle discrimi- nation toward women in business. One other recommendation made by Ms. Gentry was to have a rating system built into the Community Reinvestment Act to meas- ure the impact of the lenders' loan practices toward satisfying the credit needs of women business owners. Do you have anything that fleshes this. out? Would you accomplish this by amendment? Would you change the way the Community Reinvestment Act is imple- mented and, if that is the case, how have you gone about trying to get a change in implementation? Ms. GENTRY. When we made this recommendation this came forth, when we held the four public hearings around the State of Michigan. We were at that point supporting the legislation pro- posed at that time regarding the Equal Credit Opportunity Act. We saw the necessity to develop a rating system into the Community Reinvestment Act that did not require legislation. The gentleman who worked with me was at that time very much involved in the Community Reinvestment Act and is now the director of the BIDCO Program in Michigan. He felt by requiring, them to report their business, it could be done without legislation. Chairman LAFALCE. Is this being done in Michigan right now? Ms. GENTRY. We are in the process now of redefining it; yes. Chairman LAFALCE. So, the Michigan banks do not now have to,~ as a part of their implementation of the Community Investment Act, measure the impact on women? Ms. GENTRY. No, sir. Chairman LAFALCE. Well, if you have any paper that further em- bellishes that, I ask that you submit it to me. Ms. GENTRY. I will do that. Chairman LAFALCE. Your next recommendation is to sponsor educational programs to instruct lender institutions how to review loan packages based on cash-flow analysis rather than asset-based financing. Of course, I would assume that you could have independent semi- nars or educational programs. I would think educational programs of this nature would be most effective if they were sponsored by the American Bankers Association, the Independent. Bankers Asso- ciation of America, the National Council of Savings Institutions, the U.S. League, et cetera, because they are constantly . running educational programs for their membership. Has any effort been made, to your knowledge, to work with these - financial organizations or trade associations, to get them in their PAGENO="0087" 81 conferences? For example, I returned from the conference of the National Council on Savings Institutions in Toronto, Canada. I will be attending another conference in Boston in June, the American Bankers Association, for those bankers who want to reach out to small businesses. Do you know if there is any organized effort to work with these trade associations to get them to sponsor this type of educational program within their annual, or semiannual, or monthly educa- tional conferences or programs? Ms. GENTRY. Mr. Chairman, I don't know the answer to that. I can only respond to what is happening within the State of Michi- gan. I think that is an excellent proposal. Chairman LAFALCE. It would seem to me this is something the National Association of Women Business Owners and others might want to do, work with these trade associations to encourage them not to provide a special program just for women, but in their regu- lar program for everybody to have a program of this nature which might be of special benefit for women. Ms. GENTRY. I absolutely agree. The problem that we have run up against in Michigan is, as you know, Michigan is predominantly a manufacturing-based State. The issue of tangible assets is a major issue for us. For example, many women have said when they come to Wash- ington, DC, because it is not a manufacturing-based industry here, that it is easier for them to get loans in Washington, DC, than it is sometimes in Michigan when they have contracts here, because the bankers here have an understanding, a better understanding of service-based loans. When the bankers in Michigan look at loans, they look for tangi- ble assets. Even though it is a service-based company with few tan- gible assets, they still look for us. We began to talk with some of our bankers, and right now we are talking with a statewide bank in Michigan that is beginning to develop a special loan program ex- clusively for women-owned businesses. They are going to incorporate our capital access program. One of the things we talked about was developing this educational pro- gram. They felt that would be very touchy in that you would be inferring that bankers did not know how to do this, and you would have to be very careful as to how you presented this. One of the strategies that we talked about was talking about the new economy that was emerging in Michigan as we shift from the manufacturing econoMy into this newer economy. How were we going to sell the concept of having these bankers obtain, participate in a workshop that dealt with how to finance soft asset-based com- panies without offending them? So, that has been one of the things we have been talking about right now, and that is an issue that might come up nationwide, but that is an issue that is very clear in Michigan. Yes; they will say they understand that, but that is not how they review their loans. They understand cash-flow analysis, but they do not look at the loans in that way. That is why they keep denying the loans. Chairman LAFALCE. This is something we might be able to pursue with these associations. I am wondering-I mentioned a PAGENO="0088" 82 number of other groups, too. I can't remember the names. But over the years, I have had women counsel. One of them now is the as- sistant to the Chairman of the Federal Reserve Board. Others, counsel to the Secretary of Treasury. It seems to me that there is an organization in Washington-is it Women in Finance? Is that what it is called? There is some group-it may be a national, or perhaps, it is a local group. I have forgotten. But I don't hear of them getting together other than for the pur- pose of networking to know each other and, therefore, perhaps, ad- vance themselves. I don't hear them talking about programs that could be adopted either by Governments, whether Federal, State or local, or by trade associations, of an educational nature. Maybe that is something that should be pursued, also. Ms. GENTRY. That is an excellent concept. Except this program would benefit all small businesses, not just women only. Chairman TkFALCE. I understand that. I think it would be an ex- ceptional benefit for women. Ms. GENTRY. It has been ~r `~xperience when you can shift the attention from it being women business owners, you~ seem to get much greater participation than if it is this special program for women. Chairman LAFALCE~ I agree. Ms. GENTRY. I agree with you, that would be a marvelous recom- mendation. Partnerships have worked very well, like that in Michi- gan. Chairman LAFALCE. Very good. If there are no further questions, then I-Mr. Hiler; yes. Mr. HILER. Mr. Chairman, I came in late, so if this question has already been answered, I will read through the testimony. When we talk about access to credit and the need for increased capital for new businesses and small businesses, it seems to me that is a prob- lem that is pervasive through. small businesses in general-the 15 million small businesses that exist in our economy today. I guess from. reading through your testimony fairly quickly, you. are saying it is even more of a problem for women-owned~business- es? I wasn't sure that I saw in the testimony the evidence for why that is more of a problem for women-owned businesses than just' small businesses in general. Maybe you can help me out? Ms. BIERMAN. I am here at the request of NAWBO, but I am a very good proponent of small business,, entrepreneurship, anything like that. I am on the board of directors of the Small Business Coa- lition in Missouri I spent many volunteer hours ~ week working for that organization. I say in my testimony that I don't want to be `a women business owner. Let me be a business owner; let m~ be equal to my competi- tors and everybody else out~ there in the face of my banker. It is true that all small businesses have these problems, all small busi- nesses are undercapitalized, all small businesses ` have to put up personal backing, et cetera. As a women business owner; I see discriminations that my co- horts in the Small Business Coalition of Missouri don't have. I had to bring my husband in to sign that loan with me. I know many of the people in our organization of 150 in `St. Louis are an SBC orga- PAGENO="0089" 88 nization. We work closely with SBA. They did not. have to bring their wives in to sign loans. It was not venture capita!. We are not venture capitalists. But I am asking for operating capital. I think it could be a little bit. I think maybe he is misconstruing it at this point in time. But we are blatantly discriminated against. Yes; all small businesses are. I work hard to help change those rules for all small businesses, I am here today for woi~en-owned business, but eince 75 percent of our economy is based on small business, that is what I am here fighting for. Does that answer your question? Mr. HILER. A little bit. You were giving, I think, some very good anecdotal evidence of what you experienced in participating in a couple of different groups. I just think of the number of small busi- ness people I meet back in my district. When 1 meet those who talk about having to get someone to cosign a loan or something, or be a guarantor for maybe a son that is starting out a small business or something, it seems to me that is-I guess what you are saying is it is more endemic to a woman-owned business, but it is a problem that is endemic to small business, I believe. Am I mistaken? Chairman LAFALCE I think there is a hierarchy of discrimma tion. You are discriminated against if you are small. You are spe- cially discriminated if you are small and a woman. Then you are especially discriminated against if you are small, a woman, and black. Mr. HAYES. That is right. Ms. JORDAN-DELAURENTI. I think that says it. I think what we were trying to demonstrate by our experience is that we women business owners are not treated as capable, competent people I think your example, Congressman, was a good example to point out what we feel. Yes, many times a young son who does not have experience, who comes into a business, is asked to have some cosigner. But we are~ talking about experienced women business owners who have estab- lished records, who have established credit records and still get the same kind of rejection. I think the difference is that we are not regarded as competent people in the banking community Mr HILER My father had a very successful business, went out to start another business, and they wanted a personal guarantor of that loan He ended up telling the bank to forget it It just seems to me that there may be a particular problem here, but there is generally an access to credit, an access to capital When you look at where the capital comes from for small business es, it comes from one's own pocketbook, family, friends That is where the capital comes from Somehow, if we were able to-we have two things we have to work on here. One is~ of course, improving access to credit and capital for a woman oWned business, but the other is to improve access to credit and capital for all small husinesses Ms. JORDAN-DELAUREN~n. Absolutely. PAGENO="0090" 84 Mr. HILER. It is not a zero-sum game, where if we improve your access, it takes someone else's access away. What we have to try to do is improve the overall-- Ms. JORDAN-DELAURENTL That is correct. Every time small busi- ness is improved, we are improved. There is no doubt about that for all of us. Mr. HILER. I appreciate your comments. Thank you. Chairman LAFALcE. Thank you very much. I say that to the members of the panel, and to the members of the committee, and most especially to the members of the panel. You have been ex- tremely informative and insightful. We are. extremely appreciative for that. Thank you very much. [Whereupon, at 11:45 a.m., the committee was adjourned, subject to the call of the Chair.] PAGENO="0091" NEW ECONOMIC REALITIES: TIlE ROLE OF WOMEN ENTREPRENEURS, WEDNESDAY, MAY 11, 1988 HousE OF REPRESENTATIVES, COMMITTEE ON SMALL Busnsrnss, Washington, DC. The committee met, pursuant to notice, at 9:10 a.m., in room 2359-A, Rayburn House Office Building, Hon. John J. LaFalce (chairman of the committee) presiding Present Chairman LaFalce, Representatives Torres, Olin, Hayes, Lancaster, Campbell, Price, Hiler, and Gallo Chairman LAFAI.JCE The Small Business Committee will come to order. Executive Order 12138, dated May 18, 1979, created a National Women's Business Enterprise Policy and prescribed arrangements for developing, coordinating, and implementing a national program for women's business enterprise The Executive order recognized the significant role which women entrepreneurs can play in pro moting full employment and~ economic growth. It recognized the many obstacles facing women entrepreneurs, and it recognized the need to aid and stimulate women's business enterprise The Executive order provided for affirmative action by Federal agencies to facilitate, and to strengthen, and support such enter prises, to prohibit and discourage discrimination, and to create pro grams responsive to the special needs of women as entrepreneurs Such activities were to include management, technical, financial, and procurement assistance, education, training, and information dissemination; and procurement. The Executive order established an Interagency Committee on Women's Busn~ess Enterprise to oversee the action ordered, to do velop goals, policies, guidelines, mobilize resources, design innova tive plans, promote research, convene and consult with experts, and assess progress.~ All Federal agencies were to assist and cooperate, but SBA was given the lead responsibility of providing an Executive Director, adequate staff, and administrative support. In preparation for today's hearings, and to prov~de a comprehen sive record før future action and recommendations, the Committee sent a letter to 21 Federal agencies requesting information regard ing initiatives undertaken pursuant to the Executive order includ ing procurement figures, grant or loan programs, data collection ef forts, and any other efforts made in compliance with the Presi dent's directive. (85) PAGENO="0092" 86 It was fairly obvious from reading the agency responses that, for the most part, our governmental efforts in support of women's business enterprise are weak and ineffective, mostly window dress- ing and lip service. For example, the SBA is the agency expected to provide special financial assistance for women. But, with the exception of a brief pilot miniloan program for women at SBA several years ago, the authority to provide such financial assistance has been ignored. SBA business loans to women have gradually decreased in num- bers, dollar amounts, and as a percentage of total loans. In 1984, women received 2,103 business loans for a total amount of $212.6 million, which represents 10.7 percent of the total number of loans to all businesses. In 1987, those figures had fallen to 1,565 loans, for a total of $203.3 million, or 10.1 percent. During a period of astonishing busi- ness activity and increases in numbers and sophistication levels of women-owned small business, it is inconceivable that the demand for business loans for women business owners should decrease. Federal agencies routinely establish procurement goals for con- tract awards to women. Since 1979, the percentage of prime con- tract awards to women-owned business has increased, but still re- mains at less than 1 percent, far below what I ~vould expect their reasonable share to be. This is not surprising, given the fact that only SBA and the De- partment of Commerce have established full-time positions to pro- mote and facilitate women's business enterprise, and, in the case of SBA, its budget has been slashed; and with the exception of the De- partment of Commerce, no Federal agency reported any jnternal memoranda or policy letters to promote women's business initia- tives. The Interagency Committee still operates, but without any power or purpose. The committee issued its first annual report in 1980. The next annual report was not issued until September 1987. That report contained a one-page introduction, 15 paragraphs of text spread across six pages, and the rest of the 100-page report consist- ed of an appendix containing statistics, reprinted material, and a summary of five meetings. I think the report is an embarrassment and a waste of taxpayers' money. Susan Phillips, Associate Director of Presidential Personnel, was appointed by the President to serve as chairman of the Interagency Committee on Women's Business Enterprise. Last month, we invit- ed Susan Phillips to appear at today's hearing to discuss public policies and programs relating to these issues, but I regret that she has chosen not to appear or is unable to appear. But we will give her another opportunity. In recent years, there has been much talk about support for women. I think it is time that we started to demonstrate some re- sults. This morning, we are pleased to have before us, representatives of two of the agencies that have been doing something about women in business. From the U.S. Department of Commerce, Ms. Kay Bulow, Assistant Secretary for Administration, and Ms. Carol Crockett, Director of the Office of Women's Business Ownership of the U.S. Small Business Administration, who was kind enough to PAGENO="0093" 87 come to my congressional district to participate in a seminar on women in business. We also have Ms Susan Hager, president of Hager, Sharpé, Abramson, mc, in Washington, DC, and Ms Susan Snyder, presi dent of The Pathfinder Corp. Is Ms. Bulow here yet? Is Ms. Snyder here yet? That being the case, we will ask Ms. Crockett and Ms. Hager to come to the wit- ness table. Carol, why don't we begin with you? TES'flMONY OF CAROL M. CROCKETT, DlRECTOR~ OFFICE OF WOMEN'S BUSINESS OWNERShIP, U S SMALL BUSINESS AD MINISTRATION [SBAI Ms. CROCKETT. Mr. Chairman and members of the committee,' I am pleased to have the opportunity to appear before the Small Business Committee-~-- - Chairman LAFALCE. Just 1 minute. Do any members of the com- mittee have any statements that they would like to make before we begin? Mr. TORRES. No, Mr. Chairman. Thank you. Chairman LAFALCE. Please proceed. Ms CROCKETT I am pleased to have the opportunity to appear before the Small Business Committee to discuss the Small Business Administration's program for women business owners My testimo ny today will focus on the economic progress of women's business ownership and SBA programs that are so successful in assisting this progress. In 1980, there were 2 5 million nonfarm sole proprietorships owned by women which earned $36 billion in annual receipts In 1985, our latest figures, there were 3 7 niilhon with receipts in excess of $65 billion This accounted for 12 percent of total sole pro prietorship receipts compared with 8 9 percent in 1980 and repre sents an increase in receipts of 80 percent. SBA data show that women are starting businesses at almost `twice the rate of their male `counterparts and that almost 3 out of 10 businesses are owned by women Recent figures indicate that 25 percent of all women businesses are 1 to 2 years old We expect this solid growth trend to continue But where are women heading? In 1980, 78 percent of women businesses were in the service a~d'retail areas. `In 1985, this per- centage increased to 81 percent However, we are seeing reinarka ble growth in the less traditional industries of construction and manufacturing.' Between 1980 and 1985, receipts for women business owners in service rose 140 percent In that same period, receipts for women business owners in construction and manufacturing rose 200 per cent. ` Women have also made considerable strides in the area of pro- curement In 1980, only 87 percent of Government contract awards were made to women Today it is at a level of 1 percent In 1987, we exceeded our goal by $235 million, while o~terall Government procurement declined by $1.8 billion. PAGENO="0094" 88 With the increase of women-owned businesses in manufacturing and construction, we estimate that figure to increase dramatically in the next few years. So, the outlook is* positive~ The SBA's Office of Women's Business Ownership has many and varied programmatic responsibilities which include: One, to develop and encourage education and marketing opportu- nities for women business owners through quality conferences and workshops, trade missions, and utilizing the resources of public and private sector cosponsors and management experts. Two, to negotiate Federal prime contracting goals for women- owned businesses. Three, to provide support for the Federal Interagency Committee on Women's Business Enterprise. Four, to act as an advocate for women business owners. And five, to effectively disseminate all appropriate information. The delivery of the program is carried out at the 75 district and branch offices by a women's business ownership representative and in each regional office by a women's business coordinator. This office now effectively serves a constituency of nearly one- third of the small business community and provides an outreach program which assists, strengthens, and promotes women-owned business throughout the country. Misunderstandings concerning the status of women business owners stem from the lack of a comprehensive statistical informa- tion system. Because of this, the Office of Women's Business Own- ership has taken the initiative to sponsor research by the Internal Revenue Service, the Bureau of the Census, and SBA's Office of Advocacy. Each year, since 1980, has shown a statistical data im- provement. It is clear, more updated information is necessary. Since 60 percent of women who started business today have no previous paid managerial experience, the Office of Women's Busi- ness Ownership has improved their skills in the areas of market- ing, finance, inventory control, and production through targeted seminars, conferences, and instructional materials. The Office of Women's Business Ownership has been involved in a myriad of activities which encourage the full and equal participa- tion of women business owners in selling their goods and services to the Federal Government. As director, I feel business ownership education and planning are the most important aspects of starting a successful business. We have provided the assistance necessary for women not only to consider starting a business, but to actually make that dream a re- ality through realistic advice and information. In addition to my responsibilities at the Small Business Adminis- tration, I also serve as executive director of the Interagency Com- mittee on Women's Business Enterprise. This committee is responsible for carrying out a Presidential mandate to promote-- Chairman LAFALCE. What is your position there? Ms. CROCKETT. Executive director. With the Presidential mandate to promote, monitor, and coordi- nate Federal efforts on behalf of women business owners. Member- ship of the committee is drawn from major Federal departments PAGENO="0095" 89 and agencies and reflects the wide scope of governmental policy areas. Mr. Chairman, members of the committee, based on the available information from our data base it is clear that Women as a group are a viable and rapidly growing contributor to the Nation's econo- my. The growth in just the last 8 years is probably the most expan- sive increase of any one group in this century. By all accounts, it will continue to grow. By the year 2000, it is expected that one-half of all self-employed individuals will be women. From the data we have today, we know that the needs of women today are different than a decade ago, and we must constantly monitor and provide for these needs. Women are entering the mainstream of commerce at a rapid rate, and, certainly, by the end of the next decade, this will have been accomplished. Thank you, and now I am happy to answer any questions you may have. [Ms. Crockett's statement may be found in the appendix.] Chairman LAFALCE. Before we go to questions, I think it will be appropriate to hear from the other witnesses. Ms. Hager. TESTIMONY OF SUSAN HAGER, PRESIDENT, HAGER, SHARP & ABRAMSON, INC. Ms. HAGER. Thank you, Mr. Chairman, members of the commit- tee. I am Susan Hager, the founder and president of Hager, Sharp & Abramson. It is a public relations firm here in Washington. We are the fifth largest independently owned agency in the area. I am also a founder and the first National president of the Nation- al Association of Women Business Owners, and since 1973, have been part of the NAWBO team working to bring women business owners and women's business enterprise into the public policy arena. I think it is in that capacity that I have been asked to comment on the effectiveness of the Federal Government programs that are set up to support women business owners, and on what makes them successful. As I think everybody knows, in 1972, women business owners were virtually invisible from a public policy standpoint. Since then, there are many Federal programs and many programs have been set up to support women business owners. We applaud all of those initiatives and programs. Unfortunately, we are now at the point in taking a look at all of these programs where we have to say that they are not quite achieving the results that we all hoped for. They are not making a difference is the bottom line. Let me give you a few examples of that. For example, the Feder- al Reserve Board, in its role as the Government's primary financial monitor, is certainly very interested in entrepreneurship. Martha Seger, who is a member of the board of governors, is definitely sup- portive of women. The bottom line really is women still do not have access to com- mercial credit. The access to commercial credit data we really should have. PAGENO="0096" 90 The interagency task force produced a booklet on women busi- ness owners selling to the Federal Government. The GSA, the Labor Department, Agriculture Department, AID, and many, many agencies have programs and seminars to train women on ~getting contracts and on procurement. The Commerce Department spon- sors Megamarketplace. It is a terrific program. It has really been successful. We at NAWBO ~re committed to keeping that going and making it successful. We worked with Kay Bulow very closely on that. While we are getting many, many more women trained and knowledgeable about the Federal system, the bottom line is the contract and awards are still 1 percent. It is 1 percent or less. We will talk about that. I am glad to hear it is up to one of the Federal prime dollars. Carol has been testifying about all the great things happening at SBA. We applaud all your efforts. Carol, we are glad you are there, all of those things. But we didn't read about these great reports and all of these gains in the SBA's report to* the President. We didn't see any gains made by women owners in procurement, loan dollars, or any other areas. So, why is it that Federal programs that we were all so hopeful for and we all care about so much, really aren't working? I think part of the answer is that Government programs are based on some assumptions that are no longer valid. For example, most of the Government initiatives directed at women entrepre- neurs and procurement are based on the premise that limited re- sources are best spent in training for women business owners. We agreed with that premise through the Ford administration, Carter administration, and Reagan administration, but looking at the re- sults, I think we can no longer say if only the women were better trained, they would have access to the Federal Government pro- curement system. I think perhaps women might best be served if the Federal Government procurement officers were getting the training. Many of the other Government programs, loan programs, man- agement programs, and so on, are based on a premise that there should not be separate programs for women, that women business owners should become part of the mainstream of all of these pro- grams. Again, we agree in principle with that, with mainstream- ing. Mainstreaming to me and to us means getting women included into existing programs. That is very valid. That is exactly what we hope for. But unfortunately, mainstreaming seems to have been in- terpreted in many of the agencies to mean a return to the good old days when they didn't have to deal with women as a constituency group. Mainstreaming seems to be business as usual. In some cases it is a step backward. Just as an example, Carol heard about this before, but just on the SBA national advisory council, for example, for years we had a women's committee, a committee on women's business enterprise, part of the setup within the NAC. That was disbanded in order to mainstream women in all the other committees. After that was stopped, our next meeting in South Carolina, we had 46 men and 3 women on the 3-day agenda. We never heard a word about women. It was a return to 1972. Of course, I came back and mounted a PAGENO="0097" 91 campaign. At the next meeting there's Carol. But it shouldn't take that. What have we learned from all this? To put it as briefly as possi- ble, I think we learned training programs, in and of themselves, don't get results. I think we learned mainstreaming has not brought women into the system. I think we have also learned that program initiatives directed to women entrepreneurs are simply not enough of a priority in the agencies to bring about bottom line result, and that frequently the staffers who run those programs are not part of the senior management team. They are seldom part of the senior management team. They are seldom in position to make women's business enterprise a priority within the agency. So, after 13 years we have sort of come to the conclusion that we need congressional mandates and oversight in order to move women business owners into the economic mainstream. I know, Mr. Chairman, you say what can we do about it? You say that at every hearing I have ever been to. We think we have some answers to that, what Congress can do. We think that in order to make real progress, we definitely must have it-we need an amended Equal Credit Opportunity Act. That is all there is to it. We need a women's business owners policy council that reaches across the Federal Government and has the commitment of the highest level officials. It should target goals, measurable ones, re- sults for each agency. We need Congress to mandate each depart- ment and agency to develop plans to include women in the con- tracting and procurement, i~ policy making, international trade, in outreach, in advisory committees, in commission appointments, to use every opportunity available to open their system to women business owners. We need Congress to oversee the plans, the imple- mentation of those plans, and the results. Thank you. That is exactly 5 minutes, so I will stop. [Ms. Hager's statement may be found in the appendix.] Chairman LAFALCE. Thank you. I regret Ms. Bulow and Ms. Snyder have not arrived yet. Since they haven't, we have some questions for the two of you. There are some statistics here that are pretty impressive. There are some figures that do look good or could be bad depending upon the interpretation, for example, the procurement figure. In 1980, it was only .37 percent. Today it is approximately 1 percent. I am wondering, though, if that is really keeping in pace with the in- crease of women in the business community. Let's say it was .4 percent or 1 percent. Have the number of women businesses that could take advantage of the Government contracts increased at an even higher percentage of that? We are starting at a ridiculously low base, so if the base was so low to start, should we be at 2 or 3 percent? What yardstick should we use to determine the accuracy of our efforts and the adequacy of the results which differs from the ade- quacy of our effort. These results may have come about only through arduous efforts on the part of individuals in Government. My probable assumption is that they came about without all that much effort on the part of Government officials. 88-199Q-55~4 PAGENO="0098" 92 Ms. CROCKETT. With regard to the figure of 1 percent in propor- tion to the number of the growth of women in business, generally I agree it is not proportionate. Chairman LAFALCE. What would proportionate be? Ms. CROCKETT. Comparatively, we would like them to do equally well as men. That would be our goal. So, I would say we would like to see it be half. That would be ideal. Unfortunately, if I may add that most women-owned firms in this country today are a year old or less. They have one to two em- ployees, or under five employees generally, and really are not yet in a position to compete for these prime contract dollar awards. We hope that the numbers of individuals who are going into manufacturing and construction will be able to achieve greater dollar awards and that service businesses, when they grow-- Chairman LAFALCE. Ms. Crockett, let's just focus on procurement at this point. Tell me. what process has been historically used for determining what goals should be for each agency. Ms. CROCKETT. The process is that the Federal departments and agencies submit to the SI3A their goals, and what percentage, and so forth, that they intend to achieve. The SBA looks at the past 2 years records. " . Chairman LAFALCE They don't have any set asides? Ms. CROCKET~. No; we do not. We have goals. Chairman LAFALCE. What is the process. for determining' those goals? To what extent is your office involved in determining what goals should be for each of the Federal agencies? Is that your responsibility'under the law? Ms. CROCKETT. Yes; it has been. Chairman LAFALCE.' That is the process I want to hear about. Ms. CROCKETT. The goals that are submitted to the agency are~~re- viewed by my office. The goals are submitted officially to the Office of Procurement Assistance. Chairman LAFALCE. Somebody else suggests the goals? `Ms~ CROCKETT. The informatioll is sent to us by the departments and agencies as to what the goals should be. We look at the past 2 years' record of accomplishments and try to move that forward. In fact, we~ have been successful in this effort and overall procure- ment. Chairman LAFALCE. Do you have a flowchart for each agency as an appendix which would indicate what their percentage of con- tracts were and what their percentage of dollar amounts were for women-owned businesses in 1982 and 1983, and do you have that compared `to the goals? Ms. CROCKETT. Yes, Mr. Chairman; we do. I would be happy to supply that for the record. [The information maybe found in the appendix.] Chairman LAFALCE. Do you have that with you? Ms. CROCKETT. I do not. Chairman ,LAFALCE. I wish I had it now, because that is very im-~ portant. Has that been included in any type of report that has' ever been submitted to anybody? . Ms. CROCKETT. I don't believe it was in' the Interagency Commit- tee report. However, it has been in the executive summary which PAGENO="0099" 93 was distributed to members of the Interagency Committee and to the various departments and agencies. Chairman LAFALCE. Was that included in the President's Small Business Report? Ms. CROCKETT. It was not, Chairman LAFALCE That is rather disturbing to me, too This is an important issue, and it has never been included in President Reagan's Small Business Report. It has not been included in the one report that was made by .the Interagency organization. Is that correct? Ms. CROCKETT. May I correct myself? It was, I believe, for 1986 included in that by-- Chairman LAFALCE Was there an interagency report9 My staff told me there was only an interagency report in 1987 Ms CROCKETT There was one in 1980 and one in 1987 Chairman LAFALCI~ 1980 and 1987? Ms. CROCKETT. That is correct, and there will be one in 1988. Chairman, LAFALCE. I am surethere will be. Did the 1987 report have this data regarding goals, procure~nent,~et cetera? Ms. CROCKETT. Are you speaking of the Interagency Committee Report? Chairman~ LAFALCE. Yes. Ms. CI~OCKETT, Yes; it did. Chairman LAFALCE I a~n talking about the manner in which it is presented, so we can see progression, so we can see goals, et cetera. Ms CROCKETT By year, it did not Chairman LAFALCE. I am not talking about 1 year. Ms CROCKETT It did not break out the agencies by year Chairman LAFALCE I am looking at a document dated March 1988, a procurement and management report for women owned businesses for 1987. Is this something that has been prepared every year? Ms CROCKETT Yes, it has, or at least since I have been involved in the program. Chairman LAFALCE Do you think that you could try to get me those reports for each year from 1980 to the present7 And then could you also try to give me a year by year comparison, a progres sion chart, so we can see where we have been, where we have gone on a year-by-year basis in this regard? Ms. CROCKETT. Absolutely. Chairman *LAFALCE~ Does such a ~document exist someplace al- ready? Ms CROCKETT We would have to compile that, but yes, all the information exists to my knowledge. Chairman LAFALCE Yes, I think that would be helpful [The information may be found in the appendix] Chairman LAFALCE Well, what goes into determining the goals7 You said 1 percent So, I would assume that moat agencies would average out ~to about a 1 2 percent goal or 1 1 percent goal What is the goal for most agencies? What is the average goal for the Feder al Government? Ms. CROCKETT. I think that probably depends greatly on their projects, PAGENO="0100" 94 Chairman LAFALCE. Forget about each individual agency. What is the aggregate goal for the Federal Government with respect to procurement? Ms. CROCKETT. We do not base it on aggregate goals. We base it on an individual goal based on the past performance. Ch~iirman LAFALCE. I don't know if I am going to be at a disad- yantage. Do you have an extra copy of this? Do you have one now? You just have this one copy? Mr. GALLO. Mr. Chairman, could we also have a copy of that? Chairman LAFALCE. I have to Xerox it, but you should get one. Mr. GALLO. Thank you. Chairman LAFALCE. I am looking at fiscal year 1987 goals and fiscal 1987 achievements. I guess there are discrepancies here. AID, for example, had a 3.6 percent goal, a 1.7 percent achievement level; On the other hand, Department of Comi~ierce had a 2.8 per- cent goal and had a 5.4 percent achievement level. Maybe that is testimony to Ms. Bulow's efforts. 1 am not sure. We will have to distribute this report. Maybe we are going to have to sit down sepa- rately, Ms. Crockett, and determine how these goals were estab- lished, but only after we see the progression year-to-year. Who within each agency is responsible for seeing to it these goals are accomplished? Who within AID? Ms. CROCKETT. We deal with the Director of the Office of Small and Disadvantaged Business Utilization. Members on the Inter- agency Committee also have input into~ that goal process1 Chairman LAFALCE. Unless either Mr. Lancaster or Mr. Gallo have questions of either Ms. Crockett or Ms. Hager now, it would be my intention to hear from Ms. Snyder, who just came in. Mr. GALLO. I do have some questions. Chairman LAFALCE. Then we will hear from Mr. Gallo, and we are Xeroxing a copy of that report. Mr. GALLO. Thank you, Mr. Chairman. I want to thank you, Mr. Chairman, for having this hearing, because I do think we are talk- ing about a subject matter that is important to this country. It is putting emphasis in an area where emphasis should certainly be put. I believe Ms. Hager indicated some areas that need expansion or certainly more effort in dealing with finances. I don't think there is any question that women have had greater difficulty getting access to credit. At the same time, I think perception is also very important in dealing with these issues. I lQok at some of the statistics that I have dealing with the facts and figures, IRS statistics. I, too, would like to ask Ms. Crockett, on the goals that I see here, it seems to be impressive as far as the increases going from the year 1979 to the year 1986, dealing with trends in Federal prime contract award activity to women-owned small businesses. It would seem to me very clearly that each year the goals that were set were exceeded in many cases by a healthy margin. To have that mean something to me, the question is who sets that goal, who says that goal is the one that you are supposed to achieve? In many cases, in every case you have exceeded that, or the women have exceeded it. The question is, who sets that goal? PAGENO="0101" . 