(Bloomberg) -- Energy, materials and real estate firms are not reaping the “diversity dividend” which links multiracial management to better profitability, a new study of companies across eight industry sectors from shareholder activist group As You Sow shows.
In an analysis of employment demographic data over a five-year period, the benefits of diversity were “not observed” in traditionally male- and White-dominated sectors such as utilities and industrials. In fact, the more Black, indigenous, and other people of color (BIPOC) management these sectors had, the poorer the performance of some of their financial metrics.
The study, however, revealed a “statistically significant correlation” between profitability and the number of BIPOC executive hires for a broad swathe of sectors, with the link seen strongest in sectors such as finance and technology.
The discrepancies between sectors could be due to the fact that some industries have not fully adopted a culture of diversity, equity and inclusion (DEI), the report’s authors said, noting that a lack of a lack of other workplace data made it hard to pinpoint exactly why there were divergences.
Previous research from the group showed the energy, materials and real estate sectors faring poorly in terms of addressing internal racial disparities, observed As You Sow’s racial justice initiative manager Olivia Knight. She said that some companies in these industries may not be fostering inclusivity beyond the upper echelons of management to create an environment that would make for a more productive workforce.
“These sectors don’t historically show up as providing DEI resources and really giving the attention to those programs that they need to flourish,” she said, adding that more research is needed to understand the disconnect.
Examining data from 1,641 publicly traded companies — about six times more than the number scrutinized last year — As You Sow assessed hiring data against eight financial metrics, including post-tax income and the 10-year total revenue compound annual growth rate.
The scope of the report, which adds to a growing body of evidence linking representation to financial performance, widened following a lawsuit filed by The Center for Investigative Reporting that prompted the Department of Labor to reveal the workforce diversity of government contractors.
Noting that the US is on track to be a minority-White country by 2045, As You Sow said it was increasingly critical companies acknowledge the shifts in the American labor market and customer base even with the conservative backlash against corporate diversity.
“Companies will need to be in tune with these changing demographics to remain competitive,” Meredith Benton, founder of social-investing consultancy Whistle Stop Capital and the report’s co-author, told Bloomberg.
“You really want to have a wide diversity, a much broader understanding of the world,” she said.
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