We know that bias, discrimination, and harassment in the workplace are persistent and widespread. Forty-eight percent of African-Americans and 36% of Hispanics have experienced race-based workplace discrimination. Sixty-four percent of Americans believe that sexual harassment in the workplace is a serious problem and 55% of senior-level women say that they have been sexually harassed during their careers.
We know the promotion gap precedes the pay gap; Much of pay equity disparity comes from diverse employees being unable to move up the career ladder into higher paying jobs. The consultancy McKinsey has found that women comprise 48% of the entry level workforce, but only 22% of the executive suite. People of color represent 33% of entry level positions and only 13% of executives.
In a similarly disheartening vein, Just Capital has found that of 890 large publicly traded US companies, 86% released diversity and equal opportunity policies. However, of those 890 only 11% disclosed measurable targets.
We also know that some companies are trying very hard. And, some companies say they are trying very hard. What we don’t know, unfortunately, is which company is which. Current data is insufficient to provide strong delineation between the companies leading, and the companies lagging, in providing equitable workplaces.
Active Owners Can (and Should) Make a Difference
A strong business case exists for companies to address these issues. The consultancy McKinsey has found that companies with high ethnic and cultural diversity are 33% more likely to outperform in profitability. In addition, companies in the top quartile for gender diversity are 21% more likely to outperform on profitability. Consultant PwC says its not just the consultants: Seventy-nine percent of board directors believe that diversity enhances board performance, and more than half believe it enhances company performance.
The consensus is fairly universal: more diverse workplaces and teams leads to stronger companies. Harassment and discrimination meanwhile alienate employees, destroy their ability to become top-contributors, create legal and brand risks for companies, and choke creativity and innovation.
Actions Underway
Investors can be proactive in combatting workplace inequality, taking action to find out the workplace and hiring practices of companies before scandals and toxic behaviors become exposed publicly. What follows are only a few examples of the many approaches underway - All of which would welcome new participants and allies.
- Investor Statement on Workplace Equity Disclosure
Workplace data, unfortunately, is poor, piece-meal, or non-existent. This past Spring, Confluence members, As You Sow and Whistle Stop Capital, worked together to rally $1.74 trillion in represented assets and 102 signatories to sign onto an Investor Statement calling on companies to release meaningful, comparable data related to their workplace equity practices. The statement asserts “It is essential that investors
have access to the most up-to-date and accurate information related to diverse workplace policies, practices, and outcomes.“ Participants include AXA Investment Managers, Compton Foundation, Interfaith Center on Corporate Responsibility, Oregon State Treasury, Minnesota State Board of Investment, and Wallace Global Fund. Notice of the Investor Statement was sent to over 3,000 companies as a “heads up” that investor expectations around workplace equity data and transparency are increasing. The Investor Statement is still open for signatories.
Employment clauses, such as non-compete clauses, forced arbitration, and involuntary non-disclosure agreements have been linked to corporate cultures that allow for ongoing mistreatment of employees on the basis of their diverse characteristics (gender, race, sexual orientation, etc). These clauses mask from investors toxic workplace environments, while also enabling perpetrators to continue their harmful behavior. The risk to investors of allowing company management a mechanism to continue misdeeds was amplified by the #metoo revelations and the sudden falls from grace of many formerly revered corporate leaders.
Last proxy season, over three dozen letters were sent to companies expressing investors’ concerns with their use of employment clauses that held their employees in forced arbitration and non-disclosure agreements in cases of harassment and discrimination. Resources exist for investors interested in joining this effort, including briefings on the business case, template company outreach letters, and sample resolutions.
- Addressing the Promotion Gap
As a follow-up to the Investor Statement, As You Sow and Whistle Stop Capital again collaborated to write to over 30 companies asking that they provide their rates of promotion, broken out by the groups identified in their non-discrimination policy, and compared against total organizational composition.
Investors’ need to have a way to benchmark corporate behavior and trends as they relate to workplace equity efforts. Promotion rate data is important unto itself, and is an indicator of broader corporate actions as they relate to pay and retention. Promotion rates are not compromised by corporate acquisitions or divestitures, nor by stock awards or differing definitions of job titles. This makes it a “noise” free data point that might be incorporated into securities’ selection models by the broader community of investors that integrate ESG data.
However, companies are not likely to go through the trouble of reporting out this data point if only a small number of investors have indicated their interests in it. That is why, for active investors, the shareholder resolution process is so important; it provides a forum to show companies how many other investors want to see the same reporting. As you might guess, plans are underway for the 2020 proxy season.
Taking Further Action
The above examples are not the only places or ways to get involved. Additional investor initiatives includes those that are seeking to:
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Increase board gender diversity to a minimum of 30% female board members;
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Have diverse candidates within board nominee pools;
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Push companies to release their equal employment opportunity (EEO) data;
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Require reporting of pay gap data;
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Have executive pay incorporate diversity and sustainability metrics;
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Strengthen parental leave and broaden the pool of employees allowed to access it; and
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Increase reporting on human capital management practices.
Interested in adding your name to the Investor Statement? You can learn more and sign-on here. Confluence members can also stay informed about investor actions around workplace equality and other important issues through the Active Owners Working Group. For more information, contact our team.
Meredith Benton, Lead, Whistle Stop Capital
Whistle Stop Capital, LLC, works with asset owners and advisors to increase the expression of environmental, social and corporate governance (ESG) priorities within investment portfolios. Led by Meredith Benton, Whistle Stop develops strategies intended to increase the long-term value of investments while creating sustained ESG improvements. Meredith Benton has led numerous successful shareholder engagement programs, conducted extensive analyses of corporate human rights and environmental practices, and directed the impact investment parameters of more than $2 billion in assets.
