According to a recent report by consulting firm McKinsey, companies with the most diverse boards are 43% more likely to experience greater profits. Its therefore in a company’s best interest, the report states, to have a diverse and inclusive board, culture and workforce.
The Black Lives Matter movement is one of the more recent forces to bring diversity and inclusion to the forefront of public awareness, and businesses are beginning to reckon with the reality of their own diversity, or lack thereof.
Over the past year, we’ve seen some global brands brought to task over their lack of diversity at the highest levels. But many other notable businesses have been more proactive in making changes.
How are companies instituting positive change?
Deloitte is one company which has set a goal of removing bias from the hiring process. The company has set a target of having 12% ethnic minority partners and 3% black partners by 2025, with leaders accountable for these targets. Mandatory race and ethnicity training is also being implemented, as well as the establishment of mentoring schemes.
Some of the world’s most notable financial firms are also making positive changes. BlackRock Inc., Vanguard Group Inc., and State Street Corp have been pressuring companies with regards to the gender makeup of boards and have voted against sitting male directors at companies with boards made up only of men. They have also noted that the same pressure is being applied – and will continue to be applied - with regards to ethnic diversity.
Access to work experience at financial institutions is also being tackled, with more than 70 leading fund managers pledging to offer paid internships specifically for black and minority students.
Procter & Gamble, Bristol-Myers Squibb and Nvidia Corp have all added a black director in recent months (although they had previously been named in a Newsweek article titled ‘The 20 Largest Public U.S. Companies Without a Black Person On Their Board’).
With D&O and EPL insurers increasingly aware of the rising risk of diversity and inclusion (‘D&I’) lawsuits, insureds can expect underwriters to include an analysis of a company’s D&I controls, procedures and training in their underwriting rationale.
So, what other policies and procedures could help a company achieve improved diversity, and simultaneously allay D&O and EPL insurers’ concerns over potential future lawsuits?
- For boards of directors, this might mean the nomination of a board member with clear accountability for achieving the company’s diversity objectives. The establishment of a diversity sub-committee at board level, as well as a diversity committee at employee level, would encourage discussion, engagement and action.
- Having an unbiased hiring process is becoming a must-have to reduce discrimination. The removal of gender or ethnicity specific information from CVs and cover letters may help remove bias. Studies have shown that applicants with ‘white’ sounding names were 50% more likely to receive interview requests than those with ‘black’ sounding names. Ensuring there is at least one black or ethnic minority interviewer as part of a panel can also help ensure a fairer interview process.
- The implementation of training in anti-discrimination, diversity and inclusion for all employees, executives and board members by outside consultants would also positively affect the underwriting review.
With D&I becoming an ever-present topic on the world stage, if companies aren’t proactive at reviewing and/or strengthening their D&I controls and frameworks, underwriters will likely take a dim view given the potential risk of a hit to reputation, lawsuits and in extreme cases, share price.
