Enough Lip Service to Racial Equality. Companies Can Do More


Investors have demanded that company bosses do more than just condemn racism, shaming them into releasing previously unseen data on workforce diversity. It’s a step forward, but it’s too soon to say this spells real progress toward equality. Companies need to lay out what they plan to do with the information — or face more heat.

In the wake of the police killing of George Floyd, investors dialed up pressure on the corporate sector to act. Among the most high-profile campaigns was New York City Comptroller Scott Stringer’s call for 67 major U.S. companies to release their so-called EEO-1 submissions. These forms classify employees by race, gender and ethnicity in 10 job categories and need be revealed only to the U.S. Equal Employment Opportunity Commission.

A majority of the S&P 100 companies now release EEO-1 reports, or have agreed to. The filings that have emerged so far show that the senior workforces of some of the world’s biggest employers aren’t representative of wider society in what is usually their largest market.

Goldman Sachs Group Inc. revealed that Black or African American employees made up 3.2% of the “executive/senior officials and managers” level, and women comprised only 25%. This rose to 7% and 42% in the broader “professionals” category. At rival bank Citigroup Inc., 4% of the top level were Black or African American, and 36% were female, rising to 8% and 45% respectively at the professionals level.

It’s easy to say this data confirms what is already known. Nevertheless, it’s useful to have it laid bare. Investors have a document they can hold before senior management. Clients and customers can make an informed decision about whether to deal with firms that fail to make progress on diversity. This should spur bosses to strive for year-over-year improvements.

But EEO-1 transparency can only be the start. Its broad categories make detailed comparisons between firms difficult, and that in turn makes it harder to hold executives to account. The data don’t reveal disparities in pay or set out how minorities advance through a firm. More information is needed here. The Workforce Disclosure Initiative, a global investor consortium encouraging firms to reveal employee demographics, found that just 4% of companies in its most recent survey provide data on their ethnicity pay gap (excluding cases where it’s prohibited to gather the data), while 57% track their gender pay gap.

According to As You Sow, the U.S. corporate responsibility group, only 4% of S&P 500 companies provide even one race-related recruitment statistic. Barely 1% share retention data by race or ethnicity. 

The work-in-progress state of corporate diversity disclosure is reminiscent of the early days of carbon emissions reporting. Establishing global standards is going to be hard due to legal variations. (In France, for example, it’s illegal for employers to classify staff by their ethnic origin.) Identity is also becoming increasingly complex and difficult to compartmentalize into just a few categories. 

Investors need to keep up the pressure to make disclosure better. Publishing EEO-1 forms is easy, as much of the legwork has already been done. Now is the time to force companies to pull together diversity data that requires more effort. Some investors are doing this, but not all seem willing to push too hard.

ShareAction, the U.K.-based responsible investing campaigner, found that shareholders in 2020 were less supportive of company resolutions requesting data on both gender and racial pay gaps, than for just the gender pay gap. When shareholders did back resolutions on social matters, they said it was because they didn’t think it would be “burdensome” for the company to oblige. By the same token, difficulty of implementation was an oft-cited justification for voting against such resolutions.

A shareholder call for Amazon.com Inc. to report on the timespan between promotions by title, level, gender and racial identities gained little support, with some investors saying such disclosure was not standard practice among peers, ShareAction points out. And this year, motions calling for independent racial audits at the likes of Citigroup, Goldman Sachs and Johnson & Johnson also failed to garner sufficient backing.

Investors may be split, but regulators see the importance of workforce composition data. Gary Gensler, the newly appointed Securities & Exchange Commission chair, has already said disclosure rules are one of his top priorities. In Europe, investment funds that want to market themselves as having sustainable investment objectives will have to demonstrate they are doing more than just talking about it.

George Floyd’s murder one year ago spurred corporations to proclaim their commitment to racial equality. Workforce disclosure is something firms must do to back it up. The next step is to improve transparency and ramp up efforts to hire and retain diverse talent. As with the other elements of ESG, companies that get ahead with real action will be rewarded. Laggards will find themselves punished.

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Chris Hughes is a Bloomberg Opinion columnist covering deals. He previously worked for Reuters Breakingviews, as well as the Financial Times and the Independent newspaper.

©2021 Bloomberg L.P.

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