95 ~ Ms. CROCKETT. The Office' of Women's Business Ownership estab- lishes that goal with the various departments and agencies through the Office of Small and Disadvantaged Business Utilization within those agencies. Mr. GALLO. Are~ those realistic goals? Ms HAGER They are realistic, and that is what is happening Again, 1 percent over this long period of time, I don't think is very impressive. Mr GALLO You indicated in the early seventies, there was liter ally no effort in getting women involved in business owned oper ations.. Ms. HAGER. And getting women in businesses involved in pro- curement. That i~ correct. Mr. GALLO. When I look at the 1986 figures-. Ms. HAGER. I think we have to compare~the rise in the goal with the rise in the increase of women-owned businesses and the success of those businesses They are sky rocketing Procurement is just sit ting there From that standpoint, I think there is a bit of a prob lem. I basically, personally, and from a policy standpoint there has come up and said it must be x goal or y goal or any of those things I think it is important that the program or the procurement works in a way that really works, it is not sort of a false kind of thing But it hasn't I mean it is not It is not moving very quickly It is certainly not moving with the way the businesses are growing and the way the businesses are developing I still think that a major piece of that is skepticism I think a major piece of that is out and out they don't want to do it We have ~lways shied away for the set.asides and all those kinds of things The truth of the matter is, after all these years, I think there ought to be a mandate for set asides I take a funny approach at some of these things, like perhaps, let's set up now a mandate for set asides that takes place 3 years from now if they can't figure out how to do it, only if they can't figure out how to do it I think there are incentive kinds of programs that could take place that make some sense if the procurement policy was changed or some of the regulations were changed in a way that would build in incentives from the private sector, it could make a lot of difference If a prime contractor in a bid got one extra point over and above the points you can get on the programmatic side, one extra point for subcontracting with a women owned business, a minority owned business, one extra point for dealing with small owned business, you can be sure in some of the competitions that are really tough, the big ones, something like where they are neck and neck, they will find them They will find proper ones The market will take care of itself. I think there are lots of sort of different kinds of approaches But, in fact, the approaches that are taking place now, I just don't think are adequate I don't know how you can really say that if the businesses are growing three, four, five,, it has grøwn at various times faster than men and' the procurements stay'the same, some~ thing is wrong there It doesn't seem to be something we as busi ness owners are able to do ourselves. PAGENO="0102" 96 We have been able to do a lot for ourselves and to make a lot of different things happen. I mean the preschools are open; we are in the trade associations now; we made an enormous difference in the White House conference. We are integrated. We have made an enormous difference in the climate for women business owners for ourselves to work with the press and working with lots~~of different groups. But we cannot seem to crack procurement particularly and sort of get ourselves involved in the economic policy of the Govern- ment. Mr. GALL0. I think a part of this hearing, hopefully, is to explore those areas and make some improvements. I know in my dealings with both SBA and the Department of Commerce in dealing with exports, we have had tremendous cooperation with both agencies in bringing about very successful seminars. We are having one on May 18 in which half of the participants. are women. To me, al- though we are not dealing with a procurement process, you are dealing with involvement in women-owned businesses. In the State of ~New Jersey, women-owned businesses are increas- ing two to one .over men. So, there are some fantastic things hap. pening. I think it is important to note that some of the information SBA has been providing-they have not been blowing their horn enough-are positive improvements. To have n~ore dollars commit- ted to those areas could help bring about Federal program develop ment and leadership to that end. Ms. Crockett, do you feel the conferences are of value to the par- ticipants? Ms. CROCKETT. Yes; I do; We cosponsor a great number 6f confer* ences. In the last 18 months alone, 29,000 women attended theim At our Financial Decisionmakin~ Conferences, 93 percent of the at t~ndees said it was beneficial to them to attend; 70 percent indicat- ed they would make changes as a result of the conference informa- tion they obtained. Ms. HAGER. We go to conferences, we go to the training pro- grams, seminars, conferences. We do our homework. I think the conferences and training programs are very valuable, really terrif- ic, whether they be procurement, or export, or whatever. At some point we have to look at the bottom line, which is not how many people go to conferences but how many go for procure- ment or export. There has to be some measure beyond going to con- ferences and exports. I do applaud those, though. Ms. CROCKETT. I think the overriding factor in procurement and receipts has to do with the age of the women-owned businesses today. They are very new and very small. As individuals increase the size of their firms, they will be competitive, and they will be earning more in terms of receipts. Many receipts that we capture today for sole proprietorships are really part-time businesses, where the individual may be working full time and establishing the business part time. It takes time for viable receipts to show. It is only a matter of time. The energy, the drive, and the competitiveness are there, and it will occur. Mr. GALLO. You mentioned you constantly monitor and provide information to women business owners. PAGENO="0103" 97 What do you see as the current issue to be of benefit to the women business owners? Ms. CROCKETT. I think there is a great need for or benefit to long- term training and counseling. I think beyond the conferences, we can do more of this. We can offer that currently from SBA pro- grams in SCORE, the SBDC's, and the American Women's Econom- ic Development Corporation [AWED], a nongovernmental organiza- tion, which offers quality long-term training and counseling pro- grams. In fact, I have encouraged AWED to become a national organiza- tion. Chairman LAFALCE. Ms. Patrick's group? Ms. CROCKETT. Yes. I think it would benefit women business owners to have a nation- al newsletter with information on all events, issues, and legislation, et cetera. That could be provided by the private sector. I have al- ready talked to individuals who think they can provide that sort of service. Another area is the need to capture subcontracting information. But there is a greater need, however, and that is to assist women business owners to be cleared on the bidders' list for these prime contracts, and we can do that through SBA educational programs. Mr. GALLO. Has there ever been an analysis in dealing with the charge-off rate for men and women? Ms. CROCKETT. The overall charge-off rate in direct and guaran- tee loans in the time period 1984 to 1987 was 4 percent overall. For women the charge-off rate was 6 percent. To me, that indicates that women need more assistance in financial training and plan- ning. I read the testimony from yesterday concerning the Touche Ross Michigan study. What was not in the testimony, but contained in the report was that 43 percent of the individuals who were turned down for a loan did not even have a business plan. These were es- tablished businesses. So, it points up that we need this type of edu- cation. Another factor that plays into this is that the smaller the busi- ness, the riskier the loan, and the newer the business, the riskier the loan. Women-owned firms tend to fall into both categories. Chairman LAFALCE. Our next witness is Ms. Susan Snyder, presi- dent of the Pathfinder Corp. We will put the entire text of your remarks in the record. You may read it if you wish, or you may have it included in the record. TESTIMONY OF SUSAN SNYDER, PRESIDENT, THE PATHFINDER CORPORATION FOR INTERNATTONAL TRADE Ms. SNYimIL Mr. Chairman and members of the committee, my name is Susan Snyder. I am president of the Pathfinder Corpora- tion for International Trade, a firm in its tenth year specializing in export trade and overseas business development. Pathfinder functions in diverse business sectors from waste man~ agement, to consumer goods, and professional services, Our clients include companies of all sizes; the majority come from Europe and the United States. PAGENO="0104" 98 Before founding Pathfinder, I worked overseas for 8 years for a major foreign-owned multinational corporation, first as market strategist for development and diversification and then as head of a subsidiary company's worldwide export organization. Our objective was marketing sophisticated electronic instrumentation and inte- grated systems. My primary focus was in European and East-West trade. My comments to you today are made in the context of this expe~ rience as a woman in business. Unlike my colleagues here' this morning, I have not participated in formulating or implementing policy or programs supporting women entrepreneurs. Nevertheless, an understanding of the im- pulse driving women entrepreneurship is useful if policy is to be truly effective, and I am honored to have been called to provide a view from this perspective. It is appropriate to note also that my perspective excludes having conducted business with the beneficial aid of a support program for women business owners. It is gratifying to see the attention being focused on women in enterprise by the Committee on Small Busi- ness. Descended from American settlers whose women worked by ne- cessity alongside their men,, I was, however, fortunate to have been raised in a family that believed in encouraging its daughters to at- tempt excellence in whatever field of chosen endeavor and to do so at the limits of the boundary of what is practicable. My education was obtained at a liberal arts college in New England, a seven sis- ters school, which' is the oldest continuing institution for women's higher education. This strong tradition, quiet yet persistent, has equipped me with the internal resources necessary to venture into modern business in a man's world. That it is a man's world has never been a subject of doubt for me. When I was a sophomore in college, I was hired for summer em- ployment by a Fortune 50 American corporation. My friends from the still-male Ivy League were enrolled in the company's summer management training program, positioned as future executives on the fast track. I was employed in the duplicating department oper- ating a photocopy machine. Recognizing this uncomfortable fact, the company enrolled me in a program learning to operate state-of- the-art typesetting equipment. I was appreciative for such a ges- ture of thoughtfulness. The anecdote is not presented with irony or animus. A summer episode, it appears to' be of little lasting harm. It ranks among the mildest of the difficulties I have encountered in business. The spon- taneous effort at justice during an era when women's issues were almost nonexistent was even surprising. But the tale serves as a case in point, illustrating why women of various backgrounds have found it strategically wise to short~cir~ cuit the corporate mainstream and develop business activity as en- trepreneurs. While in the corporate context, I neve~r occupied an existing job. During my employ with large corporations, American or foreign, my jobs were of my own design and earned through my own powers' of persuasion. These deals were made on the basis of my receiving a lowered pay scale in exchange for the enviable right to PAGENO="0105" 99 enter the control room, participate in the game with an appropri- ate title, and obtain the opportunity to succeed or fail on the basis of performance. The vigor and success of women entrepreneurs is explained in part by their intense desire to depart from ordinary or staff func- tions and to compete in business, incurring all the challenges and risks that entrepreneurship entails. These conditions provide the rationale for my decision to leave the protected environment of blue-chip corporate enterprise and become an entrepreneur. Fortunately, I am still too young to indulge in this biographical commentary for the purposes of reminiscence. My aim has been to use experience as a launching point for characterizing the enor- mous resilience, tenacity, and purposefulness of a labor pool avail- able to the United States whose energies and talents are underuti- lized at a time when American economic competitiveness is being severely tested. Aside from the issues of fairness and equal access which have been raised elsewhere in these proceedings, it is my opinion that the broad public interest would be served by supporting women en- trepreneurs. To ignore this resource or to permit it to be handi- capped through indifference would be a breach of leadership when the public interest should be served. It is my experience that many women entrepreneurs, rather than being a group requiring remedial help, represent a valued, dy- namic resource in pursuing vital American economic interests. I believe this fact exists in the area of trade where our negative bal- ance of payments is a source of grave concei'n to thoughtful Ameri- cans and internationalists as well. The trade situation can be summarized briefly. In 1960 the United States occupied 25 percent of world trade in manufactured goods. In 1970 America's share declined to 21 percent. In 1980, not only had this share diminished to 18 percent, but the United States lost its position of world leadership in manufactured exports. If the United States had maintained its market position,, it would have entered an additional $60 billion to $90 billion in export sales, re- ducing our annual trade deficit by about half. In overview, this trend is understandable. As our multinationals matured, their extensive operations became increasingly integrated in local economies, and production sources were diversified. This trend reflects the normal cycle of multinational activity. Unfortu- nately, our leading trading partners were poised to take up the trade slack with smaller and less cumbersome, more aggressive companies. Small- and medium-sized American companies can provide simi- lar trade impetus. A recent survey by Touche Ross has found that 4 out of 5 new businesses nationwide are women-owned. It is a matter of simple deduction to observe that such a group presents a wellspring of talent and drive for trade-related business activity. Quantified information on women entrepreneurs in trade is rare. Relying on empirical fact, I can speak of one case first-hand. Pathfinder survived an arduous startup period. We chose not to operate within programs because we felt that finding access was too problematic and the probability of obtaining assistance too un- predictable to count on. PAGENO="0106" 100 Functioning in an elite arena of international finance and negoti- ation, we have leveraged our assets to the max, taking less in order to compete successfully. Without significant financial reserves, we called upon borrowed power to. legitimize our efforts. The process has been laborious but worthwhile. In the fragmented consulting arena, the challenge we now face is how to acquire critical mass and assume leadership in a field which has enormous potential as the world becomes a global market. We feel this sense acutely as major developments occur in Europe with 1992 approaching and as East-West trade emerges in Soviet Europe with the trend toward Glasnost. At this stage in our corporate existence, we take pride in having helped American businesses to export, succeed at joint ventures with international partners, or expand through subsidiaries. Our results are accruing, seemingly too gradually. I am persuaded that the overall trade result can be multiplied by the efforts of many small and medium business participants to yield a measurable benefit to America's trade performance and its continued position in world economic leadership. To maintain our economic vitality, we need successive cycles of vibrant, aggressive companies. With four out of five new companies started by women entrepreneurs, this valuable resource holds po- tential. Survival aside, my interest as a small business owner has been to develop the capital . reserves necessary to build our organization into a recognized, forceful, significant, albeit small player in the area of international trade. Looking at the essence, rather than the letter of policy, the pri- mary means, in my judgment, for increasing women entrepreneur~ ship is through open access. From our standpoint, we do not need aid per se. We are entrepreneurs willing to take risk positions in our business activity. However, we do require equal access, as would any firm, if we are to succeed. Such access is needed in two critical areas: For business credibil- ity and operational success, access is needed to persons holding de- cisionmaking power, who will lend an egalitarian ear to one's busi- ness premise; and for financial success, access to Government pro- curement is a vital necessity. In order for women to be enabled to make the contribution they wish to make, these elements are critical-equality on economic and operational playing fields. Other specific issues .have been raised during these hearings. In sum, women entrepreneurs need the assurance that they will be included in the Nation's business process. Consistent, predictable access in the Federal arena would be a substantial gain. In the exchange of ideas about Government's appropriate role ranging from interventionism to total passivity, it has. become evi- dent that basic leadership in policy matters is our Government's responsibility. The difference between laisser faire and laisser aller is also be- coming distinct. Laisser aller, allowing policy to float in any direc- tion, is naive. Laisser faire, letting business proceed, requires a freedom that only Government can insure. PAGENO="0107" 101 I think that women entrepreneurs simply ask for the ability to be permitted laisser faire in business with the assurance that bar- riers are dissolved. Thank you. [Ms. Snyder's stateme~t may be found in the appendix.] Chairman LAFALCE. Thank you very much, Ms. Snyder. Before we go to the continued questioning, we will hear from Ms. Kay Bulow from the Department of Commerce, Ms Bulow, you know the rules of the game We c~n put your tes timony in the record But you have a very short statement Why don't you go ahead and read it Ms. BULOW. Thank you, Mr. Chairman. TESTIMONY OF KAY BULOW, ASSISTANT SECRETARY FO!~ ADMINISTRATION, U.S. DEPARTMENT OF COMMERCE Ms. BULOW. My name is Kay Bulow, andi am Assistant Secre- tary for Administration for the U.S. Department of Commérce~ I am very pleased to be asked to speak today on Federal efforts and initiatives on behalf of women owned business, because I have made increasing procurement from women-owned business one of my top priorities. Moreover, the entire Federal Government has shown a steady in crease in procurement from women owned business Since 1979, Federal procurement from women owned business has risen from $181 million to over $1 5 billion in 1987 While this is still far too low, it represents a steady and significant increase by all depart- ments. This achievement has been the result of major efforts in many areas. The major procuring agencies have women business repre- sentatives who initiate workshops, conferences, and outreach; pub- lish directories of women business owners and handbooks contain ing agency procurement information, offer counseling to women about Federal contracting, and meet on a regular basis to study methods of solving common problems In our Department, and I am sure in many others, we supply a bidders' list of women owned businesses whenever an appropriate procurement requisition is re ceived. As I see it, the biggest single problem facing women owned busi ness in dealing with t ie Federal Government is determining which procurement offices have a need for their goods and services, and then getting started with a broad marketing strategy There are some 3 7 million women owned businesses in the United States Our job is to reach out to these businesses and help them become suppliers to net only the Federal but also State and local governments It is a massive job, but we are making a start For example, I organized an outreach program for the Depart- ment of Commerce to add the names of women-owned businesses to SBA's Procurement Automated Source System [PASS] which is used as a bidders' list by all departments. At that time, there were less than 10,000 women-owned businesses o~ the list, and we raised that to 30,000. Examples of other outreach efforts were three Megamarketplace procurement conferences for women in 1986 and 1987, cosponsored PAGENO="0108" 102 by Commerce and the National Association of Women Business Owners, in which all Federal departments participated with excel- lent results. I believe that women should begin by marketing their capabili- ties to the small purchase offices within the Federal Government. This is a lucrative marketing area for small businesses and pro- vides a foot in the door which can lead to opportunities to bid on larger contracts. For example, we have just issued two contracts to women owned businesses which, with options, can total $9 5 million and $1L9 million respectively. We need better data on small businesses which are women- owned, and the Office of Federal Procurement Policy [OFPP] has just directed that the Federal Procurement Data System [FPDS] will break down procurements to women-owned business by small business and by others, which will give us a much better idea of the type of women-owned businesses we are dealing with. As I n~oted, there has been a steady and significant increase in procurement awards to women owned business But increasing these awards is a slow process. Very `often, years elapse between marketing an agency and signing a contract. Acceptance of women as viable contractors has been difficult, but it is happening. It is essential that we continue to expose women business owners to the Federal marketplace by providing annual conferences and encouraging their attendance at the congressionally sponsored Fed- eral procurement and export development conferences and other similar events. Finally, although I have been speaking solely of Federal' procure- ment, there is another major potential market for women in State and local government procurement, and one ~which they should be encouraged to aggressively pursue. That concludes my statement. I will be glad to answer any ques- tions. Thank you, Mr. Chairman. Chairman LAFALCE. Thank you, Ms. Bulow. I thank you and `Ms. Crockett for your own individual efforth, especially as it relates to the Megamarketpiace. Maybe that is because you have been in the Megamarketplace in cosponsorship with others. Maybe that is the joy of cosponsorship; then if it is bad, you can blame somebody, and if it is good, you will be praised. A few years back, I had the goal of seeing enacted into law Public Law 95-507, which created the requirement for the best effort subcontracting. We have about 1 percent in Government con- tracts presently going to women-owned businesses and 99 percent going elsewhere. But these 99 percent going elsewhere do a lot of subcontracting. We have a very fertile field there, it seems. What are we doing to aggressively pursue and measure the par- ticipation of women-owned businesses, as prime contractors and as performers of a portion of the subcontracts? Ms. CROCKETT. May I respon4? Chairman LAFALCE. Sure. I think we have an Achilles' heel here. Let's resolve to do some- thing about it through my continued foresight and your enhanced abilities in that field. PAGENO="0109" 103 Ms. CROCKETT. I have spoken with the Office of Small and Disad vantaged Business Utilization Directors As Federal forms were being revised, I had asked that we include reporting information on subcontracting with major prime contractors by women This was not considered possible in the long run I did query several major prime contractors. Chairman LAFALCE Do we not require by law that best efforts be made not only for minorities as traditionally defined, but also for women? Ms. CROCKETT. Yes. Chairman LAFALCE Do we not include in the contracts with the primes a requirement that they use their best efforts not only with respect to minorities as traditionally defined, but also women? Ms. CnOC1~ETT. Yes. Chairman LAFALCE Do we not establish goals with respect to mi norities for subcontracting purposes? Ms. CnocK~TT. Yes, Chairman LAFALCE Is it true that we do not establish goals with respect to subcontracting with respect to women? Ms. CROCKETT. This office does not. Chairman LAFALCE. Is that not a gross inequity?" Ms. CROCKETT. I don't think we need necessarily to establish goals First we need to find out how much subeontracLing is being done by the primes with women business owners before we can make any public policy decisions Chairman LAFALCE. Why don't we compromise and say we should do both simultaneously? Ms.. BULOW. Since I am in procurement, let me tell you what we do in Commerce. Chairman LAFALCE. I think we can do tremendous things with subcontractors, and I know we have to do it. Ms. BULOW. Well, let me say two things. In subcontracts, the Office of Small and Disadvantaged Business- es also works with them on a voluntary basis to give equal consid eration to women business owners who are part of the set aside Chairman LAFALCE Isn't there an inherent conflict there? Ms BULOW I don't see an inherent conflict They are a small business, and there is an overall'goal. ` Chairman LAFALCE But they have a difficult time achieving goals for minorities Don't they really have to have somebody else speaking up on behalf of women? Otherwise, might not OSDB feel that they are robbing Peter to pay Mary? Ms BULOW The OSDB speaks on behalf of minorities and `women. We have a fairly successful, track record. Chairman LAFALCE Let me continue to interrupt you In your testimony you mentioned that the major procuring agen cies have women business representatives Ms. BuLow. That is correct. ` ` Chairman LAFALCE Is the major women busmess representative in these agencies someone different than the OSDB? Ms. BULOW. Generally they are a member of the OSDE, Office of Small and Disadvantaged Businesses. `. Chairman LAFALCE They would be a lesser official within that office? PAGENO="0110" 104 Ms. BULOW. That is correct. I would have to take exception to a lesser official. It is a member of the staff. Chairman LAFALCE. I think it is a fair statement. You may take exception. Ms. BULOW. I would have to take exception because of the indi- vidual who works for me. Chairman LAFALcE. When you say somebody works for you or under you, they are not generally on the same level. But reasona- ble people can differ on that. Ms. BULOW. Another thing we do is The niegamarket contractors. We go after the primes to represent their businesses at the mega- marketing places to the women business owners. Chairman LAFALCE. I think that is good. We have hadthree Me- garnarketplaces. So, obviously, we have to go beyond that. Ms. BULOW. There is one scheduled for Chicago this year, too. Chairman LAFALCE. What I am talking about now is looking toward a means to pursue additional subcontracts on each and every contract, because it is already in the contract with the prime, correct? So, every prime has a legal obligation to at least make best efforts. Now, the question is, should we have goals for prime contractors. Since we have goals for minorities with respect to subcontracts, it is difficult to understand why we should not have goals for women. Is there a legal requirement for goals with respect to minorities insofar as subcontracts are concerned, or is this something that has been done administratively? Ms. CROCKETT. That is statutory. That is my understanding of it. Chairman LAFALCE. Is there any legal requirement for goals with respect to subcontracts for women? Ms. CROCKETT~ Not to my knowledge. I would like to capture the information that is currently available before we make any policy decisions as to what the next step is. Chairman LAFALCE. Let's talk about measuring whatever efforts exist. Theoretically best efforts are being niade because that is a contractual obligation. We have some means of measuring the best efforts with respect to traditional minorities, but we have no means of measuring the best efforts with respect to women. Ms. CROCKETT. Subcontracting information, no; we do not collect that data. Chairman LAFALCE. Have you ever asked or has Ms. Bulow asked, has the issue arisen at the interagency council as to wheth- er or not we should collect this type of data? Ms. CROCKETT. I have indicated earlier that I did talk to the council of OSDBU's when a particular Federal reporting form was being revised, and asked that this information be included on that form. Chairman LAFALCE. What was the result of that? Ms. CROCKETT. The result of that, after considerable debate, was that they did not feel that it was feasible. As a result of that, I con- tacted several major primes. Chairman LAFALCE. What would be so unfeasible about it? It seems to me it is a simple request. Ms. CROCKETT. I agree with you, Congressman. PAGENO="0111" 105 Chairman LAFALCE. Was this issue addressed by the interagency council on women's business activities? Ms. CROCKETT. A corollary to that has been addressed, and that is when we considered the issue of goals for Federal prime contract dollars to be made as part of the performance goals or objectives of the employee. Chairman LAFALCE. When is the next meeting of the interagency task force? Ms. CROCKETT. June 14. Chairman LAFALCE. I think that would be a propitious time for them to consider the letter they received from me, as chairman of the Small Business Committee, requesting that they make an effort to establish goals and collect data with respect to that. Ms. CROCKETT. I am certain the committee will be happy to re- spond to that. Chairman LAFALCE. I have more questions but I will call on Mr. Price at this time. Mr. PRICE. Thank you, Mr. Chairman. Ms. Crockett, your statement details a wide range of activities having to do with economic opportunities for women entrepre- neurs. There is a lack, though, in some cases, of quantitative data as to how widespread these activities have been. I wonder if you could fill in some of the gaps. You talked about the efforts of your office to improve the skills of wome~i in market- ing, finance, inventory control, and production, and stated that one method used to develop these skills has been seminars. How many of these seminars have been held? Is there any way to gauge the extent of this activity as well as to identify the nature of it? Ms. CROCKETT. It is quite extensive because we deliver that through our extensive field network of 85 offices. In the last 18 months we have sponsored conferences that have attracted 29,000 women. I think that is fairly significant. Mr. PRICE. The meet the lenders programs. Do you have any quantitative estimates of how extensive that has been? Ms. CROCKETT. I will be happy to give you that specific informa- tion for the record. It has been very successful. Mr. PRICE. It would be helpful to furnish that for the record. [The information may be found in the appendix.] Mr. PRICE. Also, it would be helpful to know how many people have been reached by these activities and the geographic distribu- tion of those programs. Turning to procurement, you list a number of activities aimed at increasing woman business participation in procurement. You talk about the effect of Federal prime contract goals, which a number of witnesses have mentioned. What are those goals, and what are the future prospects.? Ms. CRocKErr. The goals are established individually with each department and agency, depending on what their overall procure. ment budget is. We look at the past 2 years' performance in estab.~ lishing goals through visits with the individuals in those depart- ments and agencies who handle that and to aggressively increase whatever is submitted by them. We have been suc~essfui in virtual- ly all of our endeavors. PAGENO="0112" 106 Mr. PRICE. What is the range of those goals, lowest and highest? I see we have a chart that depicts that. Ms. CROCKETT. Unfortunately, I don't have the same chart. It varies with each department and agency. Mr. PRICE. What about the workshops to acquaint women with Federal business practices, you have no information on how often and what the geographic spread has been. Ms. CROCKETT. Yes; I will supply that for the record. [The information may be found in the appendix.] Chairman LAFALCE. Mr. Price, how many have you had in North Carolina, and why don't you do one tomorrow? Mr. PRICE. The testimony we have reêeived is that this procure- ment problem is widespread. Often outreach efforts on the part of agencies and efforts on the part of the Small Business Administra- tion to encourage participation and give accurate information can be very, very important. It would be helpful to the committee, I be- lieve, to have information about how widespread these efforts have been. Do any of the other witnesses have any experience with exposure to the outreach efforts by the SBA, particularly the efforts to en- courage procurement participation? Ms. Hager, I know you were rather skeptical of these efforts or said they were not successful. Do you have any reflections on this? Ms. HAGER. I think they are successful. I think for what they are set up to do that they are successful. As I said, the women do attend. We think they are well represented. That is really not an issue, I think they are very well attended. Basically, the point I am trying to make is not to criticize the Government programs but to say, I guess, where I disagree is that we should be happy with where it is, with where we are in procurement. I think we are not. We don't disagree with the Government pro- grams. We think it. is terrific, but I think we are going to have to work together to make it better. Mr. PRICE. You do say the bottom line is that while there are more ar~d more women trained and knowledgeable about contract- ing, they are still not getting enough contracts. Is the problem that the programs are not adequate or that we are not targeting them sufficiently? What specifically i~ your critique if you say these pro- grams on the merits are quite good? Ms. SI~YDER. May I add something? I agree with Ms. Hager that what is being done is being done well. Education and counseling are being well done, but expectations should not be unrealistically high. Our firm provides such service on a private basis, and. we feel the same frustration, perhaps, the public sector feels, which is that these vehicles can only have a limited result. We leave program participants well-informed, but the hardest part for participants is putting what they have learned into effect. They are useful, but only as a means of awakening interest and providing a degree of education. The problem at that point is to take what has been learned and implement it. I think it unrealistic and ill-advised to believe that educational programs will be sufficient. I think it is naive, and I think the people attending the programs afterward. say, "Fine, but PAGENO="0113" . ~ . 