Racial Equity in Corporate America: Some Glimmers of Optimism

After the death of George Floyd, American corporations committed to advancing equity and racial justice in the workplace, arguably with more fervor than seen in the past several decades. Just Capital, a nonprofit dedicated to tracking and inspiring corporations to adopt more just and responsible practices, provides a tracking mechanism called the Corporate Racial Equity Tracker (CRET) to measure how well those commitments are being fulfilled.

Data recently released from the 2022 CRET reveals a pattern of commitments that are long on promises but considerably shorter on actionable practices and measurable results. In the report, six categories are dominant as they relate to corporate racial equity: anti-discrimination policies, pay equity, racial and ethnic diversity data, education and training programs, responses to mass incarceration, and community investments.

But analyzing whether or not commitments are being met first depends on the corporations’ willingness to report. For example, only 43 percent of companies polled reported data on pay equity. Responses to mass incarceration was reported at a frequency of 45 percent. 

It’s difficult not to conclude that no reporting is indicative of no action; after all, even a poor score reflects some effort. Nondisclosure also equates to the absence of accountability and transparency.

The categories that are most reported — anti-discrimination policies at 98 percent, racial and ethnic diversity data at 98 percent, and education and training programs at 91 percent — represent objectives that can be met, in some cases, based on publications and nose-counting alone. In other words, more than publishing an anti-discrimination policy, how is the effectiveness of an anti-discrimination policy intrinsically measured? 

For those companies reporting data, a comparison from the 2021 CRET results to 2022 shows some improvement. Workforce diversity data disclosure increased from 86 percent to 91 percent. Board diversity data disclosure increased from 84 percent to 95 percent. Racial and ethnic pay equity analysis disclosure increased from 34 percent to 45 percent. Disclosure of pay ratios increased from 14 percent to 24 percent. 

Other categories also reflect a dismal rate of reporting. Only 7 percent of companies disclose their promotion rate by race and ethnicity. Twenty-one percent report providing anti-harassment training, compared to 98 percent of companies that disclose an anti-harassment policy. In addition, only 22 percent disclose the actual results of the pay equity analysis, i.e., pay ratios by race and ethnicity. 

But polling proves that commitment to the cause of racial equity is what’s expected. The 2022 CRET reports that 92 percent of Americans say that it is important for companies to promote racial equity in the workplace. 

There are two realities for a corporation to consider when it comes to lack of reporting and the need to improve the percentages. The first reality is, get used to it. Corporate America will be subject to increasing scrutiny by stakeholders and investors in the areas of environmental, social and governance (ESG). ESG rankings are indicators of risk, as in who is getting the job done in the present with efficient and sustainable ways of doing business and anticipating the future.

Credit rating agencies like Moody's, S&P and Fitch report ESG ratings. Investors and other stakeholders are paying close attention to rankings and reporting, and most can tell the difference between a substantive program and padding. 

The fact that Facebook dropped 700 places out of 1,000 companies ranked is a big deal. Sustainalytics, a sustainability data and analytics firm, gave Tesla a “medium” ESG risk rating, citing weak product governance and other issues—news that made headlines.

And, companies are now more likely to be ranked according to these ESG scores. In 2022, Just Capital ranked Alphabet as number one on ESG metrics.  Intel, in the number 2 spot, led Microsoft, followed closely by Salesforce. Salesforce is in the news of late for circulating an employee petition, signed by more than 4,000, to drop the NRA as a client. Examples of employees driving corporate social responsibility (CSR) are plentiful.

As part of the American corporate landscape, the importance of achieving racial equity depends on whether or not corporate leaders subscribe to the notion that a more just company can be more profitable where profitability implies a satisfied, productive workforce. 

But the second reality associated with corporate racial equity is that it’s the right thing to do. Surely, there is a point where profitability and societal responsibility can intersect. Corporations would do well to pursue that sweet spot where reporting is more than a satisfactory experience.

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