Diverse, inclusive companies have an advantage during recessions, study finds

Dive Brief:

Diversity, inclusion and equity are critical in building business value, according to Great Place to Work, which released its 2019 ranking of the 100 Best Workplaces for Diversity, in partnership with Fortune, Dec. 20. The accompanying study found that organizations committed to inclusive work environments do well during recessions.
Stryker, a medical technology firm, is listed as the No. 1 company; Cisco, Progressive Insurance, Accenture, Synchrony, Mohegan Sun, Workday, Adobe, Ultimate Software and Marriott International, rounded out the top 10.
Great Place to Work analyzed survey data focusing on the experiences of women, people of color, LGBTQ workers, generational representation and individuals with disabilities. "We found that key metrics related to equity and inclusion not only drive stronger company innovation, but also predict whether companies will thrive or stumble during a recession," Michael C. Bush, CEO of Great Place to Work, said in a statement. According to the company, during the Great Recession, "the S&P 500 suffered a 35.5 percent decline in stock performance," however, "companies whose key employee groups had very positive experiences posted a remarkable 14.4 percent gain."

Dive Insight:

The business case for diversity and inclusion argues that it's not only the right thing to do, but a source of competitive advantage. Employees with diverse backgrounds bring their own perspectives and ideas, which analysts say contributes to a company's success.

Research has shown that organizations that leverage the innovation of a diverse workforce have improved financial performance. A study from Intel and Dalberg Global Development Advisors, for example, found a link between diversity and higher revenues, profits and market value.

A company's culture of diversity, inclusion and equity must start with its leadership, including the board of directors, experts say. And while buy-in is key, diversity on a board itself may be crucial. In analyzing U.S. board diversity trends in 2019, Institutional Shareholder Services, a provider of corporate governance and investment solutions, found that after a "decline in board renewal rates in the first years after the Great Recession, boards began to add more new directors starting in 2012 and reached record numbers of board replenishment in 2017 and 2018, as a growing number of investors focused on board refreshment and board diversity."

In September 2019, the Vanguard Group also called for greater diversity among public company boards. The company noted in its annual stewardship report, that "effective boards of today and tomorrow should reflect all facets of diversity, and we are calling for greater progress on this front."

California has gone a step further, mandating gender diversity for certain corporate boards. The law's success, however, remains to be seen: An ongoing lawsuit has challenged the mandate, calling the requirement "deeply patronizing to women," and "plainly unconstitutional."