New report shows multiracial management yields higher Return on Investment 

MEDIA CONTACT: Sophia Wilson, swilson@asyousow.org, (341) 600-1832

BERKELEY, CALIFORNIA—NOV. 29, 2023—As You Sow today released “Capturing the Diversity Benefit: Workforce Diversity Linked to Financial Performance.” This comprehensive, landmark report reveals a statistically significant correlation between higher percentages of BIPOC (Black, Indigenous, and People of Color) management and increases in eight standard financial metrics. Key findings add meaningful insight to a growing body of evidence linking financial benefits to a diverse management team, making a clear business and investor case for diversity as a material factor in financial success.

The report analyzes  EEO-1 data from 1,641 publicly traded companies across eight industry sectors over a five-year period, in addition to As You Sow’s updated 2023 Racial Justice and Workplace Equity Scorecards. Financial metrics evaluated include: enterprise value growth rate, free cash flow per share, income after tax, long-term growth mean, 10-year price change, mean return on equity (ROE), return on invested capital (ROIC), and 10-year total revenue compound annual growth rate (CAGR). 

This report comes at a critical moment, following the June 2023 Supreme Court’s decision to end affirmative action-based admissions at universities other than military academies. While this decision has no bearing on corporate hiring, there has been an effort to extend the decision’s reasoning. Thirteen Republican attorneys general sent a letter to Fortune 100 companies on July 13, threatening legal action if “immoral” diversity policies continued, and the activists behind the affirmative action decision have put corporate policies in their legal crosshairs. 

“Simply put, a diverse workforce led by a diverse management team performs better financially. These findings empower corporate boards and investors who want to outperform financially to increase workplace diversity, racial justice, and equity as core business practices and push back against unfounded attacks,” said Andrew Behar, CEO of As You Sow. “These fundamentals of corporate culture create a ‘diversity dividend’ that is a material benefit for all stakeholders as it attracts and retains the best and brightest employees..” 

“When we consider how complex individual company performance is, and how hard it can be to attribute outperformance to any one factor, it becomes all the more remarkable that the data shows a statistically significant link between diverse management and corporate financial success,” said lead author Meredith Benton, workplace equity program manager at As You Sow and founder of the consultancy Whistle Stop Capital. “The findings also emphasize how important it is for investors to have access to data on manager and board diversity, as well as hiring, promotion, and retention rate.”

The Communications, Consumer Discretionary, Consumer Staples, Finance, Healthcare, and Information Technology sectors saw the strongest diversity benefits. In these sectors, BIPOC management had a statistically significant positive correlation to financial indicators. However, these benefits were not observed in the Energy, Materials, and Real Estate sectors. A cross-analysis of As You Sow’s Racial Justice Scorecard, recently expanded to cover 3000 public companies, suggests potential reasons for these discrepancies: the Energy, Materials, and Real Estate sectors had not fully adopted a culture of DEI and had poor practices across a range of racial justice-related themes. Further study is needed.

“This empirical study provides insight into how a company’s commitment to racial justice and workplace equity has a cascading impact on policy, practice, and overall financial performance,” said Olivia Knight, racial justice initiative manager at As You Sow. “Companies that want to outperform will need their boards of directors to strengthen their commitment to a just and equitable workplace.”  

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As You Sow is the nation’s leading shareholder representative, with a 30-year track record promoting environmental and social corporate responsibility and advancing values-aligned investing. Its issue areas include climate change, ocean plastics, pesticides, racial justice, workplace diversity, and executive compensation. Click here for As You Sow’s shareholder resolution tracker.

Whistle Stop Capital is a consultancy that supports asset owners and advisors in assessing and addressing social and environmental exposures within their investment portfolios. On behalf of clients, it researches, analyzes, and speaks with hundreds of companies a year on a range of sustainability and human rights-related topics. Whistle Stop manages the Workplace Equity program for As You Sow, which includes a Scorecard benchmarking 3000 companies on their disclosure of diversity and inclusion data.