Portfolio

Assessment of McKinsey Report
The “Business Case for Diversity” component of the report focuses on the tangible benefits
that diversity brings to the corporations. It specifically showcases that organizations in the top
quartile for gender diversity on the executive teams are 25% more likely to accomplish
profitability. Furthermore, it also highlights that the companies that excel in both gender and
ethnic diversity are shown to be 12% more likely to do better in comparison to their
competitors in terms of their financial performance. However, despite the advantages
mentioned in the report, it identifies a concerning trend of slow progress towards achieving
diversity at the executive level across different industries and regions. This kind of regression
and stagnation in the diversity efforts has created a divide between companies that are either
leading to significant advances (“winners”) and those that are falling behind (“laggards”),
with the latter experiencing a harmful impact on their performance due to lack of diversity in
their boards. Inclusion has been seen as a critical aspect of leveraging the full potential of a
diverse workforce. Companies like Pentair lead by example by integrating diversity and
inclusion into their core business strategies, thus fostering an environment where every
employee’s unique strengths, activities, and vision are recognized and valued (Dixon-Fyle et
al., 2020).

The report can be critiqued on the aspect of its reliance on current data while suggesting room
for improvement through longitudinal studies that could offer extensive insights into the
long-term effects of diversity and inclusion initiatives by the companies. Moreover, while the
report produces valuable information applicable across industries, it falls short in offering
detailed strategies that can be tailored to the unique opportunities within specific sectors. The
critique extends to the treatment of global diversity and inclusion efforts mentioned in the
report, which identifies the requirement for a more nuanced approach to understanding the
cultural and regional differences to effectively guide multinational companies. Additionally,
it is important to broaden the scope of impact measurement beyond financial performance to
include other key indicators such as employee engagement, innovation, and organizational
culture. These key indicators can provide a more comprehensive approach to evaluating
diversity and inclusion initiatives, provide organizations with a clearer picture of their
benefits, and encourage continuous improvement (Dixon-Fyle et al., 2020).
The report offers recommendations and frameworks that are actionable for companies aiming
to enhance their diversity and inclusion efforts. Setting specific and measurable targets based
on the report’s benchmarks allows various organizations and companies to track their
progress and adjust their strategies as required to meet the needs. The leadership commitment
is an important aspect exemplified through initiatives where the CEOs integrate diversity and

inclusion into business strategy and hold their shareholders and senior leaders accountable by
integrating diversity and inclusion practices into their business strategy and the objectives of
performance evaluations. For instance, companies in the resting on laurels cohort should
work on encouraging diversity and overcoming leadership and equality barriers by
accelerating initiatives such as breaking the glass ceiling in a female-dominated health sector
and reforming hiring and promotion to combat bias. Additionally, fostering an inclusive
culture through training and establishing employee resource groups empowers the employees
to contribute and value to the organizations. It has been advised that talent management and
revamped practices be revamped to reduce hiring and promotion processes and to create
programs like mentorship and buddy systems to support a diverse talent pool. In the end, the
example of Lockheed Martin has been used to help the arguments on having open dialogues
and cultivating an inclusive environment throughout its worldwide operations. Hence, their
idea to change the behavior is an empowering move that can be used as a recommendation
for global corporations (Dixon-Fyle et al., 2020).

Is diversity a meaningful factor in corporate performance? If so, why are corporations
noticeably not diverse?
Yes, diversity is a meaningful factor in corporate performance. There has been an emphasis
on diversifying corporate boards, which is deeply rooted and plays a pivotal role in shaping
and guiding corporate strategies. The corporate strategies management and its adherence to
legal and ethical standards have been critical in maintaining the brand value. It has been
argued that board diversity safeguards against corporate missteps, as various perspectives can
enhance oversights and decision-making processes. The literature argues that increased
gender diversity might lead to an increase in high-profile legal cases such as that of Elizabeth
Holmes, which sparks debate around the role of women in corporate malfeasance. In spite of
such concerns, there has been a push for gender equality within the boards and it is
championed for both pragmatic and moral reasons. Furthermore, advocates for diversity
encourage a diverse board’s intrinsic value and contribution to the company’s overall
environment, with a special emphasis on the broader ethos of ESG, including better
environmental stewardship. Arguments support the idea that gender-diverse boards, by
including more risk-aware individuals and diverse perspectives, can help counteract the
negative impacts of male overconfidence, particularly in legal matters (Lowenstein et al.,
2022).
Nasadaq’s introduction to diversity disclosure requirements signifies a critical step towards
inclusivity, demanding the listed companies to report on their diversity measures for the
board and including at least two directors from underrepresented groups, specifically
mentioning one female director and one from either an underrepresented minority or the
LGBTQ+ community. This mandate has underscored recognition of diversity and inclusion
importance in corporate governance leading to a push towards creating a culture that
genuinely values varied perspectives. However, accomplishing meaningful diversity extends
beyond compliance with these new standards. The mandate has challenged companies to
critically evaluate their commitment to diversity, equity, and inclusion practices. It has asked
companies to move beyond superficial compliances to more original and authentic cultural