107 what can you do for us next?" The ultimate test for participants is enacting what they have learned and making money from it Mr PRICE As far as Government and public policy is concerned, what does that next step loo~k like? VMs. SNYDER. To be able to do business with and in the Govern~ ment and to be able to have access to the procurement dollars. that are quite substantial. Mr. PRICE. Are there legal barriers? Ms SNYDER Our business includes substantial activity in Gov ernment. Few of the jobs we have done, have been on official projects We developed them ourselves in anticipation of needed work We find that such success is primarily a question of accept ance and attitude. Thus far, we have never encountered a situation where someone wished to work with us and then determined that * they could not. Ms. HAGER. I would absolutely second that. It is much mare ac~ ceptance and attitude. There are certainly plenty of situations where the women are not qualified. There is nothing in it for the OSDB. There is no incentive for them to deal with women. They don't get any points for doing that. If the subcontracting were done, it would make a tremendous deal of assistance. It is hard to deal with skepticism. I was not being facetious when I said some of the training dollars maybe should go to contracting officers to get them to deal with women, on opening up procurement It is not just that the women owned businesses are all small, but they are all sole proprietorships Their sales receipts are growing three times faster than men's. Five years ago there was a bid through the Commerce Business Daily, going in and investigating a financial situation with a vested financial Government negotiator, and the bottom line, sitting . between my lawyer and an accountant, and I knew it was all over when out of the blue he asked me who took care of my children Ms SNYDER In business, if you are going to succeed, whether you are male or female, you have to pursue the main chance Especial ly in small business, and large business as well, you cannot hitch your fortunes to vague possibilities. You have to estimate where you think you have a 999 percent chance of succeeding Our strategy, and this is simply that of our firm, has been not to sashay around with the thought of possibly obtaining business possibly on the basis of our being a woman owned company We targeted areas where we determined We had a very high probability of sales Frankly, we aren't interested in filling someone's dossier, specifi cally, we aren't interested, and this sounds rather harsh, in filling out forms and participating in the bidding process just to provide one of three required proposals to insure that someone's dossier fol lows regulations when Someone comes to check to see if there has been discrimination Such pursuits are not good, smart business Ms BULOW Can I comment on that? Mr. PRICE. Certainly. ~* * * ** Ms BULOW I agree with what is being said here to the extent finding where the opportunities are Procurement, when I started in business, to me was a fairness issue I felt the wOmen business owners deserved as much opportunity to find out what the Federal PAGENO="0114" 108 Government was buying and get their swing at that like everybody else, which is why we started doing the few Megaimarketplaces. There is direct reach out of these. We have identified in all the Federal Government what people buy, what they sell. We provide this to the women entrepreneurs. We have tried to open up the Federal procurement process to the best of our ability. In doing the megas, we have created an awareness in conjunction with NAWBO, Small Business Administration, the Department of Treasury, and every major Federal agency has been a very active participant in these. This wasn't true in 1983 or 1984. The level of activity has increased substantially as we have done these, and they need to be continued. We are developing an inventory of what Government buys so that Susan Snyder can get a booklet that will tell you exactly, Gov~ ernment~wide, what is being brought where, so she can target her own market. The unique thing we tried at mega was to schedule appoint- ments. Chairman LAFALCE. Shouldn't that Government booklet be avail- able to all businesses indiscriminately, whether they are male, female, minorities, et cetera? Ms. BULOW. The Government booklet created on the opportuni- ties? Chairman LAFALCE. No; the booklet that explains the contracts that are available. Ms. BULOW. Sure, it is. Chairman LAFALCE. All right. Let's go on. I am going to have to leave here in 5 minutes. John, do you have any quest.ions? Mr. HILER. Thank you, Mr. Chairman. I am going to play a little bit of the devil's advocate here. Just bear with me. Separating our procurement activities, the Federal Government buys enough, does it correctly or incorrectly, separat- ing out that and looking at the great bulk, of 3.7 million women- owned businesses, a fraction of which have ever called the SEA to assist them, or the Department of Commerce, or something, a couple of figures that can challenge my mind. Women-owned busi- nesses, I believe, are the fastest-growing segment of small business~ es in America. Dollars of sales are growing dramatically. It would seem to me that the barriers to access and the barriers to success for women in businesses must be falling down at a rapid rate to have that type of rapid development. Why is that statement right or wrong? Maybe go to the private sector first here, then go to the Govern- ment? Ms. SNYDER. Why-the question was why, if given the success of women in s~nall businesses, the rate of their increase and the in- creased rate of their income, isn't this a sign that barriers are fall- ing to women in business? Is that your question? Mr. HILER. Yes. Ms. SNYDER. I would take it from another viewpoint, being the devil's advocate for the other side. Mr. HILER. Sure. PAGENO="0115" 109 Ms. SNYDER. Since the ~960's, when women began to feel that higher education was a normal and expected thing, the number of women qualified to enter the workforce and eqwpped to compete in corporate activity has, in my opinion, increased substantially From a simple Darwinistic perspective, there are more of the species trying to enter the business arena From that standpoint, I don't think the numbers necessarily prove that barriers are falling I think there are more Women knocking at the barriers. I think there are more women qualified, driven, motivated with the desire to try to make it in business, and, thus, there are more women suc- ceeding. Although the numbers may look, I suggest that the pro~ portions are static for all intents and purposes. You could take a very primitive view that the strongest will make it The point of my testimony is that we should take a more enlightened view, if only in the national interest, because in this particular stage of our economic history, women owned businesses have a great deal to offer the United States New, dynamic businesses are needed to span~ the trade gap. If four out of five new businesses are women owned, it is evident that women are a useful economic source. The creativity these women represent, their expertise, could be extremely valuable. So, why not find a way to encourage the momentum, not subsidize it necessari- ly, and, at the least, allow it `unfettered movement. Such policy is in the national interest. Ms HAGER I agree with you that the barriers are falling with the exception of the two areas of procurement and equal credit op portunity I think barriers are certainly coming down in those areas, but we have a long way to go in those areas Mr HILER If you look at the long term health of women owned businesses in America, I hope it doesn't depend on the Federal Government's purchases. The Government's purchases are a small fraction of a $4 trillion economy. Ms. HAGER. It obviously doesü't depend on that. Mr HILER One of the testimonies I heard in the last day or two has suggested that a disproportionate share of women's businesses are ~n the service retail area Defining service Is broad) but that is whem e there is a tremendous amount of growth in our economy To say that women are going into an area in business broadly defined where there is tremendous growth and don't seem to be going into an area as rapidly where there isn't growth, I don't perceive that as negative, which I gather from testiumony yesterday might be neg ative. ` ` The procurement dollars, even if we had extraordinarily Success ful procurement practices at the Federal level, that would be but an extraordinarily small dent in those 3 7 million women owned businesses, wouldn't it2 I am playing the devil's advocate Ms HAGER Women's businesses will not succeed or fail because of procurement, but ~ is still not acceptable that all of that is going to men. ` Mr. RILER. That is accepted. Ms SNYDER The point about access to credit is important be cause the issue ~s one that also has national significance and is worthy of' being considered separately from the issue of procure merit. ` PAGENO="0116" 110 Mr. HILER. It has a lot to do with general difficulties in gaining credit for all small businesses, doesn't it? Ms. HAGER. Some of it does. Mr. HILER. There are two kinds of problems. One is general access to credit and equity for-I come from the foundry business. That is the business I grew up in, and 80 percent of the capital that goes in the foundry industry comes from two areas, retained earn- ings or capital that the owner or manager brings in. Only 20 per- cent of the capital comes from outside ownership or comes from banks or something. Four-fifths of the dollars come from what the person has been able to earn on their own or what they brought into the ball game to begin with. I think that is true of most businesses. General access, and coming up with new instruments for increased access to equity, I think these are things that will help all business, including women- owned businesses. Ms. HAGER. I absolutely agree. I think they will help all busi- nesses, including women-owned business. I think there is an extra barrier for women, women-owned busi- ness, when you go to deal with the bank. I am not talking about getting startup funds or things nobody gets. I am talking about re- alistically, lines of credit, things like that. There is an extra barrier for them. Chairman LAFALCE. I am going to intervene because, unfortu- nately, I am going to have to be leaving momentarily. I want to make a few points and ask a few questions. In your attachment to your testimony, Ms. Bulow, you state that there was assigned a women's specialist position at the Office of Small Disadvantaged Business to manage Commerce's women's business program. You say Department of Commerce [DOC] i~ the only Federal agency with this full-time position. Is that correct? That is in your a~achment. Ms. BULOW. If it is in my attachment, it is correct. Chairman LAFALCE. That is one of the problems. DOC is the only agency with this full-time position. I would praise DOC, but we have to ask if it is good for DOC, why isn't it good for all agencies, too. I am going. to have to pursue that. Maybe that is something else that can be brought up in our Interagency Task Force. I would like to make another point, too. I had heard of Ms. Phil- lips before I made inquiry as to what has happened to this inter- agency group, and who is the chairperson of it. Maybe that is a problem too. Maybe the chairperson should be some person of greater visibility to give it and its mission more stature. If you have visibility, you, therefore, might bring with you the require- ment for better accountability. Whether it would be Elizabeth Dole or Peggy Heckler, someone of adequate stature to. give that mission its proper stature. Yesterday, I suggested that one of the things we needed was not just a program for women, but programs in the existing trade asso- ciations and education programs, and that they be so structured, although the programs would be for all, they might be of special benefit for women. For example, the American Banker's Associa- tion program on lending practices might focus more on soft assets as opposed to hard assets in terms of lending credit. PAGENO="0117" 111 That could be very interesting4 I think that is going to be incor- porated at their next conferer~ce, which will take place in June in Boston, in which I will be participating. Something else too. On the Whole subject of goals, someone once said that happiness is directly proportionate to one's expectations And, therefOre, if we set very low goals, it would be easy to be very happy and have great success, or proclaim great success. Now if we set unrealistic goals-for example, I voted against that provision which eventually became section 1207 that called for 10 percent of all DOD contracts to go to minorities-that would have created automatic, absolute, certain unhappiness Unbelievably unrealistic How do you determine what is the proper goal-one that is at tamable if you strive mightily, but not so low' that you can achieve it easily and not so high that you are going to become absolutely, impossibly frustrated? I am not sure about methodology that has been used in the goal setting process with this fostering of procure- ment. I note there ate some agencies whose goals and achievements for 1988 are lower than goals for 1987. Ms. Crockett, we are goihg to have to sit down in the future and go over these on an agency-by-agency basis. Ms CROCKETT Our goalmg is done prior to the achievements of the previous year coming in, so we really don't have that year's achievements as a basis in negotiating. Chairman LAFALCE. Sure: Sometimes, by establishing very high goals, even if they are unrealistic, you do bring with you tremen dous frustration But you also push individuals to levels that sur prises the world. For example, didn't we have a legislative requirement for AID with respect to contracts for women? Aren't they now closer to about 4 percent whereas the average is about 1 percent? So, if we are going to err~ perhaps we ought to err on a higher goal, perhaps, tnan a lower goal We ought not to take too much solace in the fact we have 1 percent. My next point is we are addressing ourselves to women business owners But as I understand it, your organizations are also con cerned about women in business as opposed to women business owners My question is, do you have programs specifically designed to be of assistance or to look at the special problems of women in business as opposed to women business owners? Ms CROCKETT Are you defining women in business as working for women owned fir~~'~ Chairman LAFALCE. No. Ms CROCKETT Our focus is primarily on women business owners Chairman LAFALCE. All right, fine. The next question is, suppose I am the President, January 1989, and I call you into my office, and I say to you, Kay Bulow, Depart- ment of Commerce, everybody says the Commerce reports are the best show in Government Ms Hager, founder of NAWBO, and you are a critic, and Susan Snyder, you work for those Fortune 500- you have had experience in the private sector What have you tried to accomplish that you have been unable to accomplish? What have you asked for from your superiors that you have not been able to get, and what would you ask for now? What program PAGENO="0118" 112 would you want, so that at the end of my term in December 1992, I could look back and say that we did more for women in business and women business owners than any other administration ever did? How would you answer that? Ms. CROCKETT. As I mentioned earlier, more long-term training. I think that is the most important aspect of success. Chairman LAFALCE. I am going to ask Ms. Crockett and Ms. Bulow to flesh out their answers in writing on that question, OK? What you have asked for and haven't gotten, and what you would ask for, if I were President, and if there were no 0MB, and you had direct access. Ms. Hager and Ms. Snyder-- Ms. CROCKETT. There is always an 0MB. Chairman LAFALCE. Not in my administration. Mr. HILER. That will be part of the record of the committee? Chairman LAFALCE. Absolutely. [Ms. Bulow's response may be found in the appendix.] Chairman LAFALCE. To the two Susans, any comments you would like to make now on that? Ms. HAGER. Sure. I would like to see a committed administration in your administration. I am sure that would take place as it does now. I would like to see more procurement dollars going to women, both in primes and in subcontracts. I would like to see equal credit opportunity across the country. Ms. SNYDER. Rising to meet the chairman's challenge, I would probably offer total unhappiness by setting very high standards. My interest would be consistent with my testimony to see women so integrated in the procurement process in the United States that the subject would no longer be a special issue any longer. Chairman LAFALCE. Amen. That is the goal. The goal is not to have any special programs for women. That is the goal, too, with respect to minorities. We ought to remember though, that these are means to an end. They ought not to be permanent, perpetual. We are playing catchup football right now. The~who1e idea is not to play catchup football in the future. But we would be pretty stupid, or naive, or permanent devil's advocate if we didn't realize that there is an imperative for catchup football right now. The committee will adjourn, and I thank you all very much. [Whereupon, at 11:00 a.m., the committee was adjourned, subject to the call of the Chair.] PAGENO="0119" NEW ECONOMIC REALITIES: TIlE ROLE OF WOMEN ENTREPRENEURS TUESDAY, MAY 17, 1988 HOUSE OF REPRESENTATIVES, COMMITTEE ON SMALL BUSINESS, Washington, DC. The committee met, pursuant to notice, at 9:30 a.m., in room 2359-A, Rayburn House Office Building, Hon. John J. LaFalce (chairman of the committee) presiding. Present: Chairman LaFalce. Chairman LAFALCE. The Small Business meeting will come to order. Today's hearing is the fifth in a series of hearings designed to address issues affecting women-owned businesses. The committee has examined problems re1~ating to Government procurement, access to credit, the effectiveness of public policies and programs, and the accomplishments and contributions to the economy by today's business owners who just happen to be women. Representative Silvio Conte could not be with us today, but he has submitted a statement. I ask unanimous consent that it be put into the record. [Mr. Conte's statement may be found in the appendix.] Chairman LAFALCE. We have invited witnesses today to discuss the changing nature of the workforce and its implications for women entrepreneurs. We will hear from Bickley Thompson, direc- tor and senior editor of American Demographics for an overview of statistics and projections for the future; Jeannette Scollard, presi- dent of SCS Communications, entrepreneur, author; lecturer, and financial counselor featured on ABC's Home show; and Beth Wray, president of Business and Professional Women, USA. She is also Dean of Students at North State College in Aberdeen, SD. But before we hear from our witnesses, I want to acknowledge the continuing intere~t in these hearings expressed by the National Association of Women Business Owners, NAWBO. We have ar- ranged for a viewing of an 8~minute video entitled, "Against all Odds." We will view the video tape later because our first witness, Ms. Townsend, has some time constraints. Therefore, I am going to call Ms. Bickley Townsend to the witness table. We will hear from Ms. Townsend, and then we will hear from the other panelists and view the tape. I hope you will be able to stay with us a little longer. (113) PAGENO="0120" 114 TESTIMONY OF BICKLEY TOWNSEND, DIRECTOR, RESEARCH AND EDUCATION, AMERICAN DEMOGRAPHICS; INC., ITHACA, NY Ms. TOWNSEND. It is a pleasure to be able to participate in these hearings, even briefly, and especially at the invitation of a fellow upstate New Yorker. Chairman LAFALCE. Where are you from? Ms. TOWNSEND. Ithaca. I have been asked to summarize briefly the changes that are occurring in the American workforce which, as we know, are ver'y rapid and very profound, and some of the im- plications and challenges that those changes mean for employees, for the economy, and for Federal policy in the years ahead. If I had to sum up the trends we see in one sentence, I would say that America's wórkforce is becoming steadily older, on the whole better educated, although with a caveat which I will go into in a minute-more racially diverse and, of course, more female. Let me ~cuss each of those trends briefly.. Ever since the first baby boomer ~~rned 40 in 1986, we have heard probably more than many of us would care to ~ the aging of the American popula- tion. Although, I must say Ameri'mn Demographics is partly to blame for the media coverage since we put out the press release on that. Chairman LAFALCE. Did you coin the phrase, the graying of America? Ms. TOWNSEND.. That is another one. I think we have heard some- what less about a concomitant trend which is that America's labor force is also aging.. The average worker today is 35, and by the year 2000 he or she will be a distinctly middle aging 39. Now, this is happening partly because of the aging of the baby boom. But there is another important reason, and that is the baby bust, that very small generation born in the late 1960's and 1970 when families were down-sizing from an average of four to about two children. Those young people are reaching adulthood now and coming on line as workers.. Our 18- to 24-year-old population is going to decline by one-fifth between 1960 and 1995. I would like to emphasize one reason why America's workforce is not aging. It is not aging because older workers are remaining on the job for more years. In fact, just the opposite is occurring because older workers are, in fact, taking early retirement in record numbers. One third of men, aged 55 to 64 are no longer in the labor force at all as participating members. That is double the proportion of men that age who were working just a decade ago. This rising age of the workforce is a two-edged sword. It has positive aspects to it. 1~he prospects of a somewhat older, more experienced labor force could herald a big productivity bonus for the economy, one that could give our economy a boost that we could rea~y use in the next few years. But on the minus side, an aging population also means a slower growing workforce. Between now and the year 2000, our labor force is going to grow at the slowest rate in history, except during the Great Depression. Now, of course, there will be a lot of regional variation in that decline, but overall, what it means is a period of tighter labor and PAGENO="0121" 115 a threat of wage inflation as scarce entry level workers are able to bid up their price. This shrinking labor pooi is going to be a par- ticularly critical problem for retailers, food marketers, and other businesses that rely on entry level workers. Larger employers are already easing the crunch by substituting technology for labor. For example, you have seen those beverage bars in McDonald's where you have to pour the cokes yourselves instead of having a counter worker do it. Small businesses can't take advantage of high-technology solutions as these as easily as can large corporations. This is an issue your committee might want to take up. Other issues for Federal policy include retraining of older workers and in- centives to attract retirees back into the labor market, if only for part-time or temporary jobs. Turning to education, the overall trend is that America is becom- ing a steadily better educated society, and part of the reason for that is again the baby boom. Half of all baby boomers have gone to college for at least 1 year and one-quarter have a college degree. The baby boomers, of course, are also the generation that closed the educational gender gap. Women have made tremendous strides in education in recent years and they show up most strongly among those younger baby boom women, the ones now 25 to 34, who just about have the same levels of education as their male counterparts. Now, this is happening for two reasons: Not only are more women going to college than at any time in our history, but also, for the first time in recent memory, fewer young men are complet- ing college. The trend toward a more educated workforce is a good sign because most of the fastest growing occupations that we see between now and the year 2000 now will require at least some col- lege. In fact, there is a new study by the Hudson Institute called Workforce 2000, which concludes that by between now and the year 2000 for the first time in history, a majority of all new jobs will require post secondary education. But I mentioned earlier that there is a caveat to this better edu- cated picture. Statistical averages mass the fact that too many young people are failing or being failed by our educational system. We have a persistently high rate of school dropouts, particularly among children from low income and minority families. These are children who already have the fewest advantages in life. We need to do everything we can to help convince young people to stay in school and ideally to go on to college. Besides increasing the number of years of schooling our young people receive, we also need to improve the quality of that education. We know that the jobs of the future are going to require much greater literacy and much better quantitative skills than many of our children are now receiving. Educational reform has begun, but we have a long way to go to rebuild the educational standards and basic skills that fell by the wayside in the 1960's and 1970's. The National Commission on Ex- cellence in Education found, among other things, that 40 percent of recent high school graduates were unable to read at the ninth grade level. PAGENO="0122" 116 Productivity losses caused by poorly educated workers are cost- ing American businesses an estimated $25 billion each year. That is a cost that the small business owners can ill-afford to pay and money that could be invested in greater productivity and economic growth. Sam Ehrenhalt, the New York regional commissioner of Labor Statistics, summed up the policy ~implications of this trend recently. He said, "Ultimately the quality of the labor force may become the limiting factor on the New York City economy. That is why, in my opinion, improving educational outcomes now ranks as the city's number one economic development effort." I believe that conclu- sion holds true not just for New York City, but for the country as a whole. Let me turn to the third trend, and that is our workforce is be- coming far more racially and ethnically diverse. Workforce 2000 made a number of interesting projections, but one in particular stood out. For the rest of the century, this study concluded, native born white men will make up only 15 percent of new workers. For an economy for which traditionally white males have been the backbone, this trend signals a whole new world ahead. One in five Americans today is black, Hispanic, Asian, or another minori- ty. The impact of this diversity will be certainly felt in the work- force, more dramatically in some geographic regions than others. It is only a matter of a year or two before New York City has a ma- jority minority labor force. A number of other cities are also at or approaching the point at which it is no longer appropriate or even accurate to refer to non- Caucasian ethnic groups as minorities. Some of these cities include Los Angeles, Detroit, Chicago, Philadelphia, Miami, a lot of cities in Texas, and, of course, here in Washington, DC. The growing racial and ethnic diversity of our workforce will put greater demands on employers. There will be more training needs, more language problems, greater responsibility for employers to avoid violating provisions of the immigration reform laws. But it is also a two-edged sword. Many new immigrants have already proven that they are at least as hard-working and enterprising as their predecessors from earlier generations. So, we can expect that the growth of immigrant minorities in the workforce will have a positive effect on the economy. The increase of black and other native born minority workers will mean contin- ued issues of an affirmative action and equal access to employ- ment. Where these minorities are concentrated in disadvantaged areas, it is going to take special efforts in education, vocational training, and economic opportunity to bring more and more minor- ity workers into the mainstream of the economy. I have reserved for last, the trend that is of greatest interest to these hearings and very probably the single most important trend that has ever taken place in the American Iabo~r market That i~ the enormous influx of women into the paid labor force in recent years. Already, women account for nearly two-thirds of all new work- ers, and they are 45 percent of the workforce, up from 89 percent just 15 years ago. More than 7 out of 10 women in their prime PAGENO="0123" 117 working ages, age 25 to 54 are in the labor force and that is going to rise to more than 8 out of 10 by the year 2000. Women's work patterns across the life cycle have also changed dramatically. Women, until the mid 1970's, used to drop out of the labor force in their child-bearing years so that fewer women worked in their 20's and 30's than at other ages. But this pattern has completely changed. Today, more women work in their child- bearing years than at any other ages. When you chart labor force participation by age, women's pat- terns look very similar to men's now. Women's occupational choices are also becoming more similar to men's. Consider the in- roads women have made into many once male preserves. Women today are 20 percent of all medical doctors, double their proportion in 1972; 20 percent of all lawyers, compared to 4 percent in 1972; and 7 percent of all engineers which may not seem like a lot, except that they were fewer than 1 percent of all engineers in 1972. Meanwhile, men represent a growing share of telephone opera- tors, nurses, and typists. So, male and female work patterns are be- coming more unisex, and combining work and family has become the norm for most women, as well as most men today. The majority of mothers are now in the paid labor force, includ- ing more than half of all new mothers who are back at work before their baby's first birthday. So, it is no wonder that family issues related to employment, such as parental leave, child care, and flex- time have moved front and center on the policy agenda. Even so staunch a traditionalist as Senator Hatch is sponsoring child care legislation, and he defended his bill by saying no matter how much some people might want to go backward, America is not returning to an Ozzie and Harriet world. America was founded on innovation, and our system of govern- ment was even called the American experiment. Today, I would like to suggest that we are embarked on a social and economic ex- periment almost as fundamental as that undertaken by the first settlers to our shores. The premise of this experiment is that men and women can coexist as truly equal partners in the family, and in the factory, in the boardroom as well as in the bedroom. There is no precedent for the new work and family forms we are forging. Yet, today, as then, a great deal rests on the outcome of this experiment. The well-being of our Nation's children, the value of women's investment in human capital, even America's competi- tiveness could depend on whether this experiment works. I urge you to do all you can to ensure its success. Thank you. [Ms. Townsend's statement may be found in the appendix.] Chairman LAFALCE. Thank you very much, Ms. Townsend. There were so many insights that I wish to pursue. For the most part you picked 1972 as a base year. Any particular reason for that? Ms. TOWNSEND. I think there happened to be good data for that year. The economic censuses are taken in years ending in 2 and 7. Chairman LAFALCE. Fine. The two concurrent phenomenon that I am interested in analyzing a little more-women are increasing as a percentage of the workforce at a much greater rate than pro- jected now, double the rate, although it will not be as great as it was from 1972 to the present. There is also data in here regarding PAGENO="0124" 118 the, if not illiteracy of the workforce, educational inferiority of the workforce. Forty percent of high school graduates aren't able to read at a ninth grade level. I think you have other statistics regarding the poor educational quality, despite the fact that the proportion of adults who are high school graduates has risen, despite the fact that these jobs will require higher educational attainments. I wonder if this breaks down, however, along male/female lines. I only know from my own experience, and I look back to grammar school days, and we had a reuniOn not too long ago. I looked at the literates and illiterates. The females were the literates and the males were the illiterates. It was true then-that was a long time ago-with a few exceptions. Do we have any data on that? Ms. TOWNSEND. Well, there are a couple of responses to that. I think girls often do get better grades in school than boys because they tend to follow rules more. Chairman LAFALCE. Superiority of the species, I understand. Ms. TOWNSEND. Boys have higher high school dropout rates, but girls also have, high dropout rates fQr different reasons. The number one reason girls drop out is pregnancy and four out of five girls who become pregnant in high school drop out. That suggests a whole intervention strategy there for females that obviously does not apply to males in the same way. The oppo- site trend is that boys do tend to score higher on quantitative tests and do better in math aild science, at least on standardized tests. Traditionally, girls we~'e not encouraged as much as boys to pursue science and math. Clearly, when you look at the jobs of the future, we need to encour~ge both sexes to do better in both quanti- tative and verbal skills. Chairman LAFALçE. I~o you know if there is any breakdown about educatioil attainments, based upon gender? Ms. TOWNSEND. On performance? Chairman LAFALcE Yes. Ms. TOWNSEND. Yes; the Center for Education statistics has that. Chairman LAFALCE. They have all of that. I am not going to ask anymore questions right now, because I am advised that you had to leave at 10 o'clock. Ms. TOWNSEND. If you have any additional questions, I would be happy to submit answers. Thank you. Chairman LAFALCE. Thank you very much. Counsel advises me that it would be appropriate now to view the tape prepared by NAWBO. Whoever is responsible for that, why don't you put it on. [Whereupon, a video tape entitled "Against All Odds" was shown.] Chairman LAFALCE. Thank you very much. My congratulations to NAWBO for that very fine production. As the credits were being given, I noticed two things. It was obviously produced and made ex- clusively by women. Also, I see that Amy DeLouise, the daughter of our staff assist- ant,' Dick DeLouise, had a hand in the writing and producing of it, a major hand. Let us return to the traditional format of the hear- ing and call our next two witnesses to the table now. PAGENO="0125" 119 I would ask both Ms. Jeannette Scollard and Miss Beth Wray if they would come to the witness stand at the saine time Jeannette, good seeing you again Our first witness will be Ms Jeannette Scollard, who is known for many things, as I mentioned in my introductory remarks Since December, most notably, for being a principal speaker at a forum I had in my congressional dis trict on women in business I thank her for that~ Jeami~tte. . . TESTIMONY OF JEANNErj~E REDDISR SCOLLARD, PRESIDENT, SCS COMMlJNICATIoNs,~N~w YORK, NY Ms. SCOLLARn. Mr. Chairman, I am going to talk to yoU about some of the changes in the American business place. There are some fairly dramatic changes and women are a very important part of these transitions~ which are all more apparent to me be cause of several jobs I hold as a very avid entrepreneur with about eight com~panies, as author researching my third book on women entrepreneurs for Macliliflan Publishing, and as resident financial expert for ABC television's Home show~. My work certainly keeps me in touch with the heartland of America. I would like to spotlight three major trends in the Amen-, can workforce. They represent substantial changes, `and women are a pivotal factor in all three of them: I ~will briefly ôall these devel- opments to your attention, and point out some of the challenges they present, and suggest some of the ways in which Congress can provide important assistance The first and most important trend is the brain drain of women from the traditional male dominated corporate arena What you find is the cream of women executives are leaving the larger corpo rate structures and opting to start businesses of their own There are two reasons for this brain drain. ` One is, the higher up a woman moves in the business hierarchy, the more sex discrimination she is likely to encounter I know I have been there In the late 1970's, I was the first and only woman officer in the history of a 100 year old blue chip multinational I learned first~hand what it is like to reach the crystal ceiling, and the male establishment denies it exists, but it is the point at which a woman will not be promoted no matter how she performs I don't see any improvement today in this tacit discrimination, but we refuse to be so easily dead-ended in oi.ir careers Women realize that not one single woman is among the power brokers in the financial community, and there still is no ladies' room at the New York Stock Exchange Women realize that they must move into another milieu away from the older boy network which so successfully has exclude4 them They have figured out that if they want to be president, they are going to have to own the business theniselves, hence, the exodus from corporate life in entre preneurship. Not only can women make as much money on their own, they can be in control of their lives This brings me to the second factor that makes entrepreneurship attractive to women We carry the lion's share of the responsibility for our husbands and children, but the corporate structure was designed for men who had wives. PAGENO="0126" 120 Well, women don't have wives. We are the wives. The only way that a woman can have it all, as men do, is to take charge of her destiny. If she is the boss, she gets to write the rules, new rules. She can design her schedule around her family's need. She can del- egate to her assistants when Johnny is sick, instead of calling and apologizing to her boss. When she likes, she can take the office to the nursery or the nursery to the office. She can do this without losing one iota of pro- fessionalism. We are seeing this extremely capable segment of our workforce abandoning the corporate halls and creating a most ex- citing and vibrant part of our economy, new businesses that create new jobs for our workforce. I think we are only at the beginning of what is becoming a groundswell. You would be surprise4 how many women executives still in corporations are harboring ~dreams of escape. When I am interviewing for my books, women say, "Jeannette, I am not going to be here when you do your ne~~t book. I am going to be out on my own." They keep their jobs for the short term as they secretly build a framework for their long-te.rm~ future enterprises.. They plan to escape the confinements of being second class citi- zens in a man's world and create brave new worlds of their own. We should focus on two important ramifications of this change in the marketplace. One, the exodus of senior women is depriving tra- ditional American business of a power source of fresh insight and ideas. Much of corporate America is in dire straights right now and can ill-afford so crippling a brain drain. I would suggest that Congress vigorously encourage corporate America to promote its talented, capable women. As it stands, now, the outlook for women in the 1990's in corporate America is far bleaker than it was in the 1970's. To be blunt, many corporations have already hired their token woman, who may have left in frustration, and now the corporation feels und~r no pressure to replace her. The attitude is, "We had one, and she didn't work out, so you can't say we didn't try." There is another interesting ramification of the exit of women from male-dominated corporate America, and this is more pro- found. Women's ideas are lost and so is the impact of their man- agement style. Women's management style tends to be more appro- priate to social realities and economic contingencies of today. It is more open, subject to give and take, and responsive to the attitudes and insight of their subordinates. Moreover, women managers tend to inspire more loyalty and have earned a reputation among their male superiors for being far more loyal than counterparts. Transfer this management style to the unique advantages of entrepreneurship, and you have an inter- esting combination here. As you know, one of the key strengths of privately held business is that it has the privilege of thinking long term. Such a business is not at the mercy of investors who think short term and are preoc- cupied solely with the price of their stock and dividends which must be paid next quarter. Since an entrepreneur must answer to no outside interest, she can plan for the long term. Therein lies much of her business' future strength and the future of success. PAGENO="0127" . 