Beginning of the era of diversity data disclosure at granular level?Sachin Mohan
We have witnessed that the growing importance of #ESG criteria as one of the key factors in investment decision by conscious investors, left the coal business high and dry. We are now witnessing the growing awareness and inchoate war against racism.
The social factor in ESG is now reinvigorating. For the past few years, it is gaining strength and making its way into corporate strategy. The mournful death of George Floyd and resulting fulminations of media / people against racism are indicating a change.
There has been growing interest of investors in the last few years about the work place information on equity policies, ethnicity, and race etc. This indicates that ESG criteria is becoming an important factor in investment decisions by investors.
According to Equileap, a group of investors representing $1.7 Trillion in assets are letting companies know that access to their #diversity data is important to their investment decisions. Growing investors’ interest in Social factors would be further fueled by the support of people for equality issue.
Till now most of the companies considered diversity data as trade secret- according to them, revealing which would -deprive them of competitive advantage. They consider diversity data their trade secret.
In 2018, for example IBM cited diversity data a trade secret as a key argument to enforce non-compete agreement against her Chief Diversity Officer Lindsay-Rae McIntyre who planned to move to Microsoft.
As per IBM statement: “Specifically, among other things, McIntyre knows confidential data about diverse representation in every segment of IBM’s workforce…and monitor diversity metrics at the company…”. However, the approach of considering diversity data as a trade secret looks like extreme case for not being transparent in terms of diversity. It would hinder transparency, investors’ confidence and effort for workplace equity.
Till now not many companies are publishing their diversity data. Corporates need to grapple with the idea of how to plan and improve workforce diversity if they haven’t done so yet. A bold initiative of publishing the detailed diversity data across gender, race, ethnicity, sexual orientation, and other diversity types would be welcomed by investors. Ignoring the idea of diverse and transparent workforce has a #financialrisk and #operationalrisk in long run.
Growing pressure from investors and media would stimulate more companies to disclose their diversity data in public. The time has come for corporate to think strategically about the diversity in only in board representation but also in entire work force.
Making their diversity data transparent (for example Intel) would boost the confidence of investors. This is the time to take ESG criteria more seriously. I believe that after initial hiccups, in future, disclosing diversity data at granular level would become a norm.