In a recent interview with Fortune, the CEO of a nonprofit organization representing shareholders engaged in the discourse surrounding diversity, equity, and inclusion (DEI) programs. The CEO addressed the matter from a financial and business standpoint, emphasizing the fiduciary responsibility of investors and their representatives, such as asset and retirement fund managers, to mitigate material risk and enhance long-term financial sustainability for all stakeholders.
During the interview, the CEO expressed that detractors of corporate diversity initiatives are driving companies to "underperform." It was noted that over 1,000 comments on platforms where the interview was featured showed that both advocates and opponents shared common ground. There is a shared agreement on the importance of hiring and promoting employees based on “merit,” judging individuals by their qualifications and work output rather than gender, race, or ethnicity.
The CEO proposed a straightforward means of uniting differing opinions on this contentious topic through a shared definition of DEI: organizational frameworks are meant to promote the equitable treatment and complete involvement of all individuals based on merit. This definition does not suggest the establishment of "race quotas" or discrimination against white men, both of which are illegal. The purpose of diversity programs is to advance workers based on merit across all demographics, thereby eliminating prevalent "glass ceilings" that impede the promotion of women and people of color, ultimately striving for optimum business outcomes.
Addressing how to achieve meritocracy, the CEO highlighted the challenge posed by unconscious biases in hiring and promotion decisions, as decision-makers may naturally gravitate towards applicants with similar backgrounds. The solution proposed is diversity training to expose and counteract these biases.
Furthermore, the CEO emphasized that nondiscrimination within corporations is not only an ethical or legal requirement but also beneficial for business. A study conducted by the nonprofit, As You Sow, examined 1.5 million data points over five years from 1,641 public companies, analyzing metrics related to gender and race. The findings revealed a significant positive correlation between diverse management teams and superior performance across eight financial metrics, including enterprise value growth rate and return on invested capital (ROIC). The analysis underscores that greater diversity equates to financial outperformance.
Commentators on the interview observed that DEI initiatives enhance excellence, contrasting with normalized discrimination that compromises it. Organizations recognize that diverse workforces foster innovation and productivity due to a broader array of thought patterns and experiences. Despite this, resistance persists partly due to perceptions of DEI as a "zero-sum" game among some majority group members, where others’ gains are seen as potential losses. Additionally, a denial of corporate discrimination or a distancing from bias by white males exacerbates resistance.
Much of the misinformation regarding DEI stems from conservative political figures and biased social media narratives that exploit these objections, recognizing that stirring such sentiments can benefit voter turnout. The opposition to diversity initiatives, exemplified by a recent executive order banning DEI from federal activities, seeks to eradicate diversity efforts by mandate.
Despite the political pushback, a vast number of companies continue their diversity programs. Prominent leaders, such as JPMorgan Chase CEO Jamie Dimon, have publicly endorsed DEI as both proper and legal. Organizations like Costco and Apple defend these initiatives as critical to their business, standing firm even amidst expected political repercussions.
Shareholder resolutions aimed at terminating DEI programs during annual meetings at companies like Deere, Costco, and Apple were overwhelmingly rejected by over 98% of investors, who prioritize initiatives that bolster shareholder value over political agitation.
Questions about the future of DEI often arise, yet the CEO conveyed confidence that while the acronym might evolve, the underlying principle of fostering a meritocratic culture that yields positive business results remains indelible. Corporations are fundamentally committed to maximizing profits.
The commentary in Fortune.com pieces reflects the views of the authors and does not necessarily represent the opinions and beliefs of Fortune.
