Why Companies Need To Defend Their Diversity Policies

A diverse work group. In the wake of the supreme court decision against affirmative action, companies are looking to defend their DEI policies.
Diversity and Inclusion policies at Fortune 500 are under attack following the latest Supreme Court decision on affirmative action.

While the Supreme Court’s rejection of affirmative action last month in Students for Fair Admissions v. Harvard was focused on admissions in higher education, conservative activists are already mobilizing to extend their victory into the business world. Last week, 13 state attorneys general sent an open letter to the CEOs of the 100 largest U.S. companies, charging that “racial discrimination in employment and contracting is all too common” at their businesses.

One of the prime movers in this wrong-headed effort is Kris Kobach, the attorney general of Kansas. I first encountered Kobach 20 years ago, when he was leading legal efforts in Arizona and elsewhere to restrict the rights of undocumented immigrants on behalf of the Federation for American Immigration Reform (FAIR). As the director of Human Rights First, I was involved in challenging FAIR’s efforts to curtail due process rights for asylum seekers. Over the last two decades, Kobach also has sought to restrict voting rights, implementing some of the most draconian voter-ID laws in the country, measures which have been found to disproportionately harm voters of color.

Now, Kobach is leading the effort to stop the promotion of diversity in the workplace. He and his colleagues accuse big companies of “drawing crude lines based on skin color,” charging that corporate hiring practices discriminate against white people in a manner that is “immoral and illegal.” They are wrong on the law and the facts.

The law governing workplace employment is clear. Consideration of race in hiring has been banned by statute since Congress adopted the Civil Rights Act of 1964. But as Charlotte Burrows, the chair of the U.S. Equal Employment Opportunity Commission, rightly emphasized after the Supreme Court affirmative action decision, “it remains lawful for employers to implement diversity, equity and inclusion (DEI) and accessibility programs that seek to ensure that workers of all backgrounds are afforded equal opportunity in the workplace.” The state attorneys general reject this position, arguing without providing any factual showing that DEI programs have themselves led to discrimination against white job applicants and therefore should be eliminated.

Kobach and his allies also have asserted, again without concrete evidence, that DEI programs have led to significant and unfair advantages for Black and Hispanic job applicants in all aspects of the employment process. The facts bely that assumption. While Black people have made important progress in advancing aspects of the traditional civil rights agenda and in the political sphere, efforts to foster greater economic opportunity and equality for Black men and women have been far less successful.

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In general, economic inequality in the U.S. has increased steadily over the last 50 years, and dramatically so since the pandemic. It is higher than in any other developed country, closer to Mexico than Sweden or Germany. This growing gap between rich and poor has had an especially pernicious effect on Black people. According to the Federal Reserve Bank of St. Louis, in 2022, the assets of the average Black family was one-quarter of the value of assets held by the average white family. The economic disparity even extends to those with a college degree. Between 1992 and 2016, wealth among college-educated white people increased by 96%; Black college graduates saw their wealth decline by 10% when adjusted for inflation.

The disparity in economic opportunities is most dramatic in the upper echelons of our economy. Today there are only eight Black CEOs of Fortune 500 companies, and there only have been 25 throughout our history. Just 3.3% of all executive or leadership positions in the largest companies are held by Black people, a number that has remained static for decades. As reported by Judd Legum in Popular Information, among the top 100 firms in the country, Black professionals held 4.6 % of all senior executive positions, and Black women held only 1.1% of those positions. Black people constitute about 13% of the U.S. population. Hispanics, who constitute 19% of the U.S. population, have had comparable difficulty in gaining a foothold in the leadership ranks of business. According to a study published by the U.S. Government Accountability Office, Hispanic women are “underrepresented by eightfold [in management jobs] when compared to their share of the workforce.”

The absence of Black leaders is perhaps most striking in two sectors that have driven recent economic growth: technology and investing. Black investors make up less than one percent of partners in venture capital firms and, not surprisingly, less than one percent of the start-up founders receiving venture funding are Black. Though the rapidly growing and lucrative private equity sector is shielded from public scrutiny, the absence of Black leadership in that sector also is readily apparent.

The case for promoting greater diversity in the workplace starts with what EEOC Chair Charlotte Burrows calls the societal imperative to “ensure that workers of all backgrounds are afforded equal opportunity in the workplace.” Business also has a self-interested reason to favor diversity: More diverse corporate environments lead to better economic outcomes. This was the finding of a 2020 McKinsey report which found that corporations with ethnically diverse executive teams were 36% more likely to financially outperform their competitors than executive teams that lacked diversity. According to McKinsey, diverse leadership teams are associated with “better decision-making and “new approaches to problem solving.”

This also is why 60 major corporations, including Apple AAPL +0.6%, General Electric GE -0.2% and Starbucks SBUX -0.1% filed a friend-of-the-court brief supporting affirmative action in educational admissions in the recently decided Supreme Court case. “Acknowledging, supporting and promoting the benefits of diversity – specifically including racial and ethnic diversity — among their workforces is essential to meet client needs, achieve business goals, and strengthen relationships both internally and within the communities they serve,” the coalition of corporations told the high court.

One hopes that these and other companies will stand up to those who seek to end diversity initiatives in business, efforts that are critically important to the health and vitality of our economy and democracy. 

Michael Posner is the Jerome Kohlberg professor of ethics and finance at NYU Stern School of Business and director of the Center for Business and Human Rights. Follow him on Twitter @mikehposner.

Reprinted with permission from Forbes.