Report: Companies Unlikely to Disclose Unfavorable Diversity Data

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Despite a general increase in promoting DEI (diversity, equity, and inclusion) in major U.S. companies over the past several years, a recent study shows that people of color are still underrepresented in leadership roles and, moreover, that corporations are less likely to disclose diversity data if it’s not considered favorable.

Conducted by researchers at the Columbia University Business School— Thomas Bourveau, PhD, an associate professor of business, and Anthony Le, a PhD candidate.— along with Rachel Flam, PhD, of the London School of Business, the study investigates the landscape of DEI practices among publicly traded companies in the U.S., focusing on the disclosure of workforce composition and DEI metrics.

Titled “Behind the EEO Curtain,” the study examines Equal Employment Opportunity Commission EEO-1 reports from more than 800 federal contractors answering two main questions: What is the extent of diversity among Report: Companies Unlikely to Disclose Unfavorable Diversity Data IN BRIEF public firms and when do companies strategically disclose diversity metrics based on their level of diversity?

“[W]e provide evidence on the lack of racial diversity among U.S. public firms, particularly among the first and middle managerial ranks,” the study reads. “We further document that the lack of workforce diversity at the middle management level is negatively associated with the public disclosure of firms’ EEO-1 reports, suggesting that firms with greater imbalances hide their lack of diversity from investors and other stakeholders.”

Despite the increased interest in DEI practices, many companies do not disclose their diversity-related metrics, citing concerns about a competitive disadvantage. The researchers determined that gender and racial diversity at managerial levels lag behind overall workforce composition.

For example, women hold 35% of middle managerial positions despite constituting 39% of the workforce. Similarly, people of color are underrepresented, with White employees occupying 71% of middle management roles compared to their 63% representation in the total workforce.

Analysis indicates that companies are more likely to disclose their EEO- 1 reports if they have a higher ratio of managers of color relative to those at lower-level positions. Gender diversity, however, does not significantly influence transparency decisions. Furthermore, firms tend to reveal more when their diversity metrics surpass industry averages, particularly concerning race.

The study highlights the persistent underrepresentation of people of color, especially at managerial levels, and suggests that companies with less diversity may strategically withhold their data. These findings have implications for investors and policymakers, indicating the potential need for mandatory disclosure to ensure transparency and accountability regarding DEI practices in public companies.