1?i To summarize, we have a new management . style that inspires job satisfaction and a setting where a long term view ~s possible Thus, women entrepreneurs can provide ~ fresh new environment which might compare f~avorably with the much touted Japanese style. ~ ~ ~ ~ ~ We are much more in keepuig with the trends than is the more rigid and increasingly outmoded approach. of our traditional, but beleaguered American business. What is the major challenge facing these women9 Money Women entrepreneurs typically have more difficulty than their male counterparts in raising capital Banks routinely discriminate against women American bankers simply have not kept up with the changing nature of the work force, and very few of them recognize what an important market is emerging in women owned businesses, and very few women have the ease and success that we saw in the video tape of Ms Rabit Most of them don't know their banker, and haven't seen them socially, and are unlikely to get that support We really need help, and Congress can provide it You in Congress must help us open the eyes of the banking community to the major economic trend of the 1990's You must encourage them to give women a break You can mandate incentives to encourage banks to stop discriminating against women owned businesses The second trend I would like to call your attention to is as a result of the take over mania that currently possesses corporate America, which I see continuing for at least the next 5 years We are seeing an extraordinary consolidation of major companies as they take turns swalléwing each other up. The mergers have a direct result on. the workforce because they eliminate jobs Combined companies have redundant jobs How many accounting and personnel departments does a single business need? Mer~gers result in massive Gut placement of middle manage ment Middle level management iS fired or forced into early retire ment. Corporate America may not have many jobs for out placed 50 year old managers, but entrepreneurial America sure does These experienced managers are a ~ potential source of assistance~ for the traditional underitianaged entrepreneurial `struëtures. The challenge here is twofold. First of all, the out-placed manag- ers need to be educated about the opportunities in the world they know little about~-small business They need to be trained in the lean cost efficient management style indigenous to small business Then the banks have to take women business owners seriously and fund them as they create new jobs for an idle reserve Once again, Congress can be of great assistance in providing a solution We need educational and job placement programs to fa- cilitate the recycling of these seaeoned managers to help the usual ly understaffed entrepreneur, and we need incentives with regard to banks for funding payrolls, expanded to include otherwise un- productive members for a displaced management community The final trend I would like to bi ing to your attention is the entry of housewives to the workforce and the return of women who took time out of the formal workplace to raise children Tradition ally, these women woul4 have worked at lower ievels i~~cqrpoi~ate PAGENO="0128" 122 America, and they would have been asked how fast can you type, and can you operate the Xerox machine. But ~s entrepreneurism increases, they are instead starting their own business, frequently selling the skills they learned in the home. They sell their housewifery skills. One of my favorite compa- nies is a company called, "Rent a Yenta" in New York, and it is housewives that do what housewives do. They will pick up your grandmother at the airport, throw a party, clean your house, what- ever ~ou need that is legal or honest, and they have a good busi- ness. Businesses like this are springing up all ovei~ the country. House- wives selling housewife skills to women like me wh~ don't have time to do it for ourselves Also, cooking skills are sold, and we have seen many women-owned businesses start in the kitchen. Usually these businesses are started with very little money, under $500. Most of these businesses operate from the home. Once again, these women business owners need assistance. They need to learn more about business and business-like procedures, about marketing, and about recordkeeping They need access to small amounts qf capital. What can Congress do? Encourage the banks again. Persuade them to set up depart- ments specifically oriented to investing in tiny emerging business- es. I can't think of a better investment. Moreover, we need more basic business classes to help these women, and the tax laws should be redesigned to encourage a small business person operating from her home. There is no reason why she should be penalized because it is more efficient and cost effective to keep the business at home. Finally, simplify the paperwork necessary for small businesses that employ only two or three people. Encourage the small busi- nesses, because many of the greatest success stories in American business began in the home. As a matter of fact, Henry Ford began at home. He started tinkering in his backyard. In short, these trends, the brain drain of female executives out of corporate America, the out placement of mostly male middle man- agers in corporate America, and entry of housewives and full-time mothers into entrepreneurial America are all challenges which can be met with basically the same solutions, increased knowledge and access to capital. You in Congress have the power of authorizing various agencies to fill these educational needs I have brought to your attention and of persuading the banks to give, women an e4ual chance. You can legislate tax incentives to help small business grow into bigger ones. As reported to you earlier, by 1990, half of the new business startups in this country will have been initiated~ by women. What we need now is to form, conscientiously, an environ- ment where these enterprises can flourish, creating new jobs and contributing long-term American benefits to the American ecbnO- my. Thank you for the opportunity to bring these issues to your at- tention. [Ms~ Scollard's statement may he found. in' the appendix.] Chairman LAFALCE. Thank you very much. PAGENO="0129" 123 Next we have Ms. Beth Wray, Preside itt Ôf~Bu$ifles$ and Pthfes~ slonal Women U S A TESTIMONY OF BETH WRAY, PRESIDENT, NATIONAL FEDERA TION GI~' BUSINESS ANI~ PROFESSIONAL WOMEN'S CLUBS, INC [BPW/USA] Ms WRAY I am the president of the National Federation of Busi ness and Professional Women's Clubs, Inc I want to thank you for giving Business and Professional Women U S A this opportunity to present testimony to the committee on issues certainly of great im- portance to BPW, women's business issues. I would like to summarize my remarks and then submit our full testimQny for the record. Chairman LAFALCE Without objection, so ordered Ms WRAY I would also like to commend you, Mr Chairman, for once again demonstrating yQur commitment to a very proactive ap proach to the needs of America's small businesses Hearings such as these really provide all of us, whether it be Government, private sector, or education in the nonprofit community, *with food for thought and certainly recommendations for action. I thank you for that opportunity. BPW is the oldest, as well as the .largest, organization in. Amer- ica dedicated. to. the needs of working women. We are 125,000 women and men from across America, business people and entre preneurs who are in business.. Our role is actually twofold Promoting women's roles in the workplace and helping business to adapt to the social and economic climate created by women's changing role One third of our mem bers in BPW are employed in or are owners of small businesses, and many others serve these small businesses either as bankers, computer specialists, accountants, telecommunications experts-po- sitions of that nature. As business Women, we deal daily with the impact of the chang ing labor force and the changing economy on the bottom line As women, we know our personal reactions to these changes and what we need from our employers and our Government, as well As citizen lobbyists, we have a unique, broader perspective bol stered by research We believe that the systematic entry of women into the workforce has created a revolution in our economy, our businesses, and our society Certainly, it is as profound as the changes brought by the industrial revolution You have heard throughout these hearings so eloquently today from my colleague from American Demographics about the increas ing number of women in the workforce These numbers have had dramatic effects on businesses in two ways The changing needs of their changing workforce and a very different business climate in which to operate~. . . The American labor force is being transformed by the incorpora tion of women into the labor force and the percentage of workers who have parental roles without someone at home to assume full time family and household responsibilities Because of this, the needs of families are going to play an increasingly larger role in recruitment efforts, benefit plans, and productivityincreaseg. 88~-].99O-~88.-5 PAGENO="0130" 124 Employees, and particularly women, can't leave their problems at home, as their employers might prefer, because, increasingly there is no one left in the home to take care of family and house- hold needs. The productivity of the American labor force will depend on business policies that allow~ for balancing work and family responsibilities of the mother and the fathers who increas- ingly share at least some of the family responsibilities. Demographic shifts as large as these also create new demands on the economy. Just as the baby boom led to an increase in public schools, health care services, and the growth of child-related indus- tries from Gerber, to Mattel, to Walt Disney, the incorporation of women into the labor force has created dramatic changes in the cli- mate in which business must operate. One of the most dramatic consequences' of the changing work- force is `the growth in business and services once provided by home- makers, such as child care. The incorporation of women into the labor force has also made people time'póor and willing to purchase setvices and products that compensate for lack of time. Cleaning services, microwave' ovens, VCR's and take-out' and home-delivered food services have all exploded in response. The rhythm of life Clso means people no longer shop during working hours. About 70 percent of households have no adult at home to shop, go to the bank, pick up the dry cleaning. Stores have changed their hours, and there has been a dramatic growth in per- sonal shopping consultants and shopping through mail order cata- logs. These combined forces have created a climate for American business in which' they must adapt or die. For example, if we can take a moment to look at the American tradition, the Fuller Brush Co., both their products and their `mode of delivery had to change. Women and men i~oW use Vanish drop- ins and Scrub Free instead of specialized brushes and elbow grease to clean their homes. The American woman isn't at home to answer the door when the Fuller Brush man arrives. Fuller adapted. It now specializes in beauty care brushes and sells them by mail with a telephone, order system personed by female customer sales representatives. Small businesses have always been the first to adapt to changing demographic and economic shifts. In this major shift, they are not different. We know anecdotaUy that small businesses `have made some of the fastest adaptations to the 1~amily needs of employees. Our small business women report starting onsite daycare centers, implementing parental leave policies, and doing flextime arrange- ments to keep valued employees. The increasing presence of women as business owners is a major change. The' women now own an estimated 25 percent of the Na- t~on's small businesses, and we are the fastest growing segment of the small business world. In 1982, despite significant barriers, women-owned firms generat- ed receipts of $98.3 billion and paid over $37 billion in Federal taxes. The policy innovations demanded by changes we have outlined are as broad and as far reaching as the changes themselves. Not all the changes are governmental. Many can, must, and are being made by the private sector itself. PAGENO="0131" 125 Economic theory indicates that the business sector will adapt to demographic change given enough time We applaud those businesses who are at the cutting edge of that change, such as Hallmark, Payless, Cashways, and others cited in the May issue of Savvy Magazine as best U.S. companies for women. I would also like to submit the article from that issue of the mag- azine citing these best U.S. companies for women. [The article may be found in .the appendix.] Ms. WRAY. Sometimes, American -society does not have that much time, and it is under those circumstances that Government needs to intervene, either through provision of information to make change possible, funding assistance to alleviate the economic cost of the change, or sometimes direct intervention to set a stand- ard below which American society will not fall. The changes we have described create three specific areas these hearings should address: - - - The adaptation of businesses to the family needs of their work ers; the adaptation of businesses to the changing economic climate created by the massive demographic changes taking place; and the specific needs of the increasing numbers of' businesses In the area of family policies, some corporations such as those we have already cited have been pace setters Small businesses are also experimenting with creative ways of providing such services. - - These private sector initiatives are to be applauded, and we be lieve more will occur as time goes on. However, the very posit of efforts by businesses points up a spe cific need for data and assistance by the Government. In our continuing research, we have discovered there is almost no research available outside individual large corporations on family policies Most of the information available on which policies work, which are cost effective, boost productivity, and increase retention and re cruitment is anecdotal and specific to the corporation doing the study. - - - - - - -~ It is in America's business self interest to have these answers, and it is especially in the interest of America's small businesses These are the first to have to adapt and the last to be abl~ to afford the research that would help them do just that Therefore, we propose a study be undertaken under the auspices of this committee to determine what America's small businesses are doing to provide for the family needs of their workers, to docu ment policies which are working, to set up demonstrstion projects to test various responses to the needs of employees, and provide quantitative documentation of effectiveness and cost benefit to the employer, and to establish the number of workers actually covered by such enlightened employees. -* - - Because there are cases where specific results are needed~ BPW continues to support legislative priorities such as the Family and Medical Leave Act an4 pay equity legislation, and we certainly hope that members of this cQinmittee will join us in these various efforts. - - PAGENO="0132" 126 In the area of the changing economic climate and the resulting business climate~ we believe data is even more needed. The pace of thange in our society is not abating. It is now normal and will continue, but we do not yet understand the full impact of the changing workforce and the changing family on our economy. Today, our small businesses, from which our future large busi- nesses will grow, are trying to make their way in the most dra- matically changed economy since the industrial revolution. They are trying to make their way without a road map. Imagine how much more productive they would be, how many more new small businesses would survive, and how many more jobs would be created if they could have access to the sort of planning projections currently available only to farsighted corporations. We call, therefore, for a second study to detail the changes in the workforce and the economy which will be ~caused by the changes in the workforce, with special attention to the adaptations which small businesses must make. This study should protect workforce changes to the year 2010, dissect and describe specific economic needs of markets produced by those changes, and issue recommendations for small business adaption. These studies will give small business the edge they need to make it in our dramatically changing. economy. Finally, we believe there are policy efforts needed by America's most dramatic economic force, worner business owners. We do make progress against all odds, to quote Julian Roe, the president of NAWBO, and we believe timely information must be geared on women business owners and accurate information made available to women business owners about Government programs, and procurement, and contract procedures. NAWBO has an jnteresting idea with its women business owner Federal initiative, and we will be discussing this with them at length. Our legislative priority is passage of a law to ensure women equal access to commercial credit. This right has been guaranteed for personnel credit since 1974, and it is a disgrace that we do not have the same, as business women. We commend you, Chairman LaFalce, for your efforts in this area and are eager to work with you to pass the needed bill. The changes facing business, especially small businesses, are pro- found. Business, Government, and society can respond with hand wring- ing, denial, and stopgap measures designed only to meet needs so pressing they cannot be denied, or we can meet the future with foresight, a sense of challenge, and see these changes as the oppor- tunities for progress in economic gain which they are. We believe the businesses which will survive are those who hit the latter route, and we are working within the system to forge that route. We ask your help to provide the data, the legislation, and the support needed. Thank you very much. PAGENO="0133" 127 [Ms. Wray's statement, with attachment, may be found in the ap- pendix.] Chairman LAFALCE. Thank you very much, Ms. Wray. I want to thank both of you for your excellent testimony. We are going to have one more day of hearings on the subject of women in business, and women business owners in particular. Then we are going to wrap it up and draft a report and legislative recommenda- tions, which may include the necessity for additional studies and reports, as some of you pointed out. But you have been very, very helpful. I found your testimony informative, interesting, and insightful and look forward to working with all of you as individuals and cer- tainly look forward to working with you as president of the Nation- al Federation of Business and Professional Women. Ms. WRAY. We would welcome that opportunity. Chairman LAFALCE. Surely, as I have been working with NAWBO. I want to thank you very much. The committee will adjourn until Thursday morning. [Whereupon, at 10:40 a.m., the committee adjourned, subject to the call of the Chair.] PAGENO="0134" PAGENO="0135" NEW ECONOMIC REALITIES: THE ROLE OF WOMEN ENTREPRENEURS THURSDAY, MAY 19, 1988 HOUSE OF REPRESENTATIVES, COMMITTEE ON SMALL BUSINESS, Washington, DC. The committee met, pursuant to notice, at 9:40 a.m., in Room 2359-A, Rayburn House Office Building, Hon. John J. LaFalce (chairman of the committee) presiding. Present: Chairman LaFalce; Representatives Hayes and Camp- bell. Chairman LAFALCE. The Small Business Committee will come to order. Today is the sixth, possibly the last, not definitely, of our present series of hearings on women's business issues. Women are succeed- ing in business, but to borrow a phrase from the video presented at our hearing 2 days ago, they have succeeded against all odds. In these hearings we have explored the impressive contributions women can make in a wide variety of trades, once they overcome skepticism and prejudice. As myth busters, women have become manufacturers, steel producers, architects, and engineers, owners and operators of successful businesses in virtually every industry classification. We have also examined matters relating to Government procure- ment for the reason that women have virtually been shut out from contracting opportunities, receiving less than 1 percent of the Fed- eral procurement dollar. Other issues brought before the committee include access to credit, the changing nature of the workforce, and the effectiveness, or lack thereof, of public policies and programs designed to encour- age and enhance women's business ownership. Our economy needs the talent resident within the female half of our population, but in order to release those reserves it will be nec- essary first, to compensate for the cultural and educational handi- caps suffered by women over the years. These hearings have indicated that there is a broad perception amongst women that they lack equality of opportunity, and rightly so. Socially acceptable roles Of the past have provided little encour- agement or training for the management or leadership roles women must assume as heads of their own firms. Today, we will look to the future. We want to document what is needed to overcome the feminine hähdicap, prepare women to meet (129) PAGENO="0136" 130 the challenge, and maximize their economic potential, and there- fore, most importantly, the economic potential of America. We have a prestigious panel of witnesses this morning. We will hear from Ms. Beatrice Fitzpatrick, president and chief executive officer of American Women's Economic Development Corporation [AWED], perhaps the most successful management and training program ever devised for women business owners., Mr. Martin Mayer, the husband of Karin Lissakers [laughter] and the token male at our six hearings thus far on women in busi- ness. Incidentally, in his own right he has also been a journalist and author of best selling books on the American economy such as: "The Brokers," "The Schools," "The Lawyers," "The Builders," "Madison Avenue USA," and others. I believe yesterday he' `cam~ out with a new book entitled, "Mar- kets." Mr. MAYER. Thank you. Chairman LAFALCE. I expect a free copy for that. We also have Ms. Esther Shapiro, best known, perhaps, as the creator-owner and coproducer of Dynasty, winner of the Golden Globe and People's Choice awards. Ms. Ann Ascher, president of Ann Ascher, Inc., member of the President's Council on Private Seótor Initiatives, founder-member of the Los' Angeles Music `Center, a superb business woman and a strong influence in promoting women as players in today's econo- my. We also `have with us Ms. Laura Henderson who is president of Prospect Associates, a small business that is growing large, who will be representing, once again, as our final witness, NAWBO. I want to welcome them to Washington and express' my apprecia- tion for their efforts and contributions on behalf of this important issue. Is there any member of the panel who has a statement to make? I do know we have a statement that Representative Silvio Conte would like to make. He is not here. I ask unanimous consent that it be put in the record. So ordered. [Mr. Conte's statement may be found in the appendix.] Chairman LAFALCE. Before we go `to our regular witness list `and before we hear the testimony, we also have with us today Congress- woman Connie Morella. Connie, I am going to ask if you will come up here for a second, if you would. First, to' make any statement that you would like to whatsoever, and second, although Ms~ Laura Henderson will be our last witness today, she is fortunate in having ~ou as her Congresswoman, and you might want to say something. TESTIMONY OF HON. CONSTANCE A. MORELLA, A REPRESENTA~. TIVE IN CONGRESS FROM THE STATE OF MARYLAND~ Ms. MORELLA. Mr. Chairman, you read that just the wa~y I gave it to you, thank you. [Laughter.]' ` ` It is a pleasure to be here today before your Committee on Small Business, and to know that thi~is one~in a long series of meetings where you have focused on women in small business which is so PAGENO="0137" 131 critically ~important, and the fact that you have spent the time doing it indicates your true commitment Yes, indeed; this ~is a very prestigious panel representing women entrepreneurs who have done it the hard way and who can share their experiences and their recommendations for the legislative body, for Congress to do something about it Of course, I am. here not only to applaud them and to applaud you for the hearings and what the results will be, but also because it is a special honor to always introduce a constituent, and it is a particularly special honor when you are introducing a constituent of whom you are so proud and admire in terms øf what she repre- sents for the entire community of women business owners. So, Laura Henderson, although you are last listed, when I intrO- duce you, I know I am talking about what the other members of the panel have also accomplished in their field She is president and chief executive officer of Prospect Associates which she founded in 1979 That is in Rockville, MD, Montgomery County It is one of the fastest growing health communications and biomedical research firms in the United States, and it provides services to the Federal Government, to private industry, and has a very large staff and sales. All of them have contributed to the eco- nomic well-being of our area and our country. In 1988, prospect was selected by Montgomery County as its Out- standing SmaU Service Firm of the Year It also recently won the 1988 Maryland Award for Economic Excellence, the only one that is awarded highest recognition, given by the State for economic de velopment In addition to that, she has been well known in the business community, has been an especially active spokesperson for the small business community, and has served on numerous com- mittees. Among her unique accomplishments is to have been appointed as the first woman to serve on the United States Chamber of Com- merce Procurement Council, attesting to the success of her compa ny, Prospect Associates She has recently become a member of the Committee of 200, and this membership, as you know, requires a woman to own and have control over a business with annual sales in excess of $5 million. I know that she is testifying on behalf of NAWBO, a very active organization of women business owners I am familiar with many of the people who belong I just wanted to add as an aside, she has also been involved, as many of the women business owners have, in trying to do something with child care The Congressional Caucus for Women's Issues actually issued a child care challenge to public and private companies throughout the Nation for innovative child care projects Montgomery County Maryland's Office of Economic Development nominated Prospect Associates for its innovative child care, and I think this also indicates another one of the obsta des, as you mentioned, against Etil odds~ that they must also con front and try to solve So, it is my pleasure to introduce Laura Henderson as she re fleets women throughout the Nation I thank you Mr Chairman You are doing a good job Chairman LAFAtCE Connie, would you introduce me all of the time in the future?. You do a great job. PAGENO="0138" 132 I know Connie a number of different ways. First of all, as a Member of Congress. But second, we are both members of the Con- gressional Caucus for Women's Issues, and you know what we do in that respect. But we are also members of the Italian/American Legislators' Club, and if you do not know what we do there, we have one thing in common. We come from all over the country and have different perspectives, but we love the same food. [Laughter.] We get together about every month or so and eat that same food. Ms. MORELLA. Not only that, we talk with our hands. [Laughter.] Chairman LAFALCE. Connie has many credits that she can point to, but 1 think she should be most proud of the fact that despite the fact that she is from Maryland, the Italian/American organization in the city of Buffalo, NY, where I come from, this past year hon- ored Connie Morella, by coincidence, as their Woman of the Year and gave her the Queen Isabella Award. [Laughter.] I would be very remiss if I did not do one other thing. Since Connie is introducing her constituent, I have a constituent in the audience tonight, and I had the pleasure of having dinner with her and her husband last night, Ms. Marilyn Holinbrook who is here watching her first congressional hearing. Marilyn, welcome. With that, it takes a lot of time for Congress to get to business doesn't it? Let us get to business, and let us have as our leadoff witnesses, the star of this morning's USA Today publication with her picture on the front page of USA Today, both of you. Oh, Esther was on the front page and you were on the inside. Oh well, what are we. going to do about that Bea? I'm sth~prised at you. * [Laughter.] * Ms. FITZPATRICK. I defer to a better woman. Chairman LAFALCE. We're still going to have you lead off, Bea. Ms. FITZPATRICK. Thank you. Chairman LAFALCE. I had the pleasure of coming to know Bea, I think it was in 1980 when, at that time, we were working on women's issues and women in business in particular. Ms. FITZPATRICK. Were those the last hearings that were held on that subject? Chairman LAFALCE. Until I became chairman of the full Small Business Committee, right. [Laughter.] Ms. FITZPATRICK. Things have changed in the last 8 years. TESTIMONY OF BEATRICE A. FITZPATRICK, PRESIDENT AND ChIEF EXECUTIVE OFFICER, AMERICAN WOMEN'S ECONOMIC DEVELOPMENT CORPORATION, NEW YORK, NY Ms. FITZPATRICK. My name is Beatrice Fitzpatrick. I'm president of the American Women's Economic Development Corporation, a nonprofit corporation which was founded in 1976 under a grant from the Federal Government, U.S. Department of Commerce Eco- nomic Development Administration. I would like to thank Chairman LaFalce for his very deep and sincere interest in promoting the welfare of women business owners, because he has the vision to understand the importance that women business owners hold for the growth and development of small business in our country, particularly in the coming centu- ry. PAGENO="0139" 133 We also would like to thank the committee for its past support of our organization and for making our existence possible. All over the world today, nations of every political persuasion, nations as diverse as African countries, Sweden, Russia, China, are urging their citizens to become entrepreneurs. Whatever their po- litical persuasion, they cannot deny the economic benefits of an en- trepreneurial economy. At the same time this is going on all over the world, in the United States there has been a phenomenal growth of women as small business owners. We all know that women started in the last 20 years going into the workplace in increasing numbers, and as they have gone into the workplace, been forced to go in, in order to support their families, they have come to learn or feel that the best way they can solve their socioeconomic problems is to go into their own business. There is nothing unique about this. Waves of immi- grants from all over the world have come to this country and come to the same conclusions, and helped enrich this Nation. Women who are native Americans in the sense of participating in business at the level of their ability are really equivalents to the immigrants who came to these shores. These women are coming from a different culture, a different kind of understanding of life than people who have been in business for a long time would have. They come with great skill, they come with great talent, they come with energy. These are not alienated people. These are not people who feel hopeless. These are people who are full of hope and energy for themselves, their families, their Nation, and the future. The things they bring with them are incredible talent and the ability to do something particularly well, well enough to make them feel that they can overcome all the obstacles that have exist- ed for women as business owners in our country and succeed. They are driven by necessity. They are driven often by desperation. They are women of all kinds. You have minority women who feel that the only chance they have to work at the level of their ability is to go into their own business. You have women who are displaced homemakers, who stayed home, and raised a family, and suddenly find, after having done that, that they must go to work in order to survive, and they have been out of the workforce so long they cannot get a job anywhere near their level of skill or ability. There- fore, they come to the, conclusion that opening their own business is the only way for them to work at the level of their potential, which after all is the American dream, that people get the opportu- nity to work at the level of their potential. You have younger women who are single heads of households, and are raising children alone, and who feel, OK, if I have to raise the kids and make a living for them at the same time, I will start a business in my home, keep one eye on the kids, and one eye on the business, and support us in that way. Then you have women who have reached the top level in their corporations, women of extraordinary achievement in the business world, who are deciding that the only way they're going to get the authority, responsibility, and financial reward which they feel they're entitled to, is to go into their own business~ So, from all di- rections in American life, women are coming to the conclusion that small business ownership is the answer to their problems. PAGENO="0140" 134 This is an exciting development for our country, because every- one knows that the majority of new jobs are created in small busi- nesses. With large corporations downsizing the way they are and are going to continue to do, the hope for new job creation in this country is with small business. Now, if the most important new factor in the picture of small business ownership in this country is this emergence of women, this drive and determination of women to realize themselves, to take advantage of the American dream and make it their own, then the country has an obligation in its own behalf to pay atten- tion to what is going on and to see what can we do to support and assist this exciting movement. It is our experience that the thing women who are going into business want the most is training in the business end of business. Most women come into business knowing the creative end of their business and are highly skilled at it. They have had very little op- portunity to learn the business end of their business. Almost every woman who has ëome into our training program is terrified of finance. Now that is not genetic. You are not born being afraid of money. Something goes on in this culture that says to women it is not feminine for you to worry about large sums of money. It is not appropriate for you to do this. We have helped 45,000 women in every one of the 50 United States since our found- ing in 1976, and if most of the women you see are afraid of money, this is something that society does. Women need an opportunity to learn everything about financial planning and control which they have to know to run a small business. To allow women to go into business ownership with all the poten- tial they have for economic expansion and not teach them the rules of the game of doing business' is like sending young people out look- ing for jobs without having learned how to read and write. To me it's the exact equivalent. So, if anyone is very serious and concerned about the potential for our economy that women offer, it is incumbent on us to provide the information and knowledge that they need to succeed in bnsi- ness. We are not saying here is some poor decrepit group of people who have no skill, no talent, and give them some kind `of a welfare program to make it possible for them to live. We are saying here is extraordinary talent. Here is extraordinary energy. Here is ex- traordinary potential for our country, not only economically, but socially. Give them the tools they need so they can function at the level of their ability ,in the same' way we say we want' this for all people. Therefore, we ask that the Congress of the United States begin to make money available, and not only money, but support programs. Now, we used to be totally federally funded. We don't get one penny of Federal funds at this time. That's fine. We are doing a good job. We could do 10 times as much as we are doing with a little bit of Federal support. We urge the Federal Government to make the kind of training that we have developed with the support of the Federal Govern-. ment, available to women all over this country. The return on in- vestment will' be incredible. Women in our program create an aver- age of 2.2 new full time and 2.3 new part time jobs over the PAGENO="0141" 1~35 number of employe~s t~y had before they came into our training program Their sales increase over 121 percent Their profitability increases What happens to their families and their own self image and the contribution they make to the community is multiplied Women are undertaking to help other people who would otherwise have to go on welfare or have to get helD themselves. So, the Investment in helping women be successful in business is one of the best invest- ments this country can make~ We have developed a proposal requesting $4.5 million from the Federal Government and pledged, as a condition of that money, that we will raise an equal amount, $4 5 million from the private sector, and ?et about $14 thillion in contributed goods and services from the private sector, in order to establish regional management training and technical assistance centers for women all across this country. To ask for the establishment of four regional centers for women business owners in a nation of our size is~- Chairman LAFALCE; Just a second, Bea. The bells have just rung indicating that there is an extremely unimportant vote, a motion to approve the Journal. That would delay our operations by usually at least 20 minutes, so I would think the other Members would want to go make the vote I am making the deliberate judgment that I am going to miss that vote, that this is more important, and we will just continue You can join us when you. will. If any reporter here wants to criticize me for an absentee voting reco~'d, it is a question of priorities. Ms. FITZPATRICK. The women of this country will thank you. [A short recess was taken.