Higher levels of racial diversity among management positively correlates with an increase in enterprise value growth rate, free cash flow per share and income after tax, finds a recent As You Sow study.
In a study on workplace diversity and financial performance, across 1,641 U.S.-based companies, As You Sow found that higher percentages of Black, Indigenous and people of color (BIPOC) members in management teams positively correlates with a long-term growth mean, a 10-year price change and a mean return on equity.
The study found that in key sectors such as communication services, consumer discretionary, financial, healthcare and information technology, statistically significant relationships between BIPOC management and financial performance were positive.
As You Sow’s analysis also found that companies with a large market capitalization displayed a positive relationship with diverse management, and that investors are incentivized in advocating for diversity, equity and inclusion (DEI) initiatives.
The energy, materials and real estate sectors were singled out for lagging behind their peers across the majority of the criteria related to their strategy and racial justice management strategy.
In July, questions were raised regarding the necessity of corporate diversity, equity and inclusion policies, with Republican Attorney Generals from 13 U.S. states writing to Fortune 100 companies, urging the restriction of diversity policies.