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WorkLife | Don’t put DEI on backburner in a downturn, experts warn

Dec 7, 2022

Creating more opportunity for women and employees who belong to minority groups should remain a top priority for businesses headed into the new year, despite current economic worries, according to diversity, equity and inclusion experts — arguing that prioritizing equity is, in fact, very much tied to a company’s financial well-being.

A new report from the shareholder advocacy nonprofit As You Sow and consultancy Whistle Stop Capital found a positive association between diverse representation in management and a company’s bottom line.

In an analysis of 277 corporate Equal Employment Opportunity (EEO-1) reports and 14 key financial performance metrics, the study found specifically that greater representation of Black, indigenous and people of color (BIPOC) individuals in management has a positive relationship to a range of financial indicators, including greater cash flow, net profit and stock performance. And yet, brokers are more likely to offer positive assessments of companies with a greater percentage of white managers — a problem because they exert “significant influence” over stock valuations, according to the study.

The report called on companies to release their EEO-1 forms in the coming year, as well as recruitment, retention and promotion data. “The relationship between workplace diversity and financial performance is complex, and more data, at a greater level of granularity, is needed,” said the report’s lead author Meredith Benton, workplace equity program manager at As You Sow and founder of Whistle Stop Capital.

Meanwhile, NxtWork, led by a group of C-suite leaders and women of color, was established with the mission to diversify the executive ranks and boardrooms of global corporations by connecting the management of those businesses with diverse women leaders.

“Companies that actually put equity at the core of their crisis management strategy during a downturn experience twice the returns of those that don’t. So, it’s a key buffer for both surviving a recession and coming out better positioned after a recession,” said Katica Roy, founder and CEO of Pipeline.

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