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  • Scoop Market Mysteries 2-27-22 - Diversity Reporting

Scoop Market Mysteries 2-27-22 - Diversity Reporting

🔎 Market Mysteries: How do we hold companies accountable for diversity initiatives?

 Market Mysteries of the week

  How do we hold corporations accountable for diversity initiatives?

Answer:

Companies that improve their diversity improve their business. But companies

need to be pressured to report on their workforce diversity before we can track their improvement

.

Why is diversity reporting important?

Companies that report on diversity

promote transparency

and show investors their work toward initiatives that can improve their business. The majority of Americans,

, and

diversity ultimately can enhance corporate profitability

. Companies in the top quartile for racial and ethnic diversity were 35%

. Companies in the top quartile for gender diversity were 15% more likely to have financial returns above their industry peers.

Diversity in the workplace can also

. Companies that prioritize inclusion in their talent strategy are 1.7x more innovative, 3.8x more likely to coach employees for improved performance, 3.6x more equipped to deal with personnel performance problems, and 2.9x more likely to identify and build leaders than other companies.

How do companies report on this stuff?

Not every company must disclose employee gender, racial, and ethnic identities.

Only companies with more than 100 employees and certain federal contractors must

, a federal agency that enforces laws against workplace discrimination.

evaluate how companies meet criteria based on demographic data, including gender, race, ethnicity, and standardized job category data. 

Are these reports enough?

Even though large companies must submit EEO-1 reports to the EEOC, the statements are confidential, so

. Only about half (55%) of the largest companies in the US

some type of racial and ethnic workplace data to the public. But,

more companies are feeling the pressure to release this data.

The current 55% is a significant improvement from 32% just one year ago.

EEO-1 reports are standardized and can easily be used to compare their data across various companies and industries

, but they need to be more inclusive. Employees who identify as

on EEO-1 forms or forced into binary categories - male or female. Providing a more comprehensive range of data to the public will help shed light on these issues and hold companies accountable for their representation.

What about all of the racial equity commitments and pledges?

As a result of the Black Lives Matter movement and rising pressure for racial equity,

have made pledges and commitments for diversity, equity, and inclusion (DEI) within their organization. About â…“ of Fortune 1000 companies issued a public statement on racial equity between May 25 and the end of October 2020.

, and 57% announced they were committing money to racial equity initiatives that reached a total of $66 billion.

announced in June 2020 to put 2% of its cash holdings into financial institutions and organizations to directly support Black communities in the US. In December 2021,

and invested a total of $100 million allocated to various Black financial institutions. But whether or not these pledges have tangible outcomes remains to be seen.

Has there been any real progress?

Yes, but without standardized reporting, we really only know what companies tell us.

Last week, Netflix announced that

of the streaming service’s global employee and leadership workforce. Historically excluded ethnic and racial backgrounds now make up 50.5% of employees. 

But

progress in leadership diversity for most companies has been relatively slow.

A McKinsey study found that

from 2014 to 2019. And ethnic minority representation on executive teams in the US and the UK rose only from 7% in 2014 to 13% in 2019. 

Some companies are tying executive compensation to performance in DEI metrics

to accelerate change. Chipotle announced this week it would

, which could positively or negatively impact annual bonuses by up to 15%. The company plans to increase internal diversity above its current rate of 60%

Are we just hoping companies will make progress on their own?

It’s not just internal pressure that drives change.

Investor demand for more DEI disclosure from companies hit record highs last year

. Shareholder proposals nearly doubled in 2021 to 143 compared to 74 in 2020. Support for these proposals addressing diversity and inclusion in the workforce averaged 61.6%, and proposals addressing board diversity averaged 62.6% shareholder support. 

As social justice, working conditions, equitable pay, and other issues take the spotlight and shareholder demand increases for more disclosure from companies,

within companies. 

Despite shareholder demand for disclosure,

some companies have pushed back.

Earlier this year,

from its annual proxy because the company feared the audit would harm its defense in pending lawsuits by Black franchisees claiming they were steered to lower-performing markets.

At Share Scoops,

we believe in the power of public pressure.

Creating greater transparency around each corporation’s impacts and empowering thoughtful conversation can encourage companies to change through better-informed employees, customers, and investors.

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💙 The Share Scoops Team

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