} Chairman LAFALCE. Please continue. Ms FITZPATRICK We think the establishment of four regional management training centers, one in the Northeast, one in the Midwest, One on the west coast, and one in the South, is the mini mum that the Federal Government coi~ild do to make this kind of training available nationally We would, over a 3 year period, serve 67,000 women in a variety of programs, and they in turn would create and maintain a minimum of 22,000 jobs so that the cost to the Federal Government of this program would be $67 per woman, or $217 per job created or maintained, which is by far the cheapest job creation and maintenance program that the Federal Govern ment or any other Government supporte I think women would ania~e you with the results that they can achieve with relatively minor investment, but serious, well thought out investment, in their successful future We would like to work with you to make possible the harnessing of the private sector and the public sector in a partnership to support this movement of Women into business ownership We urge Congress to take this very seriously We ask you to do this, not just as a favor to the women of this country, but as a favor to the people of the United States, and to the growth of our economy, and to the support of the entrepreneurial foundation of our country and its successful future for all its citizens Thank you very much~ PAGENO="0142" 136 [Ms. Fitzpatrick's statement may be found in the appendix.] Chairman LAFALCE. Thank you very much, Ms. Fitzpatrick. Our next witness will be Mr. Martin Mayer. Mr. MAYER. I have no statement to distribute to you. Chairman LAFALCE. You have never been at a loss for words. Mr. MAYER. You said I was the only man testifying in 6 days. As men will-- Chairman LAFALCE. Against my will, but at Ms. Fitzpatrick's in- sistence. Come tutti gli uomini, as your caucus n~jght say. I have a tendency to give personal statements anyway, and this is a person- al statement, and therefore, I don't think that important to get ab- solutely exact On the record. It is by nature background, but in this matter I think background is extremely important. TESTIMONY OF MARTIN MAYER, JOURNALIST/AUTHOR, NEW* YORK, NY Mr. MAYER. My name is Martin Mayer. I write, mostly about business subjects and banking these days. I have had two connec- tions with Government. In this decade, I was a member of Presi- dent Reagan's National Commission on Housing, and back in the 1960's, for 6 years I was a member of the panel on Educational Re- search and t~evelopment in the Kennedy and Johnson White House. The connection I have with Mrs. Fitzpatrick goes back to those days when I was chairman of the local school board on the east side of Manhattan, and she was president of the PS-116 Parents Association. It was by some margin the best parents association in the district, indeed, quite possibly in the city. When she became co- ordinator of the Head Start Program, also in the 1960's, she ran the best Head Start Program in the city. There are very few people in the world who have really interest- ing ideas. That is sort of sad. One runs around and one interviews a lot of people, and interesting ideas are not there in great quanti- ty. Of the small cohort of people who have interesting ideas, there are even fewer who have the wit, and the drive, and the moxie to carry them out. Mrs. Fitzpatrick has done this repeatedly in differ- ent contexts, with different human, financial, and physical re- sources, actually within my sight. I've seen her do it. One of the things that banking and politics have in common, it seems to me, is that in both of them you really have to place your bets essentially on individuals. One of the things that recommends AWED to me is that Bea gives you unusually short odds that the money will be well spent and that results will come out of it. It is. a remarkable experience to go into an AWED gathering. The room absolutely crackles with energy. When you see it, mci- dentally, in a big ballroom in one of their annual big meetings where you may have a couple of thousand women, the energy is almost too much for the room to contain. There is a vast variety of womankind in the room, all races, all creeds, all colors, all shapes and sizes, all ages, and all ambitions. They are there for a purpose. You have a wide variety of talents present, too. They are concen- trated and they are demanding. PAGENO="0143" 137 It can be said, I think, that when they come to AWED, they know what they need, and they have gotten past the stage, most of them, of knowing only what they want. Therefore, they are much more responsive, and they are much more able to grasp what is of- fered. We are dealing in these rooms with people's dreams, but you are dealing with people's dreams in a second stage after they've had to become hard headed about it, because they found that while they may have dreams, dreams don't get you there. You're going to need a wide variety of skills. You're going to need things that you didn't know you needed when you had the dream and when you started to think of yourself as someone in business for oneself. One of the fights that Mrs. Fitzpatrick's board has had with her-we've had several over the years-was over our insistence once that she start an alumni group and ding dong her graduates for money. If we were going to go out and try to help her raise money from foundations and from corporations, there had to be a demonstration that the people who had been through the program were willing to contribute and were willing to make this statement that what they had gotten from it was worthwhile. Mrs. Fitzpatrick remembered these women essentially as they were when they arrived in the program. They were people who had a struggle. They were sweating through the rudiments of account- ing. They were laboring with the mysteries of merchandising. They were absolutely consumed by their own needs, and they were people who needed a lot of help. What we said was, well if they've got the help they're over some of that now, and they should be grateful, and they were. Letters went out and checks poured in. The group had done better than Mrs. Fitzpatrick thought. Many of these people, indeed, were not struggling any more. They were successful, they had businesses, it was operating, and they were delighted to help their successors. As she said at breakfast, the one mailing brought in $69,000. it is not that much money, but this was still a relatively immature organi- zation. It still has only a limited number of graduates, and we are not talking about people who can give in the thousands mostly. You are talking about people who sent $100 here and $50 there be- cause they had it, they wanted to make a gesture, they wanted to help the others who were coming along. She did better, in fact, than the colleges do and the colleges have been working on alumni associations for years. We are still push- ing her to work on the alumni. It takes an investment. This has been a bare bones shoe string operation which has not been able to make a major investment in this sort of fund raising. But every time it has called upon alumni, every time it has called upon the people who have been through the program for their assistance, it has had a demonstration of its. own success from that call which is very impressive and rather moving. You mentioned, Mr. Chairman, cultural and economic disadvan- tages that a number of women have had, and one does indeed feel this. But I would like to say that from a public policy point of view one of the major attractions of AWED it seems to me, is that it does not require credentials. There are fewer and fewer institutions PAGENO="0144" 138 in this society, there are fewer opportunities offered to those who want to come along and try to take them. When I was in the education business, I was increasingly dis- turbed, and I am still, though thank God I have got: off that fly paper, at what had happened in this country to change the image of education from one of an educational ladder that people could climb, to one ~of. educational barriers that kept you `out:öf things if you didn't have the proper credentials. This has `happened in our lifetime. It is bad for the schools, it is bad forthe soci~ty. There have been fewer :and fewer opportunities for battl~field promotions in this country~ You eannot get into corporate training programs without certain pieces of paper. What these pieces of paper require primarily, they also take a certain amount of brains, and skill, and talent, but what they require primarily `is what we used to call `sitzfleisch, the ability to sit down und take instruction, and be a good boy or girl, and hang' around and follow the rules of some educational institution, rules Which are made for an average. If you don't fit into that mold andY you leave, there is a punishment which you are told all the tithe that may follow yo~ the rest of your life. AWED does not ask about people's crede~itials. It offers an educational ladder. It offers an educational ladder that is tai- lored to something that people want, that they know the~ `want, and that they will work for. It is unthreatening. You don't~have an examination at the ends It is unfake. It's not something Where you have to accept somebody's assurance that if `you do A, B will happen to you, which may or may not be true since really all any- body can do is teach What somebody learns remains his own busi ness. So, the central fallacy of ~ducational theory is that' because you teach it, people `learn it. They may or they may not, and the"y~ may learn something quite different from what `you are teaching. These people, as I say, know what they need, so they know what they have to learn, `and they are very helpful to those who advise them and counsel them. The role of counseling In what AWED does has been enormously important, and the fact that the counselors are themselves practitioners, people who are active i'n the business~ es that these people want to go into. This means you' get an effi- ciency which is quite unusual in an educational enterprise as a function of how people get into these things. What you learn is validated by your perforniance, which is the best way to learn. It's the way you learn how to play a musical in- strument. It's work. You have a certain number of failures. But if you feel yourself getting better you have this increase in energy. One of the reasons that I think there is `this kind of energy in the AWED operation is people sense that if they do what they're work- ing at they get better at it, and that is, after all, What they are there for. There are no artificial criteria. You really can make measurements of your own performance in ways that are unusual in more formal structures. I believe in education, but it does have ` awful empire-building tendencies, and it has a tendency toward self-satisfaction, and it has a tendency to measure inputs rather than outputs. One of the nice things about AWED is that it really is, `if one may use an awful sort of cliche, output oriented. It is for real. PAGENO="0145" 139 To some extent Bea lucked into this, because she couldn't afford anything else. She couldn't go out and buy teachers, she couldn't go out and buy educational expertise. She was reliant upon volun- teers to come in and help these women, and upon the experience of the volunteer that this was something they very mach wanted to do. You started off by making a virtue of necessity, and it turned out that you were making a virtue of a comparative advantage. The or- ganization is now committed to it, and one of the things it is not asking money for is to pay people to be professional trainers. They have a certain number of people you have to have, obviously, to co- ordinate programs, but the important work is going to continue to be done by volunteers. When you talk about private/public sector there is some tenden- cy to think gee, it's money. But it is not money. It is a matter of the will to do something. Finally, I feel strongly that not only is there the larger scale eco- nomic value of having women go into entrepreneurial situations, there is also, in this country, a deep and growing need for neigh- borhood enterprise, for locally based enterprise. I gave a talk on Monday of this week to the Shopping Center Convention out in Las Vegas-24,000 people registered in that convention. I guess there was a black face or two. There were a handful of women. Basically, the people who are developing and working in shopping centers were my hosts, and they are good guys, and one is not trying to stand in the march of progress, but one of the things shopping cen- ters do is that they make the neighborhood enterprise more diffi- cult. It is a danger to this society. We need something that feeds in neighborhood enterprise, feeds in neighborhood stores, feeds in neighborhood service operations. One of the advantages that you get from tapping into this commu- nity is that women are more tied into this neighborhood, as against the traditional male situation where people leave the home, and go elsewhere, and return at night. This provides an opportunity to participate in the revitalization of many of our urban neighbor- hoods that are now deeply troubled. So, it Seems to me that there is a public policy issue that does transcend some of the economic things, that we are talking about. We have seen that in what Bea has done in New York. What you get from it is a modern version of the yeomanry which was so im- portant in the development of the theory of this country's Govern- ment. I think this should be part of your deliberation and consideration when you think of where the Small Business Administration, indeed, the Congress should put money. There are great resources of women who want to be in business, want to have their own shop, and as a freelance writer I have this strong feeling anyway for people who do not wish to be responsible to large organizations and want to go do their own thing. This organization has been quite a spectacular success in New York and in the outreach that it has done. The question of whether it can be generalized geographically is something that you cannot answer until you try it. I think you have to do it one step at a time. PAGENO="0146" 140 Bea is asl~ing for four centers. If we could get funding for one or two for the first year, I would, as a member of her board who does not wish to see her drop dead traveling around; be just as happy. But I think you have to get started with it. I think you have to move one step at a time, see how many times you can clone the Mrs. Fitzpatricks of this world, how wide the span of this sort of effort is, how large a cadre of volunteers for this very exciting work you could find in. various places in this country. It isn't much money. It would be, to a large degree, supported by the private sector. And yet, as so often happens, without some sort of push from this remote center of the country, it gets to be more difficult to do. I should think it would be worth your efforts to move it along into its next stage. Thank you. Chairman LAFALCE. Thank you very, very much for your re- marks. I was going to go iii order, Ms. Shapiro, Ms. Ascher, and then Ms. Henderson. Ms. Henderson, you have to leave by 11:15, is that cor- rect? Ms. HENDERSON. 11:15 or 11:30. Chairman LAFALCE. Then we probably still can go in order. Our next witness is Esther Shapiro who was on this morning's front page of USA Today. I have in front of me an article, the front page, of New York Magazine not too long ago. Esther Shapiro and her empire. The real star of Dynasty. Ms. Shapiro is surrounded by Linda Evans, John Forsythe, and Joan Collins. They, of course, are relegated to the background. [Laughter.] We are delighted to have you with us, Ms. Shapiro. Ms. SHAPIRO. That article really spoke about the entrepreneurial side of me which is what I thought you might be interested in~ TESTIMONY OF ESTHER. SHAPIRO, CREATOR-OWNER/COPRO- DUCER, AARON SPELLING PRODUCTIONS, LOS ANGELES, CA Ms. SHAPIRO. Mr. Chairman and members of the committee, I am both honored and grateful for the opportunity to be here this morning, and to speak to you on the subject of women entrepre- neurs and their economic potential. I am pleased to be able to introduce myself to you as a woman entrepreneur, one of more than 3 million in our country. It is a designation I take pride in. I am heartened by the fact that every year there are thousands of women newly adopting that title, and I hope that thousands more will have the same chance because of the work of this com- mittee. I am reminded of how 28 years ago at the beginning of my career, I attended my first general meeting of the Writers Guild of America. I looked around the hall at the membership present, about 2,500 screen and television writers, and it did .not escape me that the vast majority were men. Only a handful were women. I was young. I had, I think, even then an entrepreneurial spirit that was a gift from my immigrant parents. Or, perhaps, it was just the damn fool fearlessness of youth. But for whatever reasons, I en- PAGENO="0147" ~14~i tered what Was tru~i~~ i~n's world :wjth~üt a setise of~1in~iithtjons, and with my husband Richard, I went to work I created stories focusing on the besiGged Teenage a1coho1i~s, battered wives, victims of racial hatred Later as ~ vi*~e president at ABC, one ~f the few female vice ptesidents at a major network at the time, :i was the executive in charge of deve1opi~ig such projects as "Women's Rooxn,'~ "Masada," "Friendly Fire," "East of Eden," "Ike," "Inside the Third~Beich," ai4 "Winds of Wa r." I left the network to become cocreator, coexecutive producer, and most important, coowner of Dynasty, oiie of the most popular dramas in the history of television, seen weekly by an audience of 150 million people worldwide During this period~I becan~e the~ seniOr vice president of Creative and Corporate Affairs for the largest independent production corn pany in Hollywood, with whi~ch my compth~ty was partnered This past television season, I served as executive producer on the pilot for Heartbeat, a 1~ho~ur drama about a group of female physicians who run their own clinic All told, I have been involved in the de velopment of over 500 hours of creative product Chairman LAFALCE. Do we think that pilot is going to~be a, regu- lar run? Ms SHAPIRO It has been on for 6 hours now, and I 1~hmk we will find out by Friday. Chairman LAFAI~OE. Great. I haven't ~en it. I hope I have the opportunity~ Ms SHAPIRO That show was, incidentally, inspired by my asSo ciation with Bea Fitzpatrick in which I saw a number of women's clinics springing up acrossihe country, and S~ràh' Davidson, the noted novelist, had the notion, and together we fought that one an4 got it on the air. Chairman LAFAL~ii~ As soon as I saw that Dynasty had an audi ence of 150 million-~..-- Ms SHAPIRO A hundred networks Chairman LAFALCE The ne~~t time you need a walk on, a Con gressman walking on somehow, I just wanted you to know--- Ms SHAPIRO President Ford and Henry Kissinger were very pleased to do it, and they did it Chairman LAFALCE As president of the College Dramatic Socie ty. [Laughter.] Ms SHAPIRO They did it at scale Ver7 cheap, $825 Chairman LAFALCE I~m very cheap Ill do it for nothing [Laugh ter.] Ms SHAPIRO Today~ there are no longer the numerical dispari ties evidenced years a~o Many women have begun to play impor tant roles in the entertainment industry Po cite a few, Marcy Carsey is coexecutive producer and coowner of the Cosby Show, which has already earhed more than $800 million in syndication sales, the highest in television history Suzanne DePasse is presi dent of Motown Productions Sherry Lansing is coexecutive produc er of Fatal Attraction, a theatrical film that has grossed more than $150 million to date Dawn Steel is currently president and head of production for Columbia Pictures But such Success Stories do not reflect the entire picture, I'm afraid, Thereiia~~stjll never been a fe~naie president of a network PAGENO="0148" 142 television division, and the chances of one emerging are slim. The number of actual owners or ~chief executive officers in the enter- tainment business is equally disheartening. Men still decide to a large degree what the American public watches in movie theaters and on television This is particularly ironic in light of the fact that women comprise 52 to 54 percent of the national population,. and that the 18- to 55-year-old female viewership is the demographic most eagerly sought by the networks and'advertisers. I was asked to be the keynote speaker M the annual American Women's Economic Development Conference. 2 years ago.. Frankly, I didn't know what to expect. I had read with great interest the AWED charter, and I was fascinated with their `goals and~ inten- tions, but nothing could have prepared me for what I was about to witness, Mr. Chairman. It is hard for me to relate today the feeling that I got when I looked out into that gathering of nearly 4,000 female entrepre neurs, sensed their dedication to the very best ideals of the Ameri- can business community, and felt their commitment to being a con- tinuing and growing part of that community. I had spent much of my professional life in pursuit of that elu- sive commodity called a hit, and I knew almost instantly that AWED was an organizational blockbuster. When I was asked to join the board of AWED several .months later, despite the geographical distance-I live in California-a husband, two children, and a production company, it was an offer I couldn't refuse. Here was an organization that paralleled my own beliefs and at- tempts to help women to become the best professionals they could be. Here was an organization which benefited women from every walk of life, not just those who went to Ivy League schools or were born to wealth, but those who, based on ability alone, had the po- tential some day to become leaders in a wide variety of fields. Here was an organization that exploded the myths and put the lie to the stereotypical attitudes that say women can't add and subtract, that they're afraid to take risks, that they're not strong enough to com- pete in business, that tears are a sign of instability, that women need to be taken care of by men or Government. Women, by virtue of their management of the family, the house- hold budget, the moral values of the home, were already halfway to becoming good business managers. Here was an organization that trained women to market their ideas, their products, their skills, to deal with cost structures, and cash-flows, and the complexities of business life. I had participated in their workshops and found them exhilarating. The staff, headed by Bea Fitzpatrick, was superb. Most impressive of all was AWED's stunning recordof success. While the national rate ~of small business failures in the first. 5 years is a disheartening 4 out of 5, here was an organization that had fewer than 5' failures for 1,000 women trained. Here was an organization with a pilot program that could help women across the country become business people, entrepreneurs, more produc- tive Americans. Inherent in AWED's hope for the advancement of women is our belief that our success will not be a female success, but rather a human one. We want that success to come not at the expense of PAGENO="0149" 143 men, but rather as a result of a partnership between men and women. It is my hope that the partnership and the values that AWED espouses will be part of a new movement, one for the 1990's and beyond, which will create new possibilities for millions, men and women, who can't see their way to them now. The writer of Ecciesiastes urged that, "Whatsoever thy hand fin- deth to do, do with all thy might." As women, we have used our hands to bathe our children, to help our husbands, to soothe the ill, to minister to the wounds of war. What we now ask is for the op- portunity to use our hands to help ourselves as well. What we are asking for from this committee and from our coun- try is not a handout, but a hand up. "Give me a fish," it is said, "and I will eat for a day. Teach me to fish, and I will eat for a lifetime." We greatly appreciate the initial help AWED has had from Con- gress, and we have already gone into the private sector and found additional funding, but more help is needed if this program is to be expanded and if women across the country are going to be taught to fish the abundant waters of American business. Women need the continued help of organizations like AWED, and AWED needs the continued and now extended financial support of Congress. With that help, the story of women's entrepreneurship in the 1990's will be the accounting of a great multiplier effect through which women build on their achievements of the past to create new opportunities for themselves, for other women, for our country, and for the world. Thank you very much. [Ms. Shapiro's statement may be found in the appendix.] Chairman LAFALCE. Thank you, Ms. Shapiro. Our next witness will be Ann Ascher, president of Ann Ascher Inc., I believe of both Los Angeles, CA, and Washington, DC, and a member of the President's Council on Private Sector Initiatives. Ms. Ascher. TESTIMONY OF ANN ASCRER, PRESIDENT, ANN ASCHER, INC., LOS ANGELES, CA Ms. ASCHER. Thank you and good morning. It is a pleasure to be here today. American women represent one of our country's most underuti- lized assets. If their talents, energies, and skills can be properly harnessed, women entrepreneurs could form businesses, employ people, and add to the capital base and tax revenues of our Nation. Already, we see this phenomenon occurring. Women owners rep. resent a large number of the new businesses being created today. However, many are doomed to failure. They bring creative ideas, energy, and enthusiasm to their business formation, but many to- tally lack comprehensive business skills. They are thus unable to compete in today's sophisticated and fast paced business climate. If women choose to become entrepreneurs, they must compete in the world as it is, and not in the world as they would like it to be. Thus, I urge the Committee on Small Business of the Congress of the United States House of Representatives to provide funding to form public/private partnerships with the goal of providing nation- PAGENO="0150" 144 wide high quality, comprehensive, long-term management training and technical assistance to women entrepreneurs. Without such structured programs, just throwing money at the problem of women business owners is a waste. In the long run, such public/private partnerships are a bargain. They result in suc- cessful businesses, new jobs, capital formation, and tax revenues. For this purpose I strongly endorse AWED, a New York-based nonprofit, which has been successfully training women entrepre- neurs for over 10 years.. It has been a pioneer in an 18-month tech- nical assistance program as well as a business roundtable program for businesses annually grossing over $1 million. Its yearly confer- ence on entrepreneurship has attendance of over 3,200 women, rep- resenting 3 countries, 37 States., and 757 cities and towns across the United States. AWED would successfully instilute and augment such a pro- gram. It also is well-connected to the private sector, since it is es- sentially privately funded. I firmly believe that the private sector must be the leader in this endeavor, for the . private sector knows what business is all. about and has tremendous benefjts to reap if more successful businesses form in our country. However, the private sector needs the help of the public sector in providing some funding to accomplish such technical assistance. As an example of positive benefits for the private èector, a bank that supports a management training facility with funds and prac- tical experience has a tremendous return on its investment when these women-owned businesses are successful and bank at their bank. That original investment can pay dividends for decades to come from more than just one original entrepreneur. The public sector's benefits accrue from having more people em- ployed and increased tax collections. This is a positive partnership for all, and I cannot underline that enough times. As we approach the last decade of this century, let us harness the skills, talents, and energies of our population. This is a great country that must be competitive and productive to be number one. I can think of no better natural resource than our American women, who can and will add to the strength and fiber of Ameri- can businesses in the 21st Century. Thank you. Chairman LAFALCE. Thank you very much, Ms. Ascher. I certain- ly applaud your call for a public/private sector partnership with respect to the promotion of women in business. I know that in your testimony you speak, number one, on your own behalf, and number two, as a member of AWED's board~ When I said earlier that .1 anticipated that this would be the last hearing, perhaps, what I had in mind was if the council to which you belong, the Council on Private Sector Initiatives, as a council believes that there should be some private/public sector partner- ship in this endeavor, we would have a new hearing, to hear the official position of that council, or if some representative of the ad- ministration such as Viôe President Bush ~would wish to call for such an initiative. We would surely be glad to have another hear- ing for him or a `representative. . Ms. ASCHE1~ Thank you very much, Congressman. PAGENO="0151" 145 ~ Chairman LAFAI~CE.~ Thank you. * ~ ~ Our last witness is going to be Ms Laura Henderson on behalf of the National Association of Women Business Owners At this time I would be remiss if I didn't say that our first witness at the first of the six hearings, was the president of the National Association of Women Business Owners, Ms Qillian Rudd, who is also in attend ance today, It was Ms. Rudd and NAWBO who were the prime movers in suggesting these hearings I am very, very grateful and indebted to them for all the work and assistance they have put in to making these very successful hearings. Ms. Rudd, Ms. Charles, the counsel. I also see in the audience someone who I'm sorry we didn't have testify because she has testi- fied before. Congress so often in the past . on so many different issues Since I see her here, I will recognize Ms Virginia Littlejohn whose counsel on these and other issues has always been invalu able Surely, Ms Littlejohn, if you have any personal statement that you wish to make, we would keep the record open for you to submit it at any point in time With that, the mother of a 3-week-old---- Ms. HENDERSON. A 4-week-old. Chairman LAFALCE. Congratulations. Ms. HENDERSON. The sleepy, mother of a 4-week-old. Chairman. LAFALCE, ~Ms. Laura Henderson. TESTIMONY OF LAURA HENDER~ON, PRESIDENT AND CHIEF EX- ECUTIVE OFFICER, PROSPECT ASSOCIATES, ROCI(VILLE, MD, ON BJ~IIALF OF THE NATIONAL ASSOCIATION OF WOMEN BUS! NESS OWNERS Ms. HENDERSON. Mr. Chairman, members of the committee. it is a pleasure to appear here today on behalf of the National Associa tion of Women Business Owners, and I share some of the pleasure of being at the table with Bea, who is an honorary member of NAWJ3O and shares many of the same beliefs that we, as an orga nization, do, and the strength of the woman entrepreneur As you have heard, I am president and chief executive officer of Prospect Associates We are a company that dQes health communi cation and biomedical research for both the Federal Government and the private sector. Prospect employs over 150 people, and we are a very fast growing company We have average growth in the last 8 years of 85 percent minimum a year Our sales last year were over--- Chairman LAFALCE Are you public yet? Ms. HENDERSON. No; I still own all the stock. I keep saying we're a high-risk company. Our sales last year were over $7 million, and we anticipate sales for next year of over $9 million I, being the optimist, think $10 million, but I only publicly say $9~ I am here today to present ±`~AWBO's recommei~dations, and these recommendations are recommendations that affect women business owners, and recommendations on issues affecting the entire business conunulaity But I am also here as a tired mother of a 4 week old because of my own personal feelings about the contri bution that women can make to: the future Of our country. Our PAGENO="0152" 146 country needs new ways of doing things. We need innovation and creativity. We need an emphasis on quality. We need to ack~owl- edge as a country the changes that have occurred in our economy and our workforce. We are now a world economy. We have moved from an economy of products to an economy of services, based, quite often, on knowl- edge. Today, as entrepreneurs and as people who run businesses and people who manage, we must manage today for work we'll do tomorrow that we don't even know about. We must be able to change constantly, to move, and to provide the latest and the high- est technology. As we look to the 21st century, we look to a very different work- force. We look to a workforce where women, minorities, and immi- grants will play a much more important role. We look to a work- force that is much smaller. We move, as employers, from a buyer's market, I think, to a seller's market. We are beginning to already feel that squeeze. We are moving to an era where our workforce may not be trained and may not be ready to deal with the issues that we, as employers, need assistance in. So, we must be willing to train, retrain, and educate. We hear a lot about the disadvantages of women and the prob- lems we have, because we don't know the way men do it. I person- ally believe that in our current climate, that is the best asset that women are bringing to the market. John Nesbit has said that women will play an important role because we have not had the creativity and innovation bred out of us. Women are managing their companies differently. Many com- pare our style of management to the Japanese successful manage- ment approaches. I compare our style of management to the old American way of doing things that somehow got lost and the Japa- nese adopted. I know that in my own company I've done it dramatically differ- ently. Our company does not focus on profit, but I hasten to add we have never had a year where we didn't have profit. Our company focuses on quality, on people, and on creating an environment where the best and the brightest in our industry ~ant to work. We receive hundreds of applications for employment, because we do it differently. When I started my company, and I discussed some of my strate- gies for running a business with other business people, the nicer ones called me naive, Pollyanna. The ones who were a little bit less nice sometimes called me crazy, insane. They said things like, "You'll learn." But 2 weeks ago, the Governor of Maryland gave to Prospect its one of four economic development awards, and these awards were awarded to companies for being the best that they could be. In doing this, they cited our holistic management approach and our innovative employee programs, entrepreneurship, and stretching our employees to do more than the average company would allow them even to think of. Also, many of the people who called me naive, who called me stupid, are not in our industry any more because their companies went out of business. PAGENO="0153" 147 Over the past few weeks you have heard of the contributions that women are making to the economy. You have heard that women entrepreneurs are the fastest growing sector of the entre- preneurial community; that we own 25 percent of small businesses; that we are playing a key role in the shift of the economy from a manufacturing base to a knowledge-based economy. But you have also heard that we have more to offer. Our ability to contribute, to contribute to job creation, to innovative, new, and more humanistic management approaches, and to the American economy as a whole, is being impeded. It is being impeded by bar- riers which include access to capital and to credit; access to the largest market in the world, the Federal Government, as well as State and local governments; misleading and the absence of accu- rate data on women business owners; the absence of a public-sector support for governmentwide programs; and as we have heard much this morning, the lack of effective and sustained technical assist- ance programs. These barriers prevent women business owners from being the economic catalysts that we might otherwise be. To assist in removing these barriers, NAWBO has developed a set of recommendations which are described in great detail in my written testimony. These recommendations are designed to assist women business owners to reach their potential. Not because We are not good, we are very good; but rather to remove the barriers so that we can be as good as we are. Obviously, I would bore you to tears if I told you about the 40- some recommendations that we have made, so I would ask that you refer to our written testimony. But I would like to just touch on a few of the recommendations in each of the areas that I think are especially important. When Gillian Rudd opened the hearings, she told of a recommen- dation that NAWBO was putting forward which was to establish a woman business owners policy council at the Department of Com- merce which would be responsible for establishing a government- wide program to encourage full participation of women business centers in the free enterprise system. We see this council chaired by a member of the Cabinet, and co- chaired by a woman business owner. They would develop a 4-year plan of action, and they would develop specific agency plans. I can tell you personally, as a woman business owner who historically has done between 85 and 95 percent of her business with the Feder- al Government, the agencies are not doing much for us. That brings us to our second set of recommendations which are in the area of procurement~ Throughout the hearings you have heard the problems and the frustrations that women have faced as they have tried to do business with the Federal Government. To look at the viability of organizations that are almost totally ex- cluded from the largest market in the world, one has to say it has to impact on us. We get less than 1 percent of all procurement, over $10,000. * I once did an analysis. I took the s:ales I had one year and divided it into the amount of money women business owners got, and I de- termined that the dollars that were awarded that year would have funded 50 companies with sales of my company's size. That is one per State, a very appalling figure. * PAGENO="0154" 148 We need public policy that will support our emerging entrepre- neurial sector. I feel very encouraged and delighted that this com- mittee recognizes that and has spent 6 and possibly 7 days looking at this sector. NAWBO has struggled long and hard with the con- cept of how we get Federal procurement dollars to women. It does not matter how good the programs sound and how good they look if they do not put dollars into the coffers of the women business owners. However, we have always, as women, been independent, and we have wanted to make it on our own, to prove ourselves. I think little girls are taught that individual effort is the most important thing. We have a tendency to say if we work hard and do a good job it is going to be recognized. But after the number of years that the Federal Government has said that they are, in fact, encourag- ing and facilitating women-owned businesses to do contracting with the Government, we do not see any increase in the dollars going to women and percentages. So, we have proposed a two-phase program. Phase one would look at improving the general procurement climate for access for businesses that have not done business with the Government before, and especially in the area of professional and technical services where so many women have their companies. We have in phase one recommended specific programs for women business owners. But we have also recommended a phase two. If the procurement dollars and the percentages going to women do not increase after 3 years of phase one activities, NAWBO believes that it will be neces- sary to establish a set-aside program for large and small women- owned businesses to get access to the Federal marketplace. The highlights of our recommendations in phase one, in kind of the general improvement of the climate area wOuld be one, to es- tablish a blue ribbon commission, and I might say this was a rec- ommendation that NAWBO took to the White House Conference on Small Business, and it came out in the top 20 recommendations. The blue ribbon commission would look at public policy as it re- lates to innovation, quality, and competitiveness. Then' they `would take a very strong feeling that came out of the White House Con~ ference, which was to review the small business set-aside program to really look, innovatively and creatively, at how it could be done better. All of us whQ have benefited from that program think it is very good, but think there is tremendous opportunity for improve ment. ` ` We would recommend that the Government revise and improve the way that it purchases professional and technical services Our contracting system is really based on how to buy airplanes; and:" toilet paper, and test tubes. When you are trying `to buy something such as was bought from my company, how to train health profe~- sionals to deal with the issue of AIDS, you need a really different way of doing it, and you need a specialized corps of contracting offi- cials who can understand the subtleties and the difference in pro posals, and the difference between quality and cost considerations Another ~concern that NAWBO has is that set-asides are clus- tered very much in certain industry~çategories. So, when~ compa- nies grow, and when our best companies get