The tragic events of the summer moved diversity issues into the spotlight, escalating the importance of this critical topic to an all-time high. The stakeholder response has been universal. The public, state legislators, corporations, investment firms, and ESG ratings agencies alike are taking action to spur meaningful change in the workplace where, in many corporations, diversity—or, rather, the lack thereof—continues to be an issue, especially at the management level.
As Women in the Workplace surveys conducted by McKinsey and Company have shown, there is a first-level management gender gap that persists today, resulting in a sharp drop of women at the C-suite level. The problem is even more significant for minorities. According the 2020 survey, for every 100 men promoted to manager, only 85 women, 58 Black women, and 71 Latinas were given the same opportunity.
Recent COVID-19 data sheds even more light on the disparity: women of color are more likely to be furloughed or laid off during the crisis than other groups. And, working moms of all races—who may not be able to rely on schooling or daycare during the crisis—are disproportionately struggling with work/life balance issues and with keeping productivity levels where they need to be.
How stakeholders are upping their efforts.
Clearly, there is much work to be done in the diversity, equity, and inclusion arena within American workplaces. The good news is, that work is well underway. Here, we share how various players are stepping up to the challenge.
Many companies are rallying around the issues and actively demonstrating their commitments to change. For example, Citigroup has pledged to spend $1 billion over the next three years to help close the racial wealth gap as it seeks to become an antiracist institution and end discrimination in its own practices and policies. Specifically, Citigroup plans to develop standards to guarantee its software eliminates biases. It will ask outside marketing, communications, and legal partners to assign people of color to service its accounts. More directly, the bank will use more than half of the pledged funds to support homeownership for people of color and affordable housing by minority developers.
Starbucks is another company taking a firm stand. It will begin mandating anti-bias training for executives and will go a step further by tying leaders’ compensation to increasing minority representation in the workforce. By 2025, the coffee giant aims for at least 30% of its U.S. corporate employees, and 40% of its U.S. retail and manufacturing employees, to be people of color. Per company figures, Starbucks currently falls short of those goals at nine of the 14 job levels it tracks. The company plans to publicize its progress every year. Additionally, it plans to offer an executive mentoring program for employees of color starting later this year and to include anti-bias materials in hiring, development, and performance assessments.
California is one of several states blazing new ground in the areas of racial and diversity lawmaking. New California legislation introduces regulations on racial and gender diversity in the boardroom that apply to more than 600 public corporations headquartered in the state. Per the new law, by the end of 2021, these companies must have at least one board director from an underrepresented community. By the end of 2022, that number jumps to two for companies with a total of four to nine directors, and three for boards with nine directors or more. This legislation mirrors a similar 2018 measure that required boardrooms to have at least one female director by 2019.
Illinois is following suit. The state recently passed legislation mandating public disclosure of the racial, ethnic, and gender diversity of boards of directors. The University of Illinois will release a report evaluating the progress on this disclosure by March 2021.
Investment Firms and ESG Rating Agencies
Board diversity with female or minority representation has become an important topic to investment firms and ratings agencies alike. BlackRock has stated that companies should have at least two female board members, while Goldman Sachs announced in 2020 that the bank will only underwrite IPOs for companies with at least one diverse board member.
According to NACD, board diversity is one of the top three ESG factors of interest to investors, with 65% and 74% of investor meetings discussing human capital and diversity, respectively. In addition, ratings agencies, such as MSCI and Sustainalytics, include board diversity as a universal topic within their governance framework. The agencies’ guidelines call for a strategy or commitment to ensure diversity at the board level, a strategy or commitment to ensure diversity beyond just gender diversity, and the disclosure of workforce equality data for the board. In most cases, these mandates extend to the entire workforce.
4 Critical Steps for Shaping Your Diversity Commitment
The investment community and the nation at large are speaking up. If your organization hasn’t made diversity a top priority yet, it’s time to get serious about your commitment. Start working toward a more diverse workforce that can spur your corporation’s future success by taking the steps below.
- Tie into your mission. Take some time to reflect on your organization’s mission, specifically as it relates to how employees—all employees—are treated. Then, ensure that your efforts, policies, and practices provide ways to advance this mission. Specific actions you can take include:
- Update your leadership agenda. In light of recent events, we’re witnessing more and more companies moving employee engagement and leadership development initiatives—particularly for minority populations—to the top of their executives’ agendas.
- Create a committee. More companies are forming Diversity, Equity, and Inclusion (DEI) committees and taskforces to specifically address diversity issues, articulate the company’s policy, and formalize the corporate commitment to the issue.
- Amend your charter. We have yet to see many companies take this official step, but we believe it will be a common next move for businesses that are serious about fully embracing diversity initiatives.
- Measure your diversity metrics and make them public. As the adage goes, you can’t improve what you don’t measure. If you really want to be accountable for your progress, share your numbers with the public. Consider the following:
- Use dashboards. Companies are increasingly keeping a close eye on key human capital management metrics. A few to consider tracking include demographics of the workforce, the ability to attract diversity, and the retention of newer (especially diverse) employees.
- Make your EEO-1 report public. This report is meant for government reporting and outlines employee backgrounds from the C-suite level down to service employees. When surveyed by Bloomberg, about 25% of S&P 100 members indicated they were willing to make this document public to meet the increased demand for employee diversity information.
- Make it personal. Numbers don’t lie. But they don’t tell the whole story, either. You can better illustrate your diversity commitment by bringing out employee stories. Here’s how:
- Blog about it. Consider sharing diversity initiatives on your company blog. You can also make sure you are including diverse employees as contributors to your blog.
- Create a spotlight. Companies increasingly include diversity features on their websites to showcase the contributions of employees with different backgrounds. These videos from Duke Energy highlight employees sharing their unique experiences and discussing the company’s diversity culture. Other companies, including Marriott International and Cisco, feature inclusion pages that outline their overall programs, touching on areas such as pay parity and social justice.
- Speak out. Engaging speakers—either employees or those external to your company—to address your employees and/or shareholders can be a great way to strengthen communications on the subject of diversity.
- Set aspirational goals. As a final note, don’t be afraid to be aggressive. Remember that more diversity equals more viewpoints and a more comprehensive perspective for your business. Indeed, diversity is the only path forward for companies that want to remain competitive and successful well into the future.
So, get ready to challenge your business to hit better diversity numbers, to foster new pipelines for promoting diversity at all levels of your organization, and to adjust its policies and charters as needed to achieve your lofty diversity goals. When you realize greater diversity of people and thought, all of your shareholders will be better for the effort. If you’re interested in learning more about how Clermont Partners can be a valuable partner integrating your policies and disclosures, contact us!