It’s Time to Act on Diversity, Equity and Inclusion

The value of diversity has been proven over and over. For years, studies have documented the fact that companies with diverse boards, diverse management teams and diverse workforces outperform rivals. They make better decisions. They grow faster. They make more money. But the case for diversity has become more than noise; it has become imperative. A year after the murder of George Floyd, it’s not just the moral case for DE&I that has become more urgent; the business case has, too.

Why?

Investors are demanding it. In April, 84% of DuPont’s shareholders voted for a shareholder resolution, despite management’s opposition, to track and report diversity, equity and inclusion data. Note that 81% of DuPont’s shareholders are institutions—the pension funds and others, some of which PE firms look to as sources of capital. Investors such as Black Rock are among many calling for disclosure and action by the companies to which they direct capital.

Regulators want it. Last fall, NASDAQ proposed requiring companies to disclose DE&I data as a condition of being listed on the exchange. The Securities and Exchange Commission has now made it a requirement that companies under its purview disclose material human capital data; while the SEC leaves it up to management to decide what’s material, DE&I tops many lists—and failure to disclose information later deemed material could open registered companies to shareholder lawsuits.

Customers reward it. There are many reasons why a diverse workforce might help companies win customers. Their marketing might be more sensitive to diverse customer segments; their customer service might be more empathetic; they might be better at spotting underserved markets and emerging trends. Whatever the cause, the result is clear: A rigorous analytical study by Cedric Herring of the University of Illinois at Chicago looked at data from the National Organizations Survey and concluded “both racial diversity and gender diversity are among the most important predictors of relative profitability” for companies.

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