Gut of the small busi- PAGENO="0155" 149 ness size standard, they find that they arc totally cut out of the market because whole sectors are set aside We ~l~o find that some procurement areas are hands off for small busrnes~ We cannot get in So, we would recommend strongly that set asides be spread as . evenly as po~sibie a~ross all ~pro~ire~iient areas. * ` ~ Specialized programs in pi~ocurement for Women would include creating an ad~rocate for women busihess OWners Within the agen- cies to look at procurement opportunities and to put them together with women business owners. We would also recommend a small business preference procurement program that would give teëhni- cal points to women-owned businesses and technical competition. We would, with Chairman LaFalce, encourage incentives for prime contractors to subcontract to women business owners. I must be in probably a thousand women owned business subcon tracting plans, and I don't think I've ever gotten any business from any of them. If at the end of 8 years we did not see a substantial äñd steady increase in the dollars going to women business Owners, we would then ask Congress to legislate a set-aside, and we would Want it to be competitive, and to mimic the competitive process in open pro- curement, except we would want it faster. Another area of concern to NAWBO is in the area of data and statistics. I always take this personally because every time we talk about women business owners I am not included, because the defi nition for the data collection does not include corporations So, companies like my company áre~ not in~ludèd. We get a very skewed view of what Women owned businesses are, how many people they employ, what their revenues are~ Certainly, with thy experience with NAWBO and the Committee of 200, I don't believe the view that is given through our data as correct. Therefore, we are recommeitding that Congress nandate the reg- ular collection af reliable data on women business owners. We also are very concerned about the standard industrial classifications, and the fact that they do not reflect the changes to the services sector, especially the professional and technical services area We would encourage that Congress mandate a cha~ige to the SIC codes, and, in fact, a replacement for them The third thing we are recommending is a private funding corn mission on the changing American economy, with an emphasis on services in the high teehnology. Repeatedly through the hearings, women busine~~ owners have talked about the problems of access to credit Without capital and credit, women owned businesses will not be begun, and will not be able to take advantage of the opportunities that aii~e there for them The need was certainly underlined when a venture capital fund was set up by the National Association of Female Executives They set up a very small fund with very Small ceilings, I think about $5,000 was available They expected a couple of hundred appli cants They got 1,800 applicants for theSe dollars This shows there are many women out there with ideas who are ready to start busi- nesses, but who can't do it Just because of the inability to get cap ital. We would encourage Congress to enact legislation that would ensure equal access to commercial credit for Women. We support PAGENO="0156" 150 H.R. 1879, which, the chairman and Congresswoman l3oggs have sponsored. However, NAWBO would favor stranger amendments to the equal credit opportunity so that no exemptions would. be given from. the protections for commercial credit. We would also encourage educational programs for lending insti- tutions on how to review loan packages from soft asset companies. One of the most serious problems that we have in the services sector is that when we go in and talk to a bank, and they look at our balance sheet, they don't see what our real assets are, which are our people and our backlog. Therefore, we are at a disadvan- tage if they're being reviewed on an asset-based basis. So, we would encourage educational programs to be designed for lending institu- tions. Finally, NAWBO, I think, is special, perhaps not unique, in the fact that it sees business responsibility being much broader and much wider than what has traditionally been thought of as busi- ness issues. We believe the small business community must partici- pate actively in issues much broader than merely business issues. The business must unite with Congress and with the president and with nonprofits, to find solutions to major national problems. When you start a company and you build it from scratch, and you look down that road to the future of that company, you want it to exist after you're gone. You want it to have a life after you do. You cannot look at it in isolation. You must look at it within the context of what is going on in the economy and in the world. As such, NAWBO brings forth three recommendations that are much broader than women-owned business issues. We recommend that Federal policies be established that encourage savings and in- vestment, and that we invest strategically in America's long-ne- glected infrastructure; that we coordinate a campaign and partner- ship between th~ private sector and the public sector to combat substance abuse and AIDS, tremendously serious problems in our country; and that we develop an initiative emphasizing the* impor- tance of excellence in education at all levels, with lifelong retrain- ing and policies that ensure readiness of our workforce~ * Probably the thing that touches my heart the most is my con- cern about the future of our workforce and the problems of chil- dren and women living in poverty. If we don't get our women out of poverty, we don't get our children out of poverty. Our workforce for the future will not be what this country needs. It's a terribly important issue that every American should be concerned about. NAWBO would like to thank you, Congressman LaFalce, and the entire Small Business Committee, for holding these oversight hear- ings. This is the first time that full committee has looked at the issue of women business owners in oversight hearings, and we thank you and applaud you for that. The House Small Business Committee is at the forefront in con- ceptualizing and shaping public policies that unleash the creativity of capitalism and open new vistas of innovation and opportunity, that train our workforce of today and tomorrow for constantly evolving jobs of the future, that transcend narrow interest and na- tional borders, and that foster trade and the spirit of international cooperation, and strengthen the fabric of society, and enhance our quality of life. NAWBO hopes and trusts that Chairman LaFalce PAGENO="0157" 151 and all of~the rn~znbers of the ~ Small Bi~iness Committee will con- tinue to provide~ such vision and leadership as Congress addresses the challenges facing Americ&s businesses, workforce, and citizen ry as we stride into the 21st century Thank you [Ms He~iderson's statement may be fouiid in the appendix] Chairman LAFALCE Thank you very much, Ms Henderson We are indebted to you, and as r said, we are. indebted to NAWBO for their tremendous assistance over these 6 days of hearings on this whole stthject of women in business I am not going to ask tob many questions, but Srnce this is, in all probability, unless the council wait1~s to come in with official recom mendations, or Vice .Presi&nt Bush wants to come, the l~t ~ hear- ing, let me just reflect a bit oh the course of these hearings. I was truly upset to learn that from 1980 to 1987, when I became chairman of the Small Business Committee, and I realized there had been no hearings in Congress explicitly on this issue, and also to k~arn that the Inter Ag~cy Ta~k Force on Women in Business had not issued a report since 1980, despite the fact that they were charged with the responsibility to issue annual reports I like to think, perhaps, that is one of the reasonS we did get a report-I think it was in November or December 1987-as brief, short, and perfunctory as that report was So, while I cannot at this time tell you that I agree exactly with your recommendations regarding a Women's Business Council within the Departm~ut of Commerce-I have some qualms about putting anything within the Department of Commerce, or the Small Business Administration, or what have you-I think the office of the President sounds a little nicer to me Ms. H.ENDERSON~ We would not argue. . Chairman LAFALCE We want to see what we can do, and we have given encouragement to the Inter Agency Task Force at their next meeting which is going to take place on June 1~, to make up at one meeting for what they have not done for the past 8 years Whether that will happen or not, I don't know, but we will contin- ue to encourage them~, With respect to procurement, 1 percent of the Federal procure ment dollar is grossly inadequate, yet at the same time we cannot lose sight of the fact that in 1980 it was four tenths of 1 percent I suppose it is a question of what your expectations are as to wheth er you are happy Some might have had very low expectations and might be happy that they have gone from four tenths of 1 percent to 1 percent I think we should have greater expectations, greater goals, greater desires, and, therefore, I am still very, very unhappy at the fact that we have only 1 percent I think it is grossly mad equate~ . . Much more important than that, however, is the opportunity to get a much larger portion of the Federal procurement dollar through subcontracts I was very distressed to learn that no goals have been established by any of the agencies with respect to sub contract opportunities for women I have encouraged the Govern ment to do that, and we might be mandating, legislatively, that they do so, because we are talking about the rest of the 99 percent of those contracts. I think there is a gold mine there. PAGENO="0158" 152 However, I also believe that procurement is something that most business owners, women business owners included; did not partici- pate in that extensively. Most businesses do not do business with the Federal Government or other. governments. They operate in the mainstream, private sector economy. We should be putting most of our efforts in that area in the future, and we intend to do that. One thing we have suggested, I have introduced as the chief sponsor along with Representative Lindy Boggs, the Equal Access to Credit Bill Not only as chairman of the Small Business Commit tee, but as a member of the Banking Committee, we are going to be pushing that very aggressively, because I think that legislation is very important. As you know, we have had discussions with the. Federal Reserve Board regarding their recommendations and.. actions taken thus far. We will continue to have discussions with them to see what changes they could make administratively, and what changes we can make legislatively to clarify the law At the same time, there are some pragmatic problems, and, therefore, I do not know that we would be able to go as far legi~lative1y as NAWBO might desire. I do not know that it would be wise, either. So, I do not want to tell you that I agree with all of your recommendations. I think too, that it is important that we understand that we are not trying to be of help to women just so we can help women. We are trying to be of help to women because, as we do so, we can. be of great help to America. The energies and the talents and the p0- tential of women constitute a relatively untapped gold mine within America. If we can tap that gold mine, if we can unleash those re- sources, we can do much to fulfill America's economic potential. That is what we want to do. I also think that politically it would be naive if both parties, the Democratic and Republican parties, did~ not realize that both of them have much more to do to tap that gold mine. I will be work- ing with Senator Bumpers in trying to ensure that the Democratic platform does recognize the special needs and special potential of women in addition to the whole small business community, and I would encourage the Republican party to do likewise. Ms. Ascher, whatever you can do with Vice President Bush with whom 1 .know you are quite close, we would appreciate . it. It would be helpful if both parties had strong planks and then made efforts to fulfill the promise, fulfill the potential. Perhaps our greatest need is additional management assistance, however, and training and counsel. In that regard, AWED has been outstanding in .the past, and I think it would be wonderful if we could replicate nationally what AWED has been able to do in the local area, primarily the Northeast, primarily the New York City area. We have had not only private groups that provide excellent man- agement assistance. We have had public~groups too, and public/pri- vate groups. AWED was a public/private partnership until 1980 or 1981. I would like to renew that public/private partnership. We have an excellent organization in the State of Michigan, for example. Are you familiar with the BIDCO program, Bea? Ms. FITZPATRICK. BIDCO? PAGENO="0159" 153 ~ Chairman LAFALCE. Yes; I think that iS what it Is called in the State of Michigaft Ms Henderson, am I correct in that? So, there are a great many different approaches that we might be ~ able to take, and we will have to consider what approaches might be appropriate as we ponder the testimony that we received over the course of these 6 days and month and a half of hearings, and as we try to come up with an action plan That is what we are looking forward to as we sit down and study all the testimony that has been given. ~ ~ What I would like the Small Business Committee to come up with is not simply a codification of the testimony of the facts and recommendations that the witnesses have made, but perhaps with an action plan. I hope We might be able to come up with that within a month or so Maybe we will use the occasion of some of the speaking invitations that I have had to reveal those plans. .1 think that is all I want to say. Ms. SHAPIRO. Mr. Chairman, could I just add one thought that I had? Chairman LAFALCE, Sure, Ms~ Shapiro. Ms. SHAPIRO. This is a little tangential. Chairman LAFALCE. Am I going to. get that walk-on part on Dy- nasty or not? Ms SHAPIRO Absolutely It's a done deal [Laughter] :We have talked a lot about partnerships here today, between the private and the public sector, and between all of us who coventure with other companies But I think if we get down to the most basic one partnership that means more to me than anything is really my family As I think of my husband, I think of all the men who are partnered with women here and throughout America One of the things that concerns n~ is that even as we find ways to help people live longer, we don't provide them with the ways to do anything meanmgful Especially women At the same time, soci ety imposes on men a dictate that they must assume the total care of their families Many of our most talented and productive men are so stressed out that we have this alarming death rate of men in their 40's and 50's I would like to say to you and to the committee that we women want to share the burden We want the men we love to stay abve to reap the benefits of what they have worked for We would like them to enjoy their homes, see their children grow and live out the full span of their lives We don't want to hear about men dropprng dead at 45, and 50, and 55, because we have an attitude and a stereotype that says men must shoulder the whole responsibiht~ Women do not need to be taken care of that way We can share the workload, and we can grow together~ I think this sharing will have an enormous effect on the way our society looks at ageism, on how we evolve as role models for our children, even, for example, young women who turn to teenage pregnancy to avoid facing a future with no possibilities I receive thousands and thousands of letters from young women all over the country who say I want to grow up and be like you Well, I never thought that would happen to me, but~ because it has, I offer to you and to your committee all my human resources to help women to become self sufficient I'll put myself on the line I know .it~s hard,. and I know there is not~~a lot of money, but ~you PAGENO="0160" 154 know, my life-long attitude has been that unless it is almost impos- sible, it isn't even worth risking~ I want today. to be a memorable day, and I want us to find a way to go into business together and let me prove to you that the women here who are in free enter- prise know how to. do this. We can help make this thing happen. if we all want it to. Thank you. Chairman LAFALCE. That is fantastic enthusiasm. I believe,, too, that you could do probably anything you wanted to. Ms. SHAPIRO. I want plenty. [Laughter.] Chairman LAFALCE. I understand. Mr. MAYER. Congressman, on a much drier level, could I make a comment? Chairman LAFALCE. We'll defer to the husband of Karin Lis- sakers; yes. Mr. MAYER. That's right. That if, in fact, Ms. Henderson could make women entrepreneurship the vehicle by which American banks began to lend on a cash-flow, rather than an asset basis, it would be perhaps the greatest imaginable contribution. Chairman LAFALCE. That is a terrific suggestion, and that sug- gestion was made at an earlier hearing, and we were very, very for- tunate at. that hearing that somebody from the American Bankers Association was in attendance. I made the suggestion that the ABA should start discussing, as part of their educational programming and training, how loans could be made on a cash-flow basis rather than just an asset basis. I am going to be addressing that sugges- tion amongst other issues at their conference on small business lending in Boston in a few weeks. These are the type of incremental things that can be done. If the American banking community will start educating their lending of- ficers about that possibility, that is more important than all these procurement programs that we are talking about. I . don't mean to denigrate them at all, but that would be extremely important, as you point out. Mr. Hayes, you may want to make a contribution to this. Thank you. Mr. HAYES. I certainly, Mr. Chairman, want to thank you for having convened this hearing. 1 have listened with interest to some testimony. I am being very candid, I do not know if I agree with all the recommendations which you have submitted. I have not studied them all. My first inclination was to, when I left to go vote, was to not return, because we had at the same time, as so often happens, a meeting of the Congressional Black Caucus, and one of the issues on the. agenda this morning with the continuation of yesterday's. meeting was the set-aside program as it affects minorities. So, I called my staff person and asked if he would sit in for me at that meeting, because I wanted to be here to hear this testimony, be- cause we do have a specific problem which I ~am sure is not going to be a localized problem. It is one that is going to spread in other areas. As to the application of the set-aside program, in Illinois as it re- lates to highway construction,' women have been used because of action of this Congress, on pretty short notice, to include women as a part of the minority on the 10 percent set-aside program for high- PAGENO="0161" 155 wayeon~truction. I ~fl .. k we ~have roughly around 15 percent in Ii- linois. ~ . ~ ` ~ . . ~ ~ ~ ~ ~ But the troubling part of it, I ha~re rio problem with entrepre neurship of women and being in business, but I think the way it is being applied has to be correcthd and instead of women being a part of the 1O~percent set-aside, we ought to make them a pàrt~of the 90 percent that is still out there hanging and being used by predominantly white men The front that has developed as a result of this, some women being a part of the prograrti only in name for the men who ai~e really the ones behind the seat, according to our information, are the ones who have been real benefactors of the procurement programs There is roughly $220 million involved in the highway construction going on in the State'of Illinois and other States. When you set up the rule or the guidelines by which we operate, I think it has to be with a degree of fairness and understanding My concern is one that goes to the consumer level when you get the little people How many jobs are provided I like the approach that I saw in some of your testimony here The have nots, an awful lot of people are out there out of work So, even in the letting of contracts to minorities or women, I think it has to be done on the basis of~what it is going to do for jobs and helping people who need help. I was wondering, Ms Henderson, in your recommendations there are a couple of things that bother me a little bit If you would look at your first section, point number seven, "Congress should enact legislation eliminating Federal competition with the private sector." I have nothing wrong with privatization-I think that is what you are alluding to-as long as it does not adversely affect people I have some problems here on this Hill The Government used to be the one who ran the restaurant Now, it has become a part of a private enterprise The food prices went up and the qual ity went down, and the welfare of the people who work there is always jeopardized So, there are areas where I think the Govern ment's competing with the private sector is necessary I have some problems with the airline companies What has been done in terms of removing some of the controls, and what has that done to the public? It does create some problems I know you have a time problem You ~ndicated you have a 4 week-old baby~-- Ms HENDERSON I have a very hungry baby outside probably screaming. . Mr HAYES Can you tell me what you mean by that? Ms HENDERSON Our concern is the Government is moving ixtto areas that the private sector could provide services in or goods in Especially in new areas which are being established We need to look very carefully as to whether the goods and services are avail able in. the private sector, and if they~are, not establish it as part of the Government, but to purchase it from the outside We feel that the private sector competition should encourage competitiveness in quality and in cost But I ththk we have to look very carefully at established programs and how we do it so it does not impact on people. We are concerned about people, toot But~the Federal Government is moving into areas that are established `in 85-199 0 88 - 6 PAGENO="0162" 156 the private sector and where programs have not: existed before where they could buy it from the private sector. Mr. HAYES. Your point 16, you said direct all agencies to include at least one bid from women-owned small business for all small purchase orders under $25,000. Is that establishing a goal or some- thing? - Ms. HENDERSON. What we have been searching for is a way for women business owners to get their toe in the door. This was kind of a concept that if women could get these small purchases that they would then begin to develop a track record and--- Chairman LAFALCE. It would be fair to say, Ms. Henderson, that your presentations were more a wish list, and your wish list prob- ably contained at least a few throwaways. Ms. HENDERSON. A few. Chairman LAFALCE. All right. Mr~ HAYES. 1 didn't want to be that harsh. Chairman LAFALCE. I'm not being harsh, I am being realistic. Also, I am concerned about her 4-week-old baby, so let me just .in- tervene and say let's not kid, ourselves. I think we have a million things that we can and should be doing to assist women business owners and women in business, and we are going to try to do that However, with respect to set-asides, in my judgment that is- not one of them. Set-asides are quotas. I do not like the idea of quotas, generally speaking, although there are certain exceptions that we should have. We have them, I don't think we should expand upon them. I don't think we should be having quotas for women or set- asides. - Now, I distinguish between goals and affirmative action efforts, however, and I think we oi~ght to.have goals, and they should. be m~ch, much higher than they are right now In fact, in some in stances they don't even exist, for example, with respect to subcon tracting So, I think it might be difficult for this committee to make recommendations that women should be participating in set- asides, and I don't even know that you want it that much. Ms. HENDERSON. We don't want a~ set-aside. However, we get to the point-- Chairman LAFALCE. You want realistic action and the goals and the affirmative action, and you want us to know that if we don't make that realistic action that you might be revisiting us. Ms. HENDERSON. Right. Also, the issue that women-owned' busi- nesses face is that even when the desire of a procurement person is there to help women, there is no mechanism, There is no way that they can push things. We get calls from people all the time saying because you're a woman-owned business, I can sole source this to you. I laugh and' say no you can't, then they go back and talk to their contracting people. So, they start out and find a company that is qualified that is woman owned, and they can't get the work to us. So, it is an issue of even if the desire is there, how you get it there if there is not a mechanism. Certainly, NAWBO has never encouraged set-asides for women- owned businesses. It is' not something we would particularly want to see. However, if the percentage continues, and if the actions remain lip service, then I think we `have to look seriously at some- PAGENO="0163" 157 thing more drastic that I don't think any of us would particularly want to move to. Chairman LAFALCE. I appreciate that comment. Bea, for the last word. Ms. FITZPATRICK. No; I just wanted to address something that I thought was implied in some of Congressman Hayes' remarks. I think it is crucial that women and minorities who have both been excluded from the mainstream of our economy don't allow fighting over some money, or contracts, or anything else to sepa- rate us, because I think our common interests outweigh any kinds of concerns. Most women in the United States do not want Federal contracts. They really don't. Most women want a chance to run a business in their own community. They just need the training to make that succeed. I don't think any programs that are developed for women entre- preneurs should be allowed in any way to take anything away from what has been developed for minority entrepreneurs through long struggle of minority groups over the years. I think anything that is done for women should be in addition to and should only be al- lowed to be in addition to. If there is a local government that has a 10-percent set-aside for minorities and then wants to include women in that 10 percent, they are helping set women and minori- ties against each other, and I think we have to understand that is political suicide for us to engage in. So, I think it is very important for the Government not to pro- mote anything that would in any way encourage women and mi- norities to do anything except see that mutual growth is essential for the growth of small business in this country. Ms. HENDERSON. I agree. I believe strongly, and NAWBO believes strongly, that we have some of the same issues. I have been in so many meetings where they do, to get you off their back, start pit- ting the minorities and the women against each, other. Send you out of the room while the main discussions are going on, to negoti- ate. We have been supportive of minority programs and continue to be. Ms. FITZPATRICK. I just also want to say on this that a quarter of our-I think I know the program you're talking about. It's the pro- gram that is addressed only to low-income women. We just happen to think all women need access to training and not only low-income women. We also think that programs that are designed only for low-income people do not get the kind of support in terms of length of time or breadth of support as programs that are addressed to a whole population. So, just from a public policy point of view it is very important that if you are going to do anything for women, whether it's in management training or anything else, that it be for all women en- trepreneurs. We have women coming in our training program who are on welfare, who are unemployed, who are paid for by the State of New York for us to train because they're in those categories, and we also have women who are at the top of their profession who are vice presidents in major corporations, and they are in training groups together. What we find is that they have more in common, and that the areas in which they have been short changed are PAGENO="0164" 158 more common than any differences they have because of back- ground or anything else. So, I think it is very important when you are thinking about pro- viding management training for women that you do it for all women, and not just for categories. Chairman LAFALCE. Absolutely. No question about that in my mind. We are going to have to conclude. One more thought. Mr. Mayer, you have written at least a dozen books. Mr. MAYER. Two dozen. Chairman LAFALCE. `I have only read. three. "The Fate of the Dollar," "The Money Bazaars," and "The Bankers." I hope to read your book as of yesterday, "The Markets," but why don't you. make your next book "The Hidden Gold, .Mine in America, Women~" I'll take fall credit for you if you do~ Mr. MAYER. We'll give you a commission. Chairman LAFALCE. You can coauthor it with your wife~ It is a good idea, and I do want to see Karin on Third World debt issues. Ladjes and Gentlemen, I think these have been terrific hearings~ Unless Vice President Bush `wants to com.e hack and testify, or Linda Evans, orJoan Collins, this will conclude our hearings. Ms. ASCHER. They're both business women. They both run a number of businesses. Chairman LAFALCE; We'll have a hearing if either Linda, or Joan Collins, or both want to testify, any time. Polly Bergen started it. We'll allow them. We'll have `Linda Evans, and `Joan Collins, and George Bnsh on at' the same time. [Laughter.] Thank you'very much. [Whereupon, `at 11:30 a.m., the `hearing was adjourned, subject to the call of the Chair.] PAGENO="0165" 159 APPENDIX Opening Remarks of the Honorable Silvio' 0. Conte Small Busir~ess Committee April 2,1988 Thank you Mr. Chairman, you are to be commended for convening this series of six hearings on Women's BusineSs Issues. There are approximately 3 7 million businesses operated by women today, accounting f or 27% of all businesses in America. They are the fastest growing segment of America's business population - growing at twice the rate of businesses owned by men. In 1986, woman received 33% of all MBA's and 14% of the engineering degrees. Also in 1986, 83% of female officers in the Fortune and Service 500 were at the vice presidential or above levels Additionally, 30% of managers 16% of lawyers 20% of doctors and 40% of programmers were female, Clearly the accomplishments of women are spectacular but their potential for small business and our country is even more awesome While all businesseá ~ace~ the same start up problems, women owned businesses have additional barriers primarily relating to credibility and equal access to capital. It is vitally importat~t that we as members of the Small Business Committee double our efforts to advance women's participation in business by eliminating barriers and developing their participation in public and private sector activities. I look forward to the testimony of our distinguished panel today and to future participation in a program of initiatives that will all~w women to achieve their personal and economic potential. Thank you. PAGENO="0166" 160 JAMES H. BILBRAY (~) 1431 LONUWODNU HOUSE OFFICE BUILDING ISV DISTRICT, NEVADA ~ (202) 225-5965 COMMITTEE ON DISTRICT OFFICE: FOREIGN AFFAIRS ~I~P49' 1701 W. COCELESTOD. SUITE 300 Los VEGOS, NV 89102 s~~J~ss Congrt~ of tilt ~niteb ~tatt~ (702) SELECT COMMITTEE ON AGING Fou~e of ~epreSentattbe~ * INa~~ptngten, ~C 20515 April 26, 1988 CONGRESSMAN BILBRAY'S OPENING REMARKS FOR THE SMALL BUSINESS COMMITTEE HEARINGS ON WOMEN'S BUSINESS ISSUES Mr.. Chairman;, 1 oongr~atulate you on your leadership to hold hearings ~n women3s issues. While only one in every three American women was employed thirty years , today~ over 50% of American women hold jobs outside the home. In my Congressional District in Southern Nevada almost 50% of the working for~e: are women. Though I realize these hearings are for businesses ope~ated by women, these. figures are an indication that wornefl,Lwill continue to. increase their participation ~ the business World not only as employees but managers, presidents, and Owners. As a lawyer involved with business over the past twenty years I can remember the term NON TRADITIONAL used to describe areas of business where women were not found in large numbers. it was non traditional for women to be involved,jn construction, engineering, or for that matter any field that was traditionaly considered a man's field. Fortunately for us as a nation we have progressed enough to realize that no career field is exclusive to one sex or the other. PAGENO="0167" 161 TESTIMONY Off (3ILLIANRUDD, PRESIDENT NATIONALASSOCIATIO!405 WOMEN BUSINESS OWNERS BIPORETHE HOUSE SMAI.LBUSINESS COMMITfEE APRIL 26,1988 My naméis GllUan~udd. I am a woman~businesa owner from Washington, D.C. Itis with greatpride that I come before you today as PresldentoftbeNatloflal Association of Women Business Owners of the Urilted States--'NAWBO." N~~tWBO is anatlonal trade assoclasionofwomeflentrepreneuto. It was founded in 1974 and has grown to 38 chapters throughout the United States. his theonly national organizatiOnthst*prns~stts the whole spectrum of well over'f million women business owners across the United States. NAWBO is affiliated with women business owners ln'22 oshercountries across the world through a 35-yearold international organization of women business owners, Lea Femmea Chefs DEntreprises Mosdiales (FCEM). NAWBC) works so advance the interestsofwomenbusiness ownersthrough education, mutual support, and collective efforts at the local, state, and federal levels NAWBO deeply appreciates the opportunity you, Mr. Chairman, and the Committee are giving womenbullness owners to present Ourcsse on theeconomiC impact women business owners have made on the ~ationsl economy in the lastdecade sods half as they have enteredhusisess ownership and continue to Cnter ata r4te that farexceeds any other segmentof the Americanbuolsess community. 4galnst4llQ&Let As I wayelna1iosal1~rand internationally, I have dlniost daily ~onversatlOns w5~h womenbusineas owners. I hope that what I say today wlllreflectsvhat they teltme and that! cancossvey to you the depth of theirfeelings. Therein an enormous smountof pride among womenbusin5ss owners. We know that we have made phenomenal achievements in the last decade or so, personal and public--againstailodd.e. But thefeis anequal amount of frustratiotssnd anger--at she barriers thatcontinue to impede ourbusinesa growth. We hope that the witnesses you have oslledforsheae hearings `will demonstrate what womenbusiness ownersare doln~eddhsvedone ovetthelsstlO-15 years, asinebave grown toown, In sole pto~trletOtships alone, morethan one 4uasterOf the sallotf s businesses-Over 3.7 million was The Small Business Admini5tfstlofl~O (SBA) figure for soleproprle*orshipe forl9S8. PAGENO="0168" 162 Our PresenlAnd PotentldL Value To The Economy The stories these witnesses tell Should demonstrate our tremendous present value so the economy and ourpotential for makinginflnitely greater contributiom in the years ahead. Our present value-- a conservatively estimated impact of tome $250 billion annually onthe economy--has been achieved with infinitesimal assistance or encouragement from the public, major corporate, andfinancial sectors, and has frequently beensetet with hostility, discrimination, and resistance. Realizing our potential value to the economy lies in many ways in your hands, gentlemen and gentlewoman. As youwiltsee, we are making some suggestions. The Need for Tourh and Visionary Leaderyhinin the Business Commu~iiy NAWBO strongly feels that we need leadership, tough and visionary, is the business community --in both the public and the entrepreneurial sectors; We need leadership fromyou to help those of un in the business community to grow, to be profitable, productive, competitive, quality firma; to create more jobs in ourcommunitiès, and to put more dollars in ourfeder~l, state, andlocal treasuries. Current estimates are that women busineas owners now pay annually $37 billion infederal taxes and $13 billion inlocal and state taxes. NAWBO is deeply concerned with the country's disastrous international imbalance of trade and with ourmountainous donsestic debt and wants to work to get the United States off the trade deficit slide internationally and to reduce our domestic debt. We women buuiness owners do not see oureconomicgrowth ass Social issue Qr a special interest issue, we see it as part of a national economic issue, Access p~~jnce~fjyes,t Woman business owners use in all types ~f businesses and stall ~uoiness otages. Isee from the list of witnesses today and tomorrow that you will be talking to women who have seized opportunities, wrested with opposition, stepped around barriers--who are competitive, profitable, who operate internationally and nationally, who are innovative, who are entrepreneurial. As I have said, they haveachieved their successes against all odtls. But, NAWBO is not, neverhas, and is not now asking for handouts and set-uaides. However, wewill no longerslepaside. We have morg thanprovedour worth, mare than paid osrduen, in these lastlO years. Existing procurement, credit, and tax policies are crIppling us, are threatening our stability, are stifling our growth. PAGENO="0169" i~8 -Women business ownelS..slnd the~uIl range Of entrepiwneurs.- slust have access to government dl$I~rs, to tech~tIcal aslistance, tofiIthncing. We believe that the countryib at a cruciaI~ecO~tn*slc crossroads aftd all of our taxpayers dollars, all otour gatel-flmeflt policies should be focused on Incentives to Americasbusitless growth, to job creation, to international trade. 