A new report shows work is needed to help improve DEI and make it more progressive in corporate America.
A new report on corporate DEI practices by Ariel Investments reveals board directors have vastly different views on the issue than average U.S. workers.
The discovery is included in the latest Black Corporate Directors Study by Ariel, a global asset management firm. The analysis discloses findings on how and why momentum has shifted on the topic of DEI in public company boardrooms.
All told, the data uncovered some eye-opening findings that show how more work needs to be done to improve DEI and make it more progressive in corporate America in the future.
The study offers a “call-to-action” for U.S. companies on DEI. It includes holding executives accountable for not making progress, offering incentives to boost DEI, and updating shareholders regularly with performance reports. Ariel Investments, No. 1 on the BLACK ENTERPRISE Asset Managers list, has about $15 billion in assets under management.
Overall, the DEI fallout has been adverse on many fronts recently. Large companies have laid off DEI teams or no longer finance programs; lawsuits have been filed against DEI initiatives, colleges are banning DEI programs, and some states are prohibiting affirmative action measures.
Operational Rigor: A DEI Challenge For Companies
“Many board members surveyed still feel their companies struggle to operationalize DEI goals effectively—with stagnation or modest improvement from two years ago,” per the report.
Asking if their board added directors from diverse backgrounds in the past year due to recent board diversity rules, like Nasdaq’s Board Diversity Rule, 41% stated their boards had added no diverse directors.
Directors say board conversations about DEI are less thoughtful, balanced, and intentional than two years ago, coming in at 84% in 2021, down from 78% in 2023.
The report stated, “Fewer companies are investing capital to support their racial equity and diversity goals; when they are, the capital is less sufficient.”
Corporate boards in the last five years have become more racially and ethnically diverse overall. But the percentage of Black and Latino directors stalled among S&P 500 firms, at 12% and 5%, respectively.
DEI Still A Priority In Boardrooms, But Infrastructure In These Initiatives Weaken
The report stated that DEI was added as a primary agenda item several years ago for 59% of the boards where respondents serve, while 28% made it a priority in the last two years. Still, 54% of directors feel that among the wide range of diversity issues, race/ethnicity gets too little attention and is lower on the priority list in their boardrooms.
For instance, race follows gender identification, sexual orientation, and political affiliation in pecking order.
Arielle Patrick, Ariel’s chief communications officer, said via email the most troubling finding is the vast misalignment between leaders and the average worker on why DEI is important. “This dissonance signals how much harder leaders must work to ensure that the rank-and-file truly understand diversity as a business imperative,” Patrick said.
A Potential Framework To Elevate DEI To Next Level
So, what is needed now to make DEI more progressive in U.S. companies moving forward?
Patrick said it’s no secret that DEI is under attack in our nation’s volatile political landscape. Diverse directors are facing more obstacles in the fight to keep civil rights on the corporate boardroom agenda—with the operational rigor it deserves.
She said the results signal that corporate America must adopt consistent oversight, transparent reporting, and accountability measures to ensure the progress of years past does not stagnate.
She added companies must ensure their DEI efforts are comprehensive and the entire management team takes it on as a strategic imperative across:
People with representation and inclusion from the entry-level to the board level.
Purchasing efforts should include diversifying vendor/supplier relationships with women and minority-owned businesses.
Philanthropy should include long-term commitments to organizations focused on equality and civil rights with employee representation on non-profit boards.
The product a company offers should ensure the research, development, and marketing process fully considers and includes the diverse stakeholders the business serves.
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Source: Black Enterprise