How We Engage

Companies, investors, policymakers, and wider society are paying increased attention to diversity, equity, and inclusion (“DEI”) within firms. DEI initiatives have two motivations – that DEI improves a company’s long-term financial performance, and that it contributes to societal goals. Under both financial and social motives, the relevant measures of DEI are holistic. New ideas, and thus superior financial performance, stem from cognitive rather than purely demographic diversity. Similarly, social outcomes stem from providing opportunities to underrepresented groups across all areas, such as demographic, disability status, socioeconomic, and educational. Moreover, both goals require not only diversity but also equity and inclusion. Hiring minorities to tick a box, but failing to ensure that they can thrive and be themselves at work, will achieve neither the financial benefits of cognitive diversity nor the social outcomes of meaningful employment.

However, given measurement challenges, DEI metrics often focus narrowly on demographic diversity. For example, legal quotas or investor guidelines typically capture only the number of women on the board. Perhaps due to the narrowness of such a measure, academic research on the link between boardroom gender diversity and firm performance typically finds negative or insignificant effects. Similarly, company reports often include the percentage of females or ethnic minorities in the wider workforce, but neither measure captures cognitive diversity, nor equity and inclusion.

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