transformations, and, hence, the organizations are urged to reconsider their traditional
recruitment practices which also includes expanding their professional network and
prioritizing diversity for the benefit of the legacy of the company. Companies’ responses to
social movements, like the Movement of Black Lives, showcase the difference between
performative actions and genuine commitment to racial equality which was seen in the active
stance of Ben and Jerry (Ben & Jerry, n.d) versus the criticized approaches of others (Singh,
2021 & NASDAQ, 2023).
The financial risks of disregarding social values are becoming increasingly visible for
companies that fail to align their actions with their public statements on diversity and
inclusion. It has been argued that a lack of diverse perspectives can stifle innovation and lead
to conformity, which can potentially alienate top talent and younger employees as well. The
post-pandemic period witnessed a surge in ESG Investing which underscores the growing
importance of social factors, with investors likely to divest from companies that ignore the
diversity issues. The call for transparency and accountability has intensified in the wake of
widespread protests and signaling a potential shift towards more stringent regulatory
requirements (Stevens, 2020).
Recommendations (So what)
Since 2010, major institutional investors like Blackrock, State Street, and Vanguard have
supported increasing female board representation. Linking measures to increase gender
diversity improved governance and dialogue and the broader agenda of fostering gender
equality and enhancing corporate responsibility. Over the past decade, these financial
behemoths have championed the cause of elevating the representation of women on the
boards of various companies within their investment portfolios, with Blackrock significantly
emphasizing it as a major focus in their engagement priorities (Blackrock, n.d & (Lowenstein
et al., 2022b)
The U.S. Government needs to become a beacon of equality within its ranks, importantly
within prominent agencies such as The Securities and Exchange Commission (SEC), where,
as of now, there have been no black individuals serving as commissioners or being seen in the
roles of chairperson at The Securities and Exchange Commission (SEC) or the Federal
Deposit Insurance Corporation. Despite three female commissioners within the SEC, there
remains a significant gap, as women only accounted for 39.4% of all supervisors and
managers in 2020 (Rodriguez, 2021b).
Following are the recommendations that can enrich these efforts. A multifaceted approach
encompassing stakeholder engagement, regulatory incentives, penalties, and comprehensive
training is essential to diversifying companies’ perspectives. Engaging stakeholders such as
shareholders, employees, and customers in meaningful dialogue and having a bi-annual
symposium about the challenges in achieving diversity and opportunities can introduce a
more inclusive culture that resonates across the units. Additionally, introducing regulatory
incentives for organizations and companies that achieve diversity milestones coupled with
penalties for those who are behind in the reforms can offer a tangible measure to drive
accountability and progress. Moreover, implementing regular, in-depth diversity and

inclusive training session preparation with a diverse focus group presenting the workshops
for all board members and senior management can accelerate the understanding and nuances
of diversity in the workplace. Hence, introducing and implementing such initiatives can be
challenging, but the pilot projects can give a picture of the inception of such models.

References

Baum, I., Dalit, Gafni, & Lazar, R. L. (2022). GENDER AND CORPORATE CRIME: DO
WOMEN ON THE BOARD OF DIRECTORS REDUCE CORPORATE BAD BEHAVIOR?
Michigan Journal of Gender & Law, Forthcoming.
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4045490

Commitment to diversity, equity and inclusion | BlackRock. (n.d.). BlackRock.
https://www.blackrock.com/corporate/about-us/diversity-equity-and-inclusion/commitment-t
o-dei

DEI – Our differences make us stronger. (n.d.). Vanguard.
https://corporate.vanguard.com/content/corporatesite/us/en/corp/who-we-are/we-care-about/d
iversity-equity-inclusion.html

Diversity, equity and inclusion | State Street. (n.d.). State Street.

Dixon-Fyle, S., Dolan, K., Hunt, D. V., & Prince, S. (2020). Diversity wins: How inclusion
matters. In McKinsey & Company.
https://www.mckinsey.com/featured-insights/diversity-and-inclusion/diversity-wins-how-incl
usion-matters

NASDAQ. (2023). NASDAQ’S BOARD DIVERSITY RULE: WHAT COMPANIES SHOULD
KNOW.
https://listingcenter.nasdaq.com/assets/Board%20Diversity%20Disclosure%20Five%20Thing
s.pdf

Rodriguez, C. (2021, November 5). How to make Corporate Boards More diverse. Center for
American Progress.
https://www.americanprogress.org/article/make-corporate-boards-diverse/

Silence is NOT an option. (2023, May 26). https://www.benjerry.com.
https://www.benjerry.com/about-us/media-center/dismantle-white-supremacy

Singh, S. J. (2021, September 1). Boards need real diversity, not tokenism. Harvard Business
Review. https://hbr.org/2021/08/boards-need-real-diversity-not-tokenism

Stevens, P. (2020, June 15). Companies are making bold promises about greater diversity, but
there’s a long way to go. CNBC.
https://www.cnbc.com/2020/06/11/companies-are-making-bold-promises-about-greater-diver
sity-theres-a-long-way-to-go.html