Hello everyone! Paolo here.
America’s 2020 racial reckoning ushered in a barrage of diversity pledges from corporations large and small. In the three-year aftermath, a new study from researchers at Columbia Business School and the London Business School suggests that many of these firms engaged in “diversity washing.” It's making bold, public proclamations about diversity but failing to implement them in their hiring practices, yielding few tangible results.
The report, which examines the workforce makeup of approximately 800 federal contractors from 2016-2020, reveals small diversity gains, especially among middle managers.
Women account for just 39% of the workforce at these companies, while racial minorities comprise 36%. Predictably, the workforce becomes more homogenous as one scales the org chart. For example, white employees hold 72% of middle management roles, despite making up just 64% of employees. The diversity numbers are especially low for Hispanic and Black middle managers, who respectively account for 6% and 4% of employees at that level.
Despite these lackluster numbers, more firms have become transparent about their diversity stats. In 2020, the last year researchers conducted the study, 15% of federal contractors released diversity metrics compared to a paltry 0.8% in 2016. But as the researchers point out, only firms with data increases worth sharing actually open up about their workforce representation.
In fact, a firm’s willingness to release diversity data was positively correlated to the presence of minorities in leadership roles, according to the study.
Interestingly, most diversity disclosure pressure on companies that don't share their metrics comes from investors, not the public. “Investors increasingly view (the lack of) diversity as a material source of risk for public companies and often call for the SEC to introduce a disclosure mandate to obtain comprehensive and comparable public data on firms’ DEI practices,” the report states.
While it’s notable that some companies share this information voluntarily, there are no consequences for those that don't. Many prefer to keep those numbers to themselves to avoid the negative publicity of a diversity deficiency. Ultimately, the paper's authors conclude that an SEC disclosure mandate is necessary, writing, "To the extent that this information is material to shareholders, the lack of unraveling through market forces suggests that a disclosure mandate might be necessary to inform and protect the public."
Paolo Confino
paolo.confino@fortune.com
@paolo1000_
