Summary: Amongst the insightful findings from an ECGI working paper from Alex Edmans, Caroline Flammer and Simon Glossner on Diversity, Equity and Inclusion (DEI), the one I found most interesting was that traditional demographic measures of diversity show weak correlation with their own measure of DEI. Their one captures more of a bottoms up sense of the DEI environment in a firm. It demonstrates that increasing actual DEI will take more than just generic initiatives. It is more complex and ultimately about culture.
Why this is important: Unless we understand what constitutes DEI in practice, we cannot really know whether our actions are increasing it or whether it is having a positive impact, both financially and from a social perspective. What constitutes 'good performance' is not as straightforward as people think, particularly when it comes to stock returns.
The big theme: A key facet of sustainability is getting the most constructive impact for society as a whole with the most appropriate resources that we have. That is often people. Those people can have different backgrounds, different ways of thinking and different starting points. With an equitable view point we can create a culture that includes these diverse viewpoints and skills for the benefit of all.
Have we been looking at DEI all wrong?
Embracing diversity with an equitable mindset aimed at creating an inclusive workplace is, from a societal perspective, the right thing to do. It has also been held up as a way of improving performance. Increase board diversity with more female directors, more people of colour or other underrepresented minorities and the benefits are clear - your stock price will go up! Is that true?
Research from Edmans, Flammer and Glossner challenges common perceptions about diversity, equity and inclusion (DEI) with the starting point that traditional demographic measures may not even be capturing the level of DEI in a firm accurately. With that as a starting point, outcomes from current mainstream policy actions may not turn out as intended.
We may well have been looking at DEI all wrong.