4Jffa/nr New Studs ofWom~n.Owped~sslpen5at Tomorrow, in these hearings, we will iOleahe thefindings ofarnitJt* new study on - - the state of womenbusinesS owners O~ound thecountry--and wliatgovernment at state and local levels is doing Is refers so women business owOers as Anierics'a "hidden resource." lthlsksoitte of us--orlthoae bad days whenthe banker askp for ourhusband to sign our business bankloan and t~teprocurenlent official relistis one moretime that "them aPeno 4uali~led wliinanbusinssa owisers Out there"--tbilsk that we are Americas buriedreaoOrC~'withfresKlhOvelfuli being thrown On us daily. What the report will reveal is windosvdre$sin$, lip service, anda mere five * continuingly funded women businesi owner prcvgram.rM.stdt~s Ond cities around the country. A paltry hf~ort--and ansnl'sstunate waite of a valuable ecoaomic resource. ~fjoe State ol'~nsall~luninesu t988~? As you are aware~ The Small Bsiineii Adnslnistiatlonfailed to document women * business owners progress in theirsepott to thëPreildeht in 1988. NAWBO was amazed! How c~ulda document that purported to' detail "The State of Small Business in the United States" in 1988 leave out ~he fastest growin~segment of the small business consnunity? We were toldby officials at SBA that no new information was gathered in time--and that is why the women business ownetihipchapterwas dropped from the report, and no risentionof"women-owned business" couldbe found in the index. The fastest growingsegment of growth business in the American eConomy had been made invisible! This omission raises serious questions asto tiB~'u commitment to the growthof women-owned businesses. - In partial defense of SBA, there is no utesrlegiaiative thandate fotthe agenry to locus major attentiotiOr resources on women-owned busineiseo, but this dons not explain the low andlowering level of attention thassye receive. What womenbuolnesu - owners have at SBA--as we have slmostwithout exceptioningovernment sgenclei around the country ~- is whet may be pesceived as w,indotedseSSlflg. Tokenoffl~ea, with little funding and authority, slot of PI~, and one-nh4t c~OfedenceS uroundshe country are nothel~1s1 wotlte4businesa Owneta. We need systematic contisstiing, effective, anti quality teChnical assistance tobreak dowksbarrstrs thathinderour - growth. * * * jdfnPoruet `tsmallpndDLeeidvastayrdntustnesSf!t - Let me just say, thatihls year NAWBO has droppedthe'words `smallbusineso" from ourlsngusge --it has esme to be synonymous with disad+asltaged, non-groteds business, whicblh nol~hat tee are about. - - ~ -~ -~,*;- - ~- -~,,c- ~ - - PAGENO="0170" 164 We believe that this Committee and the SBA shoiddbe two of the mostexcitingplaces in Washington, DC The entrepretwusial community, the growth business conunumty, the emerging business community, is where the action, the energy, the excitement, the jobs, and slseinnovation are. The SBA should be~treain1ined, focused, all the political programs that have been clumped into that agency in tern dumped / out. We need a strategic planforbusiness grow~h inthis cpuntry. If it cannos~e done in the SBA then it mustbe done elsewhere and soon. (ThvernmentPrm~ram/ In the secondpart of these hearings, I understand that youb5ve scheduled government agencies tooutllne.th~ programs they have implemented to encourage the growthof women business ownarsin thelast decade. Ido not expect much of a catalog, and when progcams are mentioned, I askyôu toquery if tl~ey were a one-ahoadeal, query thenumber of dolLars spent and the results, thenumber of contracts that womenbusiness owners have seceived, query who staffs programs, how many staff, whatthebudget is-in shoot, evaluate theirvilue, I wouldlike to add a note olthaaka to the Department of Commerce, and to Assistant Secretary forAdmlnistra$on Kay Btilow, who fortwo years has esiven mightily with us inanationwide attempt to get more of the less thanl% of federal dollars, plus state, local, and corporate dollars into women-owsedbusinesa by co-convening nationwide procurement events fortwo years called "MegaMarketplace." And toThe Department of Commerce's Office of Business Liaison and bet5rnational `trade Administration, which has worked to include women bu~lnesa owners in boll' domestic and international business efforts. ~ Te~lUo iunderttand thatyou have wiselyplanned the last segment of the hearings to took at ourfuture--what demographics are telling us, where our deficits are leading us, bow apaucity of accurate statistics is harming national productivity, what policies entrepreneurs and emerging and growth companies seed to enable them to grqw, Stow we can keep the United States competitive andprosperous inthe years ishead, This Is of niost vital concern to NAWBO--we want toplan for ourfsture and for the future ofourchlldren, to know where we are going, --otherwise as baseball legend Casey Stengel says" we may aedup somewhere else." What flu ta~e t~'ent~sC nwiu~A~~ie~ean Businesses7 Asnericanpublic policy makera,,tbe ~sancial andcorporate sectors, and entrepreateurial s~d growing buasseasiss need afonim is which tl~ work together, where a broad spectrum of interest~ and expertise can mess--a 5~ational Strategic /`lasnisg Commission For American Business Growth--that will recommend a mission and vision statement for American business/government forthe next 5,10,15 years and a plan of action, We all do strategic planning in our own businesses. Other copntries do it.It isa sensible, rational, path to take--to took at our resources, to look at our present and future demographics and trends, to look at ncr present position, our weaknesses and strengths is the global economy, to plan asatiosat path to prosperity. PAGENO="0171" 165 Sing Po~ln.The ort.Ter,n? Here are the problems women business owners face: no programs--technical and financial, or access no recognition of our growing economic Impact on the national - economy no organized Systems of outleach to women business owners, Here, we suggest, are some solutions We believe these solutions take a stew and innovative approach to the needs of the next decade, They are focused on access, business growth and stability, and econ~atic development. We are norsuggesting new programs, we are suggesting: o reallocation of exiseingresources, with no major new budget prQgrams o a greater private sector role in publicsector programs and strong effective public/private partnerships, particularly with major corporations o the development sf3-year federal model programs that canbe implemented artist state and city lev~l through matching grant progranla or local spending o assuring that women-owned business emphasis is place4,~n e~sting prsgralne. How can wedo this? We need your assistance to get us there, We steed attention from the top down.,.from the House, from the Senate, and from the next President, whatever party. This is a national economic issue to winch we seed innovative solutions, 4 Woman ~uslnex~Qwnfr Pjsd~s-al!nl1lative We need a woman business owner effort that is inotitutionalizedacross the entire federal structure ins way that wilt have long term and broad range impact--s Women flusiness Owner Federal Initiative. The key to ito success is attention and commitment from each Cabinet Officer, The White Iltipse, and Congres~ and the development of a four-year plan of action (with astnual targets, goals, and measurable objectives) for each agency, which can be consolidated into an over~l fgderal plan. The suggested institutional meclsbnism to accomplish thin: A Women Business Owner Policy Cs~uncll , eslabiished at the Department of Commerce that will consist of key agencies, The White House5 Congressional representation, women business owner groups, and individsai women bssisess swnere. This Psiicy Council will have a budget and staff to carry out its mandate. PAGENO="0172" 166 This mandate is to o coordinate the actions of allfederal agendies and departments o develop the federal comprehensive plan and specific program goals for women-owned business programs o work with statb/city/local plaisning and trade associations, such as the National Governors Association, National Leagsse of Cities, National Asspciation of Counties, etc. to ensure federal/stale/city/county emphasis on this issue. o establish agency performance goals, monitor, and report progress to Congress and the President o define the programs neededby women business owners and identify the appropriate agency to develop such initiatives. Specific emphasis will be placed on - * capital procurement high technology intersstional trade technical assistance and training The Departments of befe~nse andTransportation, The Office of Productivity, Technology and Innovation, The Small Business Developmeslt Cosporatiom, and the SBIR program. Cabinet Women Business Owner Policy Tat/c Forces I. Each Cabinet officerwould appoint a Women Business OwnerPolicy Task Force under the Assistant Secretary for Administration to develop a4-year women business owner actiOn plan, with specific targets, goals, and objectives for each year. The accomplishments of lhegoats would be ln~luded in the merit increasesof federal employees. 1~ecogzs.izing the barriers women business owners face, restrictions on sole sourcing and otherprocurement incentives will be established. There would be asunset provision to dismantle the Task Forces infour years if goals and objectives are reached. 2. Bach Task Force would inclsde agency staff, individual wolnenbusineso owners, and representation from wornenbusiness owner groups. 3. Each agency would allocate a specific portionof program budget~forthe implementation of model programs. 4. Modelprograms would be fsnded for 3 years and through matchlnggrants in subsequent years. 5. The TaskForces would make a pearly report to thePeesident onpro~ress and future actions. PAGENO="0173" 167 6. The Small Business Administration would concentrate on outreach--through a directory of women business owners, a newsletter, and outreach for programs, would buildiocal conatiluency advisory groups, disseminate program information,play an advocacy role, and establish a separate and appropriately funded women business owner office with advisory councils on policy, Legislative Oversight Congress will review the federal initiatives each year, with oversight hearings at the end of the four-year plan. Tsp immediate Action Provrams I. The Department of Commerce should refine and continue the sponsorship of MegaMarketplace for another four years to widen the effort to bring mom women into the procurement process at all levels nationwide. Monies should be allocated for this effort and for surveys on the impart of MeguMarketplace on women business owners and procurement officials, and results in number of contracts and dollars. 2. As a part of The Department of Commerce's excellent initiative to `Export Now" and because of NAWBO's extraordinary outreach to businesses in 22 countries through its international organization, we suggest a special export program targeted to women business owners--again for a four year period--where we screen and select a numberof business owners, Commerce works with those business owners to develop a strategic marketing and action plan, and provides a range of technical assistance, while The Export Import Bunk provides loans. Thele businesses' accomplishments, failures, and successes would be tracked and analyzed over four years and would lead to the development of a longer- term entrepreneurial export growth strategy. NAWBO members are uniquely qualified for this program because: 1. of oar existing international business network 2. the fact that our members are heavily in the service sector--America's cutting export edge 3. NAWBO set precedent when we led the first United Stases service sector trade mission to Europe in 1985, and followed that up with a highly successful health-care services trade mission to Japan. 4. With existing domestic barriers in procurement and credit, women business owners at this point in time may have more opportunities and access to markets abroad-- and the country needs this export push. PAGENO="0174" 168 snesotoapid New York When NAWBO's executive committee Suet in Florida last month, we talked about the future of womenbusiness owners, and the barritiru we have facedfsr so long and continue to face in the political, business, government, and socialarenas. We formed an Economic DevelopmentTask Force to define and work to establish policies and programs that encourage and support the growth of women-owned businesses. Our efforts will focus on California, Minnesota, and New York. - Cho.rtineAmenca's Course For TheFulure NAWBO is deeply concerned about America's prosperity in the future, since we and star children will be living there. We feel that afslse sense of pro~perity exists in the country, that our short-term, penny-wise, pound-foolish approach deeply endangers our future. At the 1987 White blouse Conference on Small Business, NAWBO delegates from across the country developed sn issue book, "Framework For The Futui'e." We ore updating it for release in May. It will be titled, "Framework For The Future ii: Is'.'estatg 4n America." We are calling for Americanbuolness and govtirnment so mske along-term invettSuent in America. We are asking for a holistic approach to the entrepreneurial agenda, a visionary approach, that looks at issueu of competitiveness--quality, design, education, technology, research and development, financing and taxes. Our government dollars should be spent nsw to catalyze growth. As a country we des~efately need a business mission and vision statentent and a plan of action. WiththC riglat people, the right team, the right vision, we can make oar future prosperous, we can move out of our reactive, business-se-usual mode and resume our place ma proactive, competitive, first class, world class economy again. NAWBO commits itself totally so working with you so achieve this goal. PAGENO="0175" 169 POSITION PAPERS SUEMITTEDBY NATIONAL ASSOCIATION OF WOMEN BUSINESS OWNERS [NAWBO} FOR 14OUSE COMMITTEE ON SMALL BUSINESS BEARINGS ON WOMEN'S BUSINBS5 ISSUES APRIL26,fl,~~j~n~yj0 1I,17,Arqfl~9 198* 44 PAGENO="0176" 170 DATA AND STATISTICS Since the end of the Second World War, the United States economy has undergone major transformations from being primarily a manufacturing economy to a services and information economy This transformation has resulted from interactions among technological developments, systemic shifts in the structures of industries and jobs, and changes in population. These rapid changes require effective management, but it is impossible to manage anything effectively if we no not understand its dimensions. While the federal ~overnment pr9duces a multitud~ of statistics as disclosed in Statistical Abstracts of the United State~ and other reports, comparatively little information is available on economic growth, innovation and emerging sectors of the economy. The very components of entrepreneurship. Women are playing a key role in the transformation of the economy by starting new business ventures in the services, information and high technology sectors. A study of The National Association of Women Business Owners (NAWBO) membership, funded by the U.S Small Business AdministratiQn and released in 1984 revealed that members had businesses concentrated in professional services as consultants, accountants, and lawyers--and in communications, distribution, and financial services ~1 Despite the growing interest that women are slarting such business * ventures, solid information about the nature and scope of these firms is nonexistent. Data on businesses owned by women is nonexistent by the fact that national data only refJ~~cts information on sole proprietorships. As a result, women-owned firms are viewed as being inconsequential in size and impact. This misconception greatly interferes with the ability o~ the women-owned business community to * focus the attention of the government and private sector on its needs, abilities and connributions to the economy. Several factors contribute to the lack of data and statistics that are available on women-owned businesses. One factor is attributed to inconsistent data. There are four main sources of data on women-owned businesses that are readily available to the public, They are: the census of women-owned business; the statistics of Income for Sole Proprietorships published by the Internal Revenue Service (IRS); the statistics on self-employed individuals published by the 8ureau of Labor Statistics (BLS) in the monthly publication, ~mplovment and Earnings: and current population reports. Unfortunately, the figures reported by these sources are not consistent with each other. For example, in 1977 (the only year for which data from all these sources are available), the Bureau of the Census substantially undercounted the number of women-owned sole PAGENO="0177" i71~ proprietorships ir~ their Economic Census Federal, income tax returns were the primary source of informationfor those reports, `Business interests reported on the tax returns of married individuals were attributed to the first taxpayer on the return, usually the husband. In 1977, subsequentjy~ the Census Bu~eau reported appxo~Umate1y 700 , 000 women-owned sole proprietorships.2 In 1977, the Internal Revenue Service dxe'w a sample of tax returns and from the sample estimated that thete wete approximately 1~9 u~illion' women-owned sole proprietorships, indicating th~,t the Census Bureau's figures had been off by approximately 12 million. The discrepancy betweet~ the IRS and the Bureau of Census exists despite i4~e fact ths,t the primary source of data for the 1977 census was the IRS,3 The discrepancy in the U~S and the Bureau of Census tuimbers may exist because there is no uniform-definition of a "woman-owned"-btsiness. For instance, the U.S Small `Business Adatinistration's Office of Women' s Business Ownership defines a woman-owned husineis as ~one that `is at least 51 percent owned, operated and cot~trolled by a woman -or women.4 This includes control of operations on a day-to-day basis. The Census Bureau consid'et's a busjnesa to be women~owned if the so1e~ owner of half or more of tbe~partners are women, or-, ma Onrpora'tion, if 50 percent-~opmore of the stock is~o~ined by women.-5 Meanwhile, the Interns,]. 1~e'v'enue Service estimates th~ number -of "female ~operated firms for sole proprietorships~-by using the first names from the Form 1040, Schedule C that must be filed by business owners. The IRS does not collect or analyze data by sex on partnerships or corporations.6 The Bureau ofLabor Statistics (BLS) figures count only the number of people reporti~'ig to be self employed, not the number of businesses they own nor their share of ownership. The BLSrfi-gures also do not capture all U.S. business owners. Corporate owners~-atid partners are excluded prom the count, since BI,.S counts these individuals separately as wage 2 -; A ~ ~ ~- ` - PAGENO="0178" 172 and salary workers. In addition, individuals who are self-employed in a second job, but work for someone else in their primary job are not included in the count.7 StatisticS based on these definitions represent only the smaller scale businesses owned by women, since they are based on the U.S. Census survey of sole proprietorships, partnerships and S Corporations. They do not include those women who have moved up the entrepreneurial learning curve in the last decade to larger scale enterpris~a, nor do they capture those women who initiated their enterprises as regular (c) corporations in the first place. A glimpse of the possible magnitude of this hidden corporate sector of women business owners can be seen by looking at select groups of more sophisticated women business owners, such as those who were delegates to the 1986 White House Conference on Small Business or who are members of either the National Association of Women Business Owners (NAWBO) or the Committee of 200. Sixty-four percent of the womenwho were White House delegates owned corporations (C or S)8 and 55% of the members of NAWBO are incorporated (C or 5), with 42% owning C corporations.9 Consequently many of these women's businesses were not captured by the U.S. Census survey. The Committee of 200 estimates that 80% of its members are entrepreneurs, and 13% own or manage firms with revenues in excess of $100 million. This orgamization was started with seed capital from the National Association of Women Business Owners in order to dispel the myth that all women own micro-enterprises and to point to the fact that women are entering the business inainstreani as the owners of large scale enterprises 10 The criteria for membership in the Committee is ownership of a business whose revenues exceed $5 million dollars or control of a corporatS division of a business with revenues in excess of $20 million dollars. Mo~t important, when the search was made in 1981 for the top 200 women entrepreneurs and corporate leaders, over 1,500 potential members surfaced. PAGENO="0179" 173 To improve the national da~te on woman bi,tstne5s owi~ei~s, c1~e ~lovernment; must estiablish initiatives to ens~ire the regular ct~to~ ~f r~lLab1e national data on women business owner~ and further reflse~ and upd~ta the Standard Industrial Classification Codes (SIC) to reflect the dynamic changes in the service sector, including the profess~iqna~. and technical services, where the preponderance of women busir~essosners is concentrated. Although the Standard Industrial Codes were updated in 1987, the present SIC Codes still seriously under-represent the services sector. The SIC Codes, which are used to measure output by industry group, were developed in the l930s when America was primarily a manufacturing and agriculture economy. Not surprisingly, in 1988, the goods producing sector is represented by 607 different categories although it represents only one-third of our gz~oss national product and 30 percent of employment, The services sector is represented by 442 industry categories even though it contributes two-thirds of out gross national product and 70 percent of employment. This outdated statistical framework is grossly inadequate *to support the development of sound economic, tax, trade, and regulatory policies. Lack of sound data is a practical barrier to understanding the true nature, dimensions and character of the dynamic entrepreneurial business community~ This understanding is essential to articulating the proper role for the federal government in promoting growth, entrepreneurship and innovation. As renowned management consultant Peter Drucker noted, "The aggregates on which all statistics are built are now 50 years old. And so the great national economic aggregates have been reliable plus or ninus 40 percent. . . If you get that much slippage and still base policy on it, your chances of doing the wrong thing are simply too great. The United States must accelerate efforts to modernize its national data collecting capabilities. Much of this can be done within present systems and without an unwarrabted increase in paperwork for the nation's businesses. Therefore, it is essential to develop a methodology for revising and displaying a new classification system which will be both responsive to and reflective of the rapidly changing entrepreneurial eccoomy and economic structure of the United States. The goalis a flexible classification system which, through periodic `updates, will accommodate changes in economic structure and activities while maintaining a basis for historical comparability. It is also necesSary to revise the SIC codes for management and procurement information and control purposes. Development Of a system to provide comprehensive information on c~mmercia1 transactions between LS. companies and foreign entities would assist in the formulation of international trade policies and'assist US. business in identifying and evaluating market opportunities. PAGENO="0180" 174 Nine out of every 10 j~1~s ereated in the next decade will be in the services indu~try. With woman business owners spreading into the service area at a r~apid rate, clearly women-owned businesses will be an important contributor to the national economy. Improved data accumulation and st~atistical evaluation will assist policymakers to determine the needs of women-owned businesses and their impacts on the economy. 5 PAGENO="0181" 175 1 National Association of Women Business Owners, "NAWBO Membership Profile," (Chicago, National Association of Women Business Owners, 1984, 2 U.S. Department of Commerce Bureau of the Census, Women-Owned Businesses.. 1971, (Washington, D.C.: U.S. Government Printing Office, 1976). 3 Ibid. 4 President's Interagency Task Force on Women Business Owners, Th~ Bottosi Line: Unequal Enterprise in America, (U.S. Government Printing Office, 1978). 5 Bureau of the Census, Wom~n-Owned Businesses., 1977. 6 U.S. Department of Treasury, Internal Revenue Service, ~ ProDrietorabip Retu~ns. .1979-1980. (Washington, D.C.: U.S. Government Printing office, 1982). 7 Recent information on self-employed workers is analyzed in T. Scott Fain, "Self-Employed Americans; Their. Nua~ber Has Increased," M~opth1y Labor Review (Nov. 1980): and Eugene ii. Becker, "Self- Employed Workers: An Update to 1983" Monthly Labor Re$ew., 107, 9. (July, 1984). 8 Source: white House Conference on Small Business, 1986. 9 National Association of Women Business Owners, "NAWBO Membership Profile," (Ohica~o, National Association of Women Business Owners, 1987). 10 Committee of 200, Chicago, Illinois. 6 PAGENO="0182" 176 THE CHANGING WORK FORCE and THE IMPACT of WORKING WOMEN According to Rosabeth Ranter, professor at Harvard University's School of Management and a leading advisor to many Fortune 500 companies, there are few periods in history that deserve the label of "transforming eras," when circumstances change sufficiently to warrant a major shift of assumptions. Thomas Kuhn, the historian of science, has pointed out that major change takes place only occasionally, in what he called paradigm shifts, when the working assumptions on which people have depended become so inappropriate that they break down, to be replaced by a more appropriate set. Thus, social or economic history is intrinsically characterized by long .periods of stability in paradigm, punctuated by relatively short periods of high instability: history as staircase, rather than ramp. Ranter believes this model fits the changing world of business organizations avery well. Business organizations are facing a series of changes more extansive, more far-reaching in implications, and more fundamental in transforming quality than anything since the "modern" industrial system took shape in the years between roughly 1890 and 1920. These changes in the American business environment come from several sources: continued integration of the world economy; further shifts of production from goods to services; the application of advanced technologies to most industries; faster gains in productivity, particularly in services; disinflation or deflation in world prices; and increased competition in product, service, and labor markets. Each of these by itself has changed significantly. The present situation is unusual not only in that each is undergoing transforming change, but that the changes are profound. Furthermore, radical transformations of the US work force, have required companies to address a series of managerial and human resource issues. These transformations include: o The U.S. has moved toward a society where men and women have equal opportunities to pursue whatever career and family goals they choose. o White males, thought of only a generation ago as the mainstays of the economy, will comprise only 15 percent of the net additions to the labor force between 1985 and 2000. For companies that have previously hired mostly young white men, the years ahead will force them to look beyond their traditional sources of personnel. o Over the next 12 years, blacks, Hispanics, and other minorities will make up a large share of the expansion of the labor force. Non-whites, for example, will comprise 29 perceBt of the net additions to the work force between 1985 an4 2000 and will be more than 15 percent of the work force in the year 2000. Black women will comprise the largest share of the increase in the non-white labor force. In fact, by the year 2000, black women PAGENO="0183" 177 will outnumber black men in'the work force, a striking c~ntrast to the pattern among' whites, where men outnumber women by almost three to two. o Approximately 600,000 legal and illegal immigrants ~re projected to enter the T3nited States annually throughout the halance of the century. Two-thirds or more of the immigrants of working' age are likely to join the'labor force; o Seventy percent of all collegeeducated women work; virtually all women in their twenties and thirties `work' u~1ess they have small children, and even then half the women ~with chilctren under six years work. o As the baby boom ages; atd the baby bust enters the work force, the average age~,of the work force will climb from 36 in 1988 to 39 by~ the year WOO. The number of young worke~s age l6-Z4~will drop by almost million, or 8 percent. o Part-time, flexibje~, sri4 stay-at home jobs will i,ncrease, an4 total work hours per employee are likely to drop in response to the needs of women to integrate work and child-rearing, and the modem equipped computer, *~hLch will eliminate the need for the office as a centralized communication and production area o Love ~f woth Ls~ on the upswing Seventy-f tv~ pet~enr~of - American' a no' longer ftn4 `acceptable the ~prospect~ of Worlcihg at, a~bori$g job ts~-iong at the pay is good. ,`$el'L~deni4j~n a~job setting is an aging ~dea. ~alues are changin~ o Relocation is an issue that has brought the two-career family into corporate focus. changes in values, especially among younger employees, have made career advancement and financial gain alone less persuasive inducements to relocate. In particular, the mass movement of women into the'work force has been hailed by social scientists and historians as a social change of mOmentous proportions, comparable to the industrial te~ol~tion or the wavis of immigration in the lass een1~ury. " It' s the ~is~g~l~,most outstanding phenome~nn of~thl~s o,entury~" s9ys ~lL~i~zberg, ~Q~essor at Columbia Uniwersiry. ~ attributes Ametica's rapid economic growth in recent years to one factor Mouten entry in~o' the job market as part-time, full-time, lifetime workers in virtualt~ alt occupations and at all leve).s of responsibility, This transfusion of feminine energy and skill from the pri~iace to the public world, is, the'article qontinues, "boosting ecpnomic growth', arid helping to reshape the economy dramatica1]~y. Women have seized two - thirds of the jobs created in the last decade. .An4 th~y have been the linchpip in the shift toward services and away from manufacturing Because a rapidly expanding labor force is a principal element' in propelling an eoonomy onto ,a'famn~growah traok~- t~e inf1~x of womer~ itto the job market m~y be - the major reason that ,the U~S `ba* emerged so 2 PAGENO="0184" 178 much healthier than other countries from the aconomic shocks of the l970s." Nobel laureate Paul A. Samuelson, professor of economics at M.I.T adds, "To the degree that women are getting an opportunity that they didn' t have in the past, the economy is tapping an important and previously wasted resource." In the 1980s women hmve become major players in the economic fabric of the United States. Furthermore, as the country becomes more fully entrenched in the information economy, it is becoming clearer that, if industrial America wac a. man's world, the new information economy is an era when women's economic achievements can be showcased. Thus, as we approach the 21st Century women have a unique and very important stake in business,, both as owners and as employees. Between 1970 and 1985, the female labor farce participation rate increased almost 85 percent, so that women now compromise 55 percent of the work force - - compared with 38 percent in 1960 and only 27 percent in 1940. The Bureau of Labor Statistics estimates that in 1995, 60 percent of women will wprk Slowly but surely, women's labor force participation will move toward matching that o~fmen,~ approximately 75 percent. Moreover, in~the space of a gei~c~tion, women's work patterns have undergone a complete metamorphosis: At the end of the .Second World War only 10 percent of married women with children under the age of six held jobs or were seeking them Since then mothers of preschool children have thronged to the job market~ 8~ 1985 the census bad classIfied more than half of these young mothers not: only. as participants in the work force, but also the fastest growing segment of the labor force. Women are crowding into sectors of the work force traditionallyoccupied by men. From 1972 to 1985 women's share of professional jobs increased from 44 to 49 percent and their share of "management jobs" nearly doubled - - growing from 20 to 36 percent.. From 1960 to 1983 the percentage of lawyers who are women had risen from 2 to 15 and the percentage of jobs in banking and financial management held by women had risen from 9 to ~ A similar shift has occurred in blue-collar work. 1~rom 1970 to 1984 the number of fema1~ `butchers'in~packiflghOuseS had risen by more than a third and by 1984 nearly 80 percent of new bartender jobs were going to women. The future promises yet more blurring of traditional sex roles in the work force. In the United States currently, more women than men are enrolled in college and universities, and women are earning a steadily rising share of all advanced degrees. For example, in 1983, 45 percent of those receiving accounting degrees, 36 percent of new lawers, 36 percent of computer science majors, and 42 percent of business majors were women. As women have been moving in ever-increasing numbers into jobs and professions traditionally occupied by men, the work environment has begun to respond to women's needs and values. Working women, for PAGENO="0185" 179 instapce, are raising ~he issue of omparable~,s~orth,. WOmen's pay, thot~gh still a long way~'from parity, has risen from 57 percent of men's wages in 1973 to 64 percent in 1987. Despite this~disheartening figure there is cause for opti~ism As women prepare themsel~s for business, enter traditionally male fields, and move from staff to ~nageria1. posi~o~is the gap in pay will continue to narrow. For example, according,to a ~tudy.in Working Woilien magazine professional women have made steady gains, earning seventy- five cents for each dollar a man earns, compared with only seventy-one cents in 1983. Furthermore, women's wages, especially in secretarial and clerical fields, will grow to reflect decliziipg nusib~rs of entry- level workers -- and the increased options for ~qmen in Other areas. Working women have also made mat~rnity l~ave, ~ne Of the maj or personnel issues of the l980s. The Pregnancy, Discrimination Act of 1978. requires employers to treat pregnancy like any other.disabi~.ity or illness. In practice this means that cOmpany insurance must coMier. the same~share of costs that would normally be paid for any, illness, .an4 tha; th~' employer must give the mothers short disability leave.. The law does nOt require the employer to extend the leave,beyond the ~immediape .reqovery..p~riod.or to guarantee the j9b security of the mother if she opt for a lo*lger absence. S Many of the.pation's largest corporations, however, extend a twelvs.-to- sixteen-week leave to new mothe~s, most guaranteeing job protection. Some of these:corporations also allow paternity leaves, although most companies actually frown ot~ `men who take this pption. Many smaller companies extend leaves, but. guarantee the mother .h~r ~ a comparable job only if favorable business coudition~ prevail/ ~iost American companies that eytend leave do not give the mother any cash benefits afte~r the immediate racovery. Congress has introduced legislation that wil~. close the gap, between the new diverse work force' and outdated maternity leave personnel policies that govern, the workplace. The HOuse Education and Labor Committee November ]~7, 1987 approted the Family and Medical Leave Act r~quiring many public and private employers to offer their workers job-pr~~tected family and medical leaves. The bill reqi4res businesses wLtK.50 or mbre, workers to grant unpaid, leaves~ The threshold woi4d~ drop to 35 worbers after 3 years unless Congress acts afEirm~tively to ~hange. it~, The bill, which permi~s.'~an employee to. care .for~a' ne~horn or nemly adopted child or a Ceriously ill child. or parent,. woi4d'ISe limited, to 10 weeks over 2 years, Medical leaves for workers who are themselves ill or disabled would be limited to 15 weeks per year, In addition, employees would not be entitled to.,~he .leave until' they had worked at .a business at. least; 20 hours per.weelç for at l~ast ~.year~ and, ~in~loyers would be permitted to deny reinstatement .to the .higbestpaid 10 percent. of their employees, Working women are also forcing corporations to become (tivolved with child day care. Although 8 million children t~eed day care, there is space for only. 2 million children in day-care centers. ~, it is predicted 4 5 , S PAGENO="0186" 180 that the number of children needing day care will increase to 10.5 million by 1990. A positive trend in child care is the involvement of corporations. Recent figures indicate that approximately 3,000 corporations are providing child-care assistance to their employees. The assistance takes a number of forms, including information and referral services, cash grants, vouchers, and onsite child-care centers finattced by the corporation. Corporate involvement in child care cart be expected to continue. Corporations are finding that more and more of their employees have dependent children in need of day care, and that workers are more productive when they are not distracted by child-care concerns. A stu4y by Texas Women' s IJniversity, for instance, revealed that a $50000 investment in a day-care program can save $3 million in employee turnover, trainitig, and lost work time. The city of San Francisco has passed a tiovel ordinance designed to deal with the child care needs of workers. The ordnance requires the builders of downtowns skyscrapers either to provide space for child care or to pay a tax of $1 for each sciuare foot of space in the building. The city will use the revenues generated to construct day-care centers. Paralleling the tremendous increase of women in the work force has been their influx into the entrepreneurial arena. Woman-owned businesses are spreading into all areas of the economy at a rapid rate, although the heaviest concentrations are in the service areas. The procurement awards that have been made to woman-owned businesses attest to the diversity of these businesses and the relevance of these businesses to Government needs- -operation of Government facilities, management and professional services, training, construction, and provision of such goods as ammunition and explosives, vehicular equipment components, furniture, and communications equipment. In 1981, to delineate more accurately the characteristics of women-owned businesses, the National Association of Women Business Owners funded an original research project aimed at identifying the nation's leading women entrepreneurs. The research, conducted over a 9-month period, pinpointed more than 1,700 women in the United States who are running companies that gross more than $1 milliór~ annually. These women not only own major businesses but are also actively controlling them. These women are engaged in a variety of traditional and nontraditional businesses, including venture capital, construction, manufacturing, oil and gas, and finance. A more recent study, conducted by NAWBO in l~84, reveals that among the 766 women business owners surveyed in this study 25 percent had gross annual sales of over $800~000, and 75 percenthad gross annual sales of over $80,000. 5 PAGENO="0187" 181 The study also sho~ied that those women business owners: o Have combined total revenues of more than half of~ billion dollars a' year. o Have average annual revenues of. $425 , 000 per company. o Awerage 11 full - time employees, with an additional 14 parts timS or contract employees. o Are concentrated in professiânsl services- -~ ~ection of the economy where most o~ the nation's jobs arC now being created, e.g., as consultants, actOutttants, and làyers'-and in communications, distribution, and financial services. o Include manufacturers, cOntractors, truckers, airport and train operators, robotic experts, and other nontraditional womCn's occupations. The Committee of 200, a n~tiona1 group of top woman-owned businesCes, created as an outgrowth of a NAWBO project to identify sutcessful women business owners, provides another Sample of such businesses: Membership in the Committee of 200 requires a woman to own and hav~ active control oVer a business withannual salesin excCss'Of $5 iSilliomi dollars. These businesses include general contracting, heavy construction, electronics distrihutio~'~industrial tonI distribution, industtial chemical distribution) . sirCel tontracting, mapping and hatutal resOurce ` information, analytical chemical laboratoties, petroleum refining, `oil drilling supplies, metal fabrication, marniZacture ofprOducts-etdh aS chemicals, instit~utiona1 health care products, laboret~ory siS~plies, `and plumbing and lighting fixtures, `and such high-tech busihesses as telecommunications and computers, In the 10 year period between 1972 and l982~ the number of businesses owned by women jumped from Less than~ 5 portent to over 25 percent.. Today, there arean estimated ~.7 million businesses ownedhy women in the country compared~ to l~9 millioniri 1977, Currently, `women. are going into business at a rate tw~ times faster then men and are thus the~ fastest growing segment of the entrepreneurial community. In addition, since the vast majority of these mew female entrep~epeu~s e~tCr service businesses, their role will grow. in importance as the country tontinnes to shift away from a manufacturing-oriented economic base to OtiS where service industries play an increasingly important `role. Already, the indicators of this change are significant'. It was a women business owners' trade association (the National Association'bft~omen~ Business Owners) which spearheaded the U. S. Department o~ Commerce' 5 fitst service-oriented tradS mission to Buz'ope,' and wonton played a major role in the deliberations of the :1986 white House Conference~on `Small Business wbCre they made up 36 percent of the dCle~~tCs, `compared to only 12 percent'in 1980. . - ` 6 PAGENO="0188" 182 Of equal importance, is the economic impact of women-owned businesses. Gross receipts from women-owned businesses approximated $100 billion a year according to the 1982 U.S. Census study of women business owners. However, the total economic impact of these businesses far exceeds this level if one takes into account the multiplier effect of these dollars as they turn over in the economy. Using a conservative estimate that eactli dollar will be multiplied 2.5 times in the local economy, women-owned businesses contribute $250 billion to the national economy. Of this $250 billion, approximately $37 billion is paid to the U.s. Treasury in federal taxes, and another $13 billion is paid in local and state taxes. Consequently, women business owners represent a vital new resource for the economic future of the country. Women, as busines~ owners and as employees, are having 5~ore than just an economic impact on society. Women are "neurologically more flexible than men," says Eli Ginzberg, "and they have had cultural permission to be more intuitive, sensitive, feeling. Their natural milieu has been complexity, change nuturance, affiliation, .a more fluid sense of time." As women's attributes of feminine cultural are brought into the workplace, they are providing a much-needed balance to what has been a predominantly male environment, and slowly but steadily they are eroding some of the obsolete practices and prejudices that have dehumanized work and the work environment. Business and industry are, in fact, beginning to give serious attention to the development of a more humanistic working environment. As the U.S. economy shifts away from smokestack production towards a greater emphasis on services and high technology, business analysts are calling for a more participative, people-orientated approach to managing. Many companies are adopting radically new management philosophies, style, and structures. The predominantly hierarchical authoritarian management style is sifting to a more consultutive one in which the actors within the enterprise have real opportunities to have input on decisions. As John Naisbitt has noted, "mammoth centralized institutions whose very existence have relied upon hierarchies are being replaced by smaller, decentralized units, linked informally with each other instead of being clumped together." Alvin Toffler in The Third Wave, speaks of maj or changes to come in corporate structure. Future management must be able to "operate as capably as open-door, free-flow style as in a hierarchical mode.. .work in organizations structured like an Egyptian pyramid as well as those that look like a Calder mobile, with a few thin managerial strands holding a complex set of nearly autonomous modules that move in response to the gentlest breeze." Moreover, Michael Piore in The Second Industrial Divide projects an economic system in which, "an imposing but ultimately dangerously unstable structure of vast rigid beams and girders has been replaced by a honeycomb of flexible production cells, not only giving resilience to the domestic economy but facilitating its adjustment to a stronger, more stable international order. . . In the more communal arrangements of work 7 PAGENO="0189" 18$ that become possible `under flexible specialization, new social relationships will arise, reducing the gulf between boss and worker, encouraging the introduction of machinery that magnifies rather than dwarfs the creativity of its user.' In the services and information era, the challenge is to build an operating environment which encourages freedom, ferment, aggressiveness, and innovation. One that offers opportunity for great personal satisfaction and that pro:vides ~tespect for all regardless of job level. There are several ways to do this. One is to push. `responsibility `down through the organization. Th give ~eople closest to the market or the product more say in what goes on. Another way to create this innovative environment is to break dowr~ some of the rigid organizational lines that have been established, Subsequently today's managers are being trained to Cncourage, common goals, employee participation and cooperation. Furthermore, these new managers are expeGted to exhibit qualities of sensitivity and compassion, and treat employees as valuable organizational resources, rathet than replaceable coflunodities. Women are exceptionally wall qualified to manage in the .informition and service economy. Women favor co~perattQn over competie~on. They prefer to work in team structures where power and influence are shared more across the group, as opposed to a hierarchy wher~ power is concentrated at the top. ~Women managers also tend to pla~e strong entph'asis on developing positive relationships with `co-workers. Furthermore, they try to relate to employees in a more personal way than `often is the case in the `traditional male style. Naturally., these quAlities aren't ones' the,t are observed equally in all women - - nor are they abse~it in all menE The key distinction is that, as a group, women tend to exhibit these,- particular leadership qualities to a far greater degree thati men, The reason for this is rooted'in~the basic facts of socialization, The post-World War II era- has seen eweeping demqgraphic changes- `in the work force. Women, as business owners and employeirs, have ,beo~otek new players in the nation's thdus~r~ial fabric~ Furthermore, since the vast maj ority of these new .fem~le entrmpren~eurs enter ~erytee bus4~nesse's, their role will continue to' g~rww in importance as- the ~otrnnry ~dontinueg" to shift away from a man*uftcturing~oriented ecottOmi'c base t~ one ~he-~e service industries play an ~~rtdreasingly important ro'ln. `~ If the United States is, to meet' the ch~lienge of the changing work force and survive, a~d succeed in today' s fiercely competitive economio climate, policymakers and corporaee~ America must shed outworn management structures and~practices-and make fresh use -of both people and technology.. As Richard C. Gersteuberg, former- G.M. Chairman stated, "The business,, that fails in- the years ahead will be the -one- that fails - tO understand how it is related-to the society around -it." One might - -` also add that the business will-else, faiL U it `toes not organize itseth internally to make best use of its-human resources. - 8 - PAGENO="0190" 184 WOMEN-OWNED BUSINESSES IN FEDERAL PROCUREMENTS The Federal Government is the largest purchaser of gonds and services in the United states, representing over $200 billion in purchases annually. Even though women are playing an increasingly important role in the economy of the United States through the ownership of businesses, they receive only six-tenths of 1 percent of all government purchases ovet $10,000. The procurement awards that have been made to women-owned businesses attest to the diversity of these businesses and the relevance of these businesses to Government needs--operation o~ Government facilities, management and professional services, training,' construction, and provision of such goods as anmunition and explosives,' vehicular equipment components, furniture, and conmunications equipment. Women own 25 percent of all small businesses in the United States, and with women going into business at a faster rate than men, this disproportionate share of procurement dollars is especially distressing. The limited access of woman-owned.businesses to Federal procurement~ represents a loss of excellent resources to the Government and a severe impediment to the viability' of the female entrepreneur and business owner. It is in the best interest of the nation's economy to support women business owners as an evolving entrepreneurial sector. Federal policy must create a climate that supports women-owned businesses. An analysis of this situation, however, reveals that diCcrimination and the absence of strong federal initiates to establish a greater conmitment to women-owned businesses are at the heart of the problem. Consider the following example: A Washingfo~n ~ article (September 1980) reported that Karen Haste Williams, then administrator of the Office of Federal Procurement Policy, was told-by the head of procurement at the Department of Defense that doing business with a women-owned business was, essentially, a threat to the nation's security. Robert Trimble, then acting deputy undersecretary for acquisition polity and author of the - -letter, wrote, "providing for the country's defense is our primary mission.. .As indicated above, I have reached the conclusion that the continued imposition of social programs on the procurement process is adversely affectIng our ability to fulfill this objective." "Never mind, the ~ reported, "that a good 30 percent of Defense's multi~billion dollar procurement budget goes for such things as uniforms, food, laundry and dry-cleaning equipment, liquor, draperies, mucical instruments, textiles, sIgns and advertising>displays, toiletry articles, catering services and the like." -- - For over 10 years, the Federal Governient has verbally encouraged full. participation of woman-owned businesse~ in the procurement process. For the most part, however, this encouragemeht has remainea~ at the' level of lip service, because the spirit and mechanisms to implement this policy have been lacking. No preferential contracting programs have been established for woman- owned- businesses', and' all initiatives to date have been largel~r ineffective, with the result- that the Federal Government has been essentially a closed market to woman-owned businesses. PAGENO="0191" 185 Newly established woman~owned firms encounter many~barriers when competing for Federal procurements. As with any new business, these firms are unfamiliar with the procurement process and how to work within it, lack effective contacts in agencies, and do not have a track tacord to facilitate favorable contract awa~d decisions. Moreover, woman- owned businesses often do not possess the Einancial stability to withstand the extended procurement award cycle (often 12 to 18 months), and, once a contract is awarded, must cope w&th the cash flow implications of doing business within a system whete payment often lag~ significantly behind irtcurring costs to provide goo~ds and services. Further, financing costs are not recoverable undet Government procurement regulations. No special set-aside programs e*ist specifioally for Woman.owbed businesses that would enable thesa businesses, to get their "foOt in the door." One. study, teported in the Small Business Ad *istr~tioS'~ SeLecx~d A~s~rac~g ol Compi~eted Re~~grgh Sti.t~ii~e~ teported that ~rocttrement personnel resist set-asides to small businesSes because of a general belief that "social obj ectives should not be achiewed through the procurement process.0 ret, experts say that women who aperate businesses which are;e~igible for govetnment contracts are prevented from obaaining the contracts by the general attitude - of agency peveonnel , and that "arbitrariness" is often involved in the granting of government contracts. -Several small businesses who were interviewed revea~e4 th~t "the most imporaartt fdctht~tiniit-ing bidding on contracts was that seine organizations- have -Sn -inside track, ` a trach ~somen obviously do not have. , . , Available inEorni~tion on how to sell to the government is oFten overwhelming to the uninitiated. Further, the informa,aion,a~jable. gives little insight into the rea~tties to the- l'ederal procutemeWt~ ~rouess, namely ~iow to develop technical and oost~ -strategies, whárS -tb~ ~irt~i backgtound necessaty to prepare a bid or~proposal, dud how to negotiate' contract terms. In addition to these problems faced by businesses entering the Federal procurement matket, Woman-owned businesses face sociolo~gical batriers in' the form of persistent misconceptions and biases. The~e barriers have been verifi-4 time and time again by studies examining the role of woman-owned businesses in Govetnment proauremeut. For e*ample, the 19~ teport of the U.S. Civil Rights Commission on "htinoriti,es and-Women as Govetnment- Contractors" states: "Woman-owned businesses are hampered Lti~the- procurement ptocess by the unavailability of intorniat-iott and biases built into the -procurement- system.~. i4earingà -before the Senate. Se1~ct' ~omnictee on Small Business in `February 1976 created an official `tco5rd of ~he discrimination encountered by women business owners tthder the prevailing credit and procurement systems. Tn 1978, the President's Interagency Task Force on Women Puniness Owners reported "women-owned businesses receive a very sma~l~s~ia-re t~f th~ ~fe4ova~l'procurement dollar aSd ma~ be ex~dtienc-1ng discrimination i~ their efforts to de business with'the' ,?overnsent," In a - ~iational Association of Women -Business Owners (NAWBO) survey, - members repotted numerous a~amples .q~ -bias .dnd sex-based discrimination that they- have experienced as women business owners from Coveenment ps~ogram and contract~,ng~off5~cjalg, - Examples reperted by ~A-WuO members iñclude.~ 2 PAGENO="0192" 186 o Contracting officials have labeled women as emotional during contract negotiation when the women have been tough negotiators and have dismissed their contracting concerns as "just another complaint, not to be taken seriously." Some NAWBO members have found the problem sufficiently serious to hire men to handle their company's contract negotiations. o Technical review committees questionitig the ability of a woman to do the job. o Program and contracting staff questioning the- ability of a voman to manage money and handle numbers. o Women in nontraditional occupations being questioned-as to the appropriateness of their position~atid their ability to do amen's job." Despite these subtle biases and open forms of discrimination that woman-owned businesses face, there are-successful woman busitiess owners in America. For instance, in 1979 a Maryland NAWBO member started a biomedical research planning company. Desj~ite a lagging economy, in its first 10 months of operations, the-company racked up $1.25 million in revenues from federal contractS and increased its numbers of employees from 15 to 45. This- was. accomplished by submitting 13 proposals for government consideration and winning every contract. Today, the company is one of the fastest growing health communications and biomedical research firms in the United States, offering integrated multidisciplinary health sciences support in biochemistry, behavioral psychology, chemistry, and biology, - to name a few areas, with on--staff Ph.Ds, scientists, nurses, and experts in health education and public health. The company employs over 150 staff and has projected sales of $7 million for 1988. One way a small, woman-owned business could gain experience in Federal contracting would be to subcontract with a large business. Subcontracting with larger, more experienced firms could facilitate efforts by these entry-level woman-owned businesses in overcoming some of -the barriers and in developing the track record and contracts necessary for success in the procurement process. However, procurement plans required -by Public Law 95-507 for utilizing small and minority-owned businesses as subcontractors are not legally required to utilize woman-owned businesses. The only procurement requirement for prime contractors to develop plans utilizing woman-owned businesses is contained in the Federal Acquisition Regulations, which requires prime contractors to develop plans for subcontracting with woman- owned firms. Even when agency-set goals for awards to woman-owned businesses are - established, ~i- oifict*1*taekthe too1s~~SIW!,~tct the policies! VLt~ th~- xcpttOfl of - the 8(e* program through which some "socially and economically disadvantaged" woman-owned businesses may participate, ~- ~ to directty increaae~ the- nuthet *t -awards wade to wowan-'owned businesses. ~` Further, th~1~ ~Lncenti'v** àr aecountmbi1it~ for contracting officers to - tMcs actions to west agene~r goats for contracting with woman-owned businassesa - 3 PAGENO="0193" 187 NAW8O is committed to facilitate the moVement of women business owners into the mainstream of the Federal procurement market. NAWBO, in conjunction with the U.S. Department of Commerce, sponsored MECAMARKET~1ACE I and II. MECAMARKETELACE gave women business owners an opportunity to meet with p~ocurement officials from iederal, state, and local governments, as well as with prime contractors. This opportunity increased the visability of women-owned companies among federal, state, local, and private contractors NAWBO also used the 1986 White House Conference on Small Business as a vehicle to get the issue of procurement in the forefropt of. public policy debate. As a follow-up to the conference, NAWBO is workit~g with numerous trade associations, including the Professional Services Council, National Small Business United, the U. S. Chamber of Commerce, the Small Business Legislative Council, and the National Federatiod of Independent Business to implement the procurement recommendations that emerged from the Conference. S The barriers that now e~tist for women business owners and potential. entrepreneurs will not be eliminated overnight. Probably the most important statement that could be articulated is one that Margaret Heckler, former Secretary of Health and Human Services, made when she testified at hearings on the status of women' s business enterprises in 1980: "The burden falls equally on both the public and private sector, but. . nothing will happen in the private sector unless the government takes the lead. As the Washington Star articles mentioned above stated, "The bright glow which surrounded the Carter administration's much-heralded women-in-business program has long since faded." It is telling that most of the problems outlined in that administration's report, ~he Bottom Line: Unequal Enterprise in Amarica, released in June 1977 remain. However, the recent federal, congressional and politital party interest in women entrepreneurs is encouraging. This activity by the parties indicates that Washington policymakers are finally becoming aware of the epormous contribution of women-owned businesses to long-term economic growth~ particularly to job creation. 4 88-199 0 - 88 - 7 PAGENO="0194" 188 ACCESS TO COMMERCIAL CREDIT Access to credit as a means of obtaining necessary financing for start-up costs and business growth has been reported as a major problem faced by small businesses throughout the United States. The inability to obtain commercial credit is especially problematic for young businesses which have not established a financial track record and have not accumulated sufficient assets to qualify for the business financing they need under traditional bank evaluation procedures. Businesses in the service sector, no matter how promising, often face particular difficulty in obtaining commercial credIt because usually they possess few tangible assets to which a bank could look for collateral. Women are starting their own businesses at a rate two times' greater than men, and are therefore the fastest growing segment wi.thin the small business community.1 Women-owned businesses are overwhelmingly in the service sector of the economy. Accordingly, the difficulty of obtaining credit for a small, service-oriented business has a disproportionate impact upon women. In addition, systemic discrimination places the average American woman at a disadvantage in competing for capital for her enterprise. A woman's traditional position in the work force has limited not only her management experience, but also her income and the amount of collateral she has been able to amass. The problem is even more serious for minority and divorced women. Moreover, co-mingled family funds, weak credit histories and limited experience in the male business community all impact on a woman' s ability to compete equally in raising éapital. It is these five "C's of credit" (collateral, capacity to pay back, character, credit, credit experience, and communications of capital needs) which are used to judge loan applicants. Even if de facto sex discrimination did not exist (and most women business owners maintain that it does), the average American woman comes to the financial negotiating table with a weaker hand than her male counterpart. Not only have her earnings been substantially less than men, but she has less experience in the financial system. The severity of this problem and its impact on business growth has been illustrated by two recent studies: one of Michigan business women, and the other of women business owners in Philadelphia. The Michigan study surveyed 3,500 women and received responses from 17% (621). This survey showed that while 69% of these women business owners had approached banks and lending institutions, only 14% of the capital used to start their enterprises had come from lenders, with over 70% coming from savings and earnings, and another 15% from friends, relatives and private investors. PAGENO="0195" 189 This self-reliance on their own earning and savings, despite the traditionally low earning power of women in the work fQrce, resulted in 80% of the businesses being capitalized at under $20,000. Only 5% of the women in the survey started their businessss with more than $75,000. Most important, over half (52%) of these Michigan business owners were operating without a bank loan of any kind. Yet, these were not new businesses. Only 8% of the survey respondents had been in business for less than two years. Sixty four percent had been in existence for at least five years, with 32% of these being over ten years old. In terms of size, 41% of the respondents indicated that their businesses grossed over $100,000 a year, and 54% employed over four full-time and part-time employees, in addition to themselves. Almost one fourth (23%) employed over ten such employees. These Michigan businesses were not part-time ventures or home-based enterprises with no plans for expansion. The survey showed that 86% of the respondents operated full-time ventures and that 80% leased or owned space. Most important, from an economic development perspective~ was the fact that almost half (47%) were considering expanding in 1987. The information learned from questions regard~ng collateral in the Michigan study highlight the problems women have in accessing traditional sources of capital particularly in states where the banking institutions are heavily oriented to asset-based lending. Of the 48% who had bank loans, the business owner' s plant and equipment was the frequently mentioned (47%) source of collataral, followed by there house or car (31%), and business-owned receivables (30%). In terms of the level of collateral required, the majority (75%) indicated that the collateral required was equal to or greater than the amount of the loan, with thirty-six percent indicating collateral requirements greater than the loan amount. Of those, 42% indicated that the collateral was higher than 200% of the loan amount. Fifteen percent indicated having to collateralize their loans at a level that was greater than 500% of the amount of the loan2 A recent Philadelphia survey of 650 women business owners, to which 150 responded, sheds additi~na1 light on the degree to which women are bootstrapping themselves into the market place. The t~omen in this survey represented more recent business owners with 50% in operation for less than four years. It illustrates, however, the level at which women are outside of the traditional capital markets. The initial start-up costs for 57% of the respondents were less than $5,000. While this low level of capital may be due to the many 2 PAGENO="0196" 190 professional services and home-based businesses in the sample, other studies confirm the phenomenon that women tend to start businesses with smaller amounts of capital than men, regardless of professional and/or home-based status. This initial use of small amounts of start-up capital may inhibit the ability of these women to take advantage of expansion opportunities as they become available. Most of the Philadelphia women, regardless of business type, received a significant amount oE their start-up support from personal sources. Very few women received start-up money from secondary sources (business colleagues, inheritadce, stock/bond sales, or a second mortgage) or institutional sources (banks, goverdment agencies or personal finance companies). Those percentages were 11% and 14%, respectively. Most importantly, a significant percentage (64%) of women did not seek information about securing a bank start-up loan. In other words, they opted out of the process without exploring the possibility of securing outside financing. Their teasons included thinking that they could not get a loan, not knowing the procedure to follow, and having enough money from other sources. In addition, those Philadelphia women who were married had a better incidence of getting expansion loans (since their husbands could co-sign), then those who were unmarried.3 These current studies echo earlier findings. In June, 1983, President Reagan established an Advisory Committee on Women's Bttsiness Ownership. The Advisory Committee conduced a written survey of women business owners and convened five public hearings in various areas of the country. One of the Committee's key findings was that "there are, unequivocally, barriers unique to women business owners today which place them at a serious disadvantage." The Committee contributed women business owners' problems with access to commercial credit to: o A "hobby mindset" of some lenders which leads them to believe a woman' s business is truly an avocation, and not a serious business enterprise. o Women are not always aware of their rights under the equal access to credit laws. There are inconsistent enforcement of lending laws. o Women may not be aware of the likeliest source of capital or of how to make the most effective loan presentation and finat~cial projections. o Often service industries find it hard to obtain financing because it is difficult to collateralize staff and services. PAGENO="0197" 191 o Women are not always as aggressive as men in seeking alternative financing when denied credit by a bank, Men demand explanations and keep searching for a source that will fund them, o The "e*perience factor may be missing" Women may know their area of expertise but may lack business/management skills. Unfortunately, the public sector has done very little to overcome these barriers. In Th~ Annua)19~eport to the Pre~ident (June 1980), the Interagency Committee on Women's Business Enterprise stated, `The most formidable barrier to women's efforts to establish bu~inesses of their own, continues to be latic of access to traditional source of credit and capital. Banks have been slow to perceive women as a profitable target market. Because of their low income status relative to men, -credit worthiness is often difficult for women to establish when standard measures such as collateral and income form the basis for judging. The very small size of many women's enterprises both in receipts as well as number of employees hinders their ability to focus on expansion." Realizing these problems, the Small -Business Administration initiated a mini-loan program exclusively for women entrepreneurs in late 1979. The SBA program, designed to assist women whose capital needs for starting or expanding a business were $20,000 or less, received 150,000 requests for mini-loan information almost immediately, 1~uring the first six months of fl 1980, the SBA approved almost 900 loans for 13.9 million- -with roughly half granted to existing women-owned businesses and half to new businesses, Unfortunately, this successful program was discontinued in the early years of the Reagan Administration. Women-owned businesses and women entrepreneurs must once again compete with larger, well-established and usually male-owned business for credit from conservative lending institutions. The 1978 Presidential Interagency Task Force on Women Business Owners found that women seeking capital from financial institutions have Laced problems "over and above those normally faced by any,. new or ~small business person" and have encountered "subt~Le discri~uina~ipn," It based these findings in part on an American Management As~oc~ation - survey in which a majority of women believed that inability to obtain adequate financing is a significant anci special problem ~or women business owners. Many women, according to the study, found obstacles disappearing and borrowing becoming sudc~en1y possible when they approached the banking environment with support or assistance -from their spouse, family members, or male friends. The Equal Credit Opportunity Act of 1974 (ECOA) should have eradicated barriers that have adversely affected the ability of women-owned businesses to secure business credit, but unfortunately it did not. Although the Act requires Linantial credit institutions to make credit 4 PAGENO="0198" 192 available equally to all credit-worthy customers without regard to sex or martial status, many of its provisions have been interpreted not to apply to business transactions. The Equal Credit Opportunity Act prohibits discrimination in lending on the basis of race, color, national origin, sex, martial status, age, the receipt of public assistance or the exercise of rights under the Consumer Credit Protection Act. It applies to both consumer and commercial credit. In implementing the ECOA, the Federal Reserve Board adopted Regulation B, specifying various anti-discrimination safeguards applicable to all types of credit transactions. Ordinarily, creditors must (1) furnish credit applicants with written notice where credit is denied or other adverse action is taken, and provide either a statement of specific reasons for the action taken or inform applicants of their right to request such a statement; and (2) automatically retain records of the credit application and evaluation for 25 months. Regulation B also prohibits a creditor frc~m requesting information on the marital status of the applicant~ However, the Federal Reserve Board also included in Regulation B a so-called "business credit exemption" which removes the safeguards described above in the context of commercial credit transactions, despite the apparent intention of the ECOA that its safeguards apply to all credit transactions. Thus~ the so-called "bitsiness credit exemption" in Regulation B t~$* the effect of shifting the burden of ensuring non-discrimination from banks to some of the people the ECOA was enacted to protect -- women and minority business owners. Consequently, with respect to commercial credit applicants, creditors may inquire into the borrower's martail status, need not supply arty notification of reasons for adverse actions unless requested by the borrower within 30 days of notice of denial, and need not retain credit files for 25 months unless specifically requested to do so in writing by the applicant within 90 days of the adverse action. Most importantly, creditors are not required to notify commercial credit applicants that they have the right to request both a written statemertt of reasons for action taken and the retention of their credit files. These exemptions from the otherwise applicable provisions of Regulation B permit sex-based discrimination against women business owners and appear contrary to congressional intent. Commenting on the Board's power to grant exemptions from the Act, the Senate Committee on Banking, Housing, and Urban Affairs wrote: The Board would have to make an express finding that there was no evidence or likelihood of discrimination in that class of transactions, nor would the potential for discrimination be greater if the Board were to exempt that class of transactions from compliance withone or more provisions of the Act. . The committee intends to indicate to the Board that it should not grant broad exemptions. PAGENO="0199" 193 Similar language appears in the Conference Report on the 1976 Amendments to the Act (Conference Report S.685, 94th Cong. 2nd Sess.9 (1976)). As reasons for adopting the business credit exemption, the Federal Reserve Board stated that the buainess loan application process was more extensive than that of consumer loans, and that borrowers would learn the reasons for denial of their application during negotiations and exchanges in the application process. Moreover, the Board stated that commercial borrowers are more sophisticated and don't need extensive explanations, The Board also stated that creditors would learti of the marital status of borrowors anyway when negotiating the loan application, thereby alleviating the need for a prohibition of marital status inquiries. Finally, the Board said that the cost of retaining voluminous business records was significant and the Board was unwilling to impose this cost on banks. As the courts have recognized in the employment context, discrimination is often subtle and hard to detect and prove. Exempting business credit transactions from the requirements of the Act hampers the ability of enforcement agencies and women entrepreneurs to detect illegal discrimination eliminates incentives for financial institutions to monitor their own practices, and makes it impossible for public policymakers to know whether they need to address discriminatory practices or other types of barriers to full access to credit. The rapid growth of women-owned businesses, and the evidence that their problems with financing continue, make action on this issue vitally important. To ensure that applicants for business credit receive the protections intended by the Equal Credit Opportunity Act, Representatives John LaFalce and Lindy Boggs in April 1987 introduced HR. 1987. This bill permits the exemption of business loans from the broad scope of the ECOA and Regulation B only if the Board holds a formal hearing and finds that the application of the ECOA or particular provisions thereunder to particular classes of business transactions is not necessary to promote equal credit opportunities, 6 PAGENO="0200" 194 1 Report of the President's Advisory Committee on Women's Business Ownership. 2 Source: Michigan Women-Owned Business Survey by Michigan Woman Magazine and Touche Ross, April, 1987. 3 The. Hub Program For Women's Enterprise. A survey of Philadelphia Women's Business Owners, by Dr. Amy Lyman, Warton Center for Applied Research, University of Pennsylvania, April, 28, 1987. 7 PAGENO="0201" 195 PRE?ARE~ STATEMENT TO THE 100TH CONGRESS COMMITTEE ON SMALL BUSINESS APRIL 26, 1988 by MARY H FARRAR PRESIDENT SYSTEMS ERECTORS, INC. 651 NORTH SOMERSET TERRACE OLATHE, KANSAS 66062 (913) 782-7144 PAGENO="0202" 196 STI~EMENT OF M1~RY F2'tRRW~ April 26, 1988 Good morning Mr. Chairman and seaters of the cctrinittee. It is both an hcncc and a pleasure to be here today. My naite is Mary Farrar. I am the owner of Systems Erectors, Inc., in Kansas City. I just finished my second term as national chairman of my trade association, the Independent Erector Division of the Systems Builders Association and also as an excutive cczmtittee neater of the Systems Builders. (I ant the only ~ien to have ever held office In the associaticn.) I am a fainding nember of the Carmittee of 200. I'm married, have five adult children and wa are expecting grandchild nine and ten this year. I am the oldest of six children, I grew up in Kansas city, the product of a very middle working class family. My father was a conductor for the Santa Fe rai]road~and my mother was a school teacher who didn't earn her degree until middle age (all my children attended her college graduation). I married six naiths after high school and except for a clerical job before wa had children and sate part tine (evenings when my husband was hate with the chi]4ren) work for a neighborhood tax acconntant, I was a hateneker until 1972. In September of 1972, with visions of college expenses for five children loatr~ ing before my eyes, I want to work fcc a ccnstruction cat~any that was in its infancy. I was there in tine to prepare the second waekly payroll. The ccinpany did both general construction and steel erection. The cai~any grew and I gained knowledge in all ~ttases of the cçeration.. I learned to estimate and bid ~k. I learned field mañagenent and scheduling. But my main job description was still office nen-~ ager and In that position I hal full responsibility for the financial rnanagenent of the canpany. One of the most important lessons I learned during my six year~* with the canpany was that my boss wo.i]d teach ma anything I was willing to take tine and effort to learn and then he coi]d spend more and n~e tine away fran the besiness. Because of my total involvenent, I hc~ed to eventually beccaxe a part owner of the PAGENO="0203" 197 ccmpany. After being refused the right to boy into the canpany, I left in 1978 to launch my own canpany. I had no formal training in either b.isiness or canstructice. But I did have six years of ai-the~-job training, the magnificent sum of $500.00, lots of energy and deterxninaticn, the support of my husband, Jim and xuDst importantly a cantract to biild three warehcnise lxiilding fran a local general ccritractOr. Systems Erectors, Inc. provides labor and equiptent to erect structural steel, precast ccncrete and pre~engineered b.iilding systems for the low~rise ccn*tercial, Industrial and warehcxise markets. Besides my office manager, Eerry Cac (who is also my yaangest daughter) and myself, ve have no other employees except unicri ircn~rkers and hoisting engineers. Because I had no ira~ey to finance my operaticu and I knew I didn't have a bank- able deal (a ~znan trying to start a uniui steel erecticn ccspariy with $500.00 to her nams), that first cqntract becane all important. `The gerIeral cantractor agreed to all~ ith to draw against that ccntract weekly, whatever ancunt my payroll and pay- roll taxes cane to. A typical canstxucti~i ccntract calls for ncnthly draws, billed at the end of the ncnth, bit usually nOt ~id until fifteen to thirty days later. Thus, yce are making payrolls forty five to sixty days before yc*a collect any xttney. A labOr intense cctupany such as maine ~ald need substantial capital just to exist. So I bad a real sweetheart of a deal. I ms~e a small profit