Companies are making bold promises about greater diversity — there's a long way to go

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U.S. companies need to diversify and be representative of the country at large, and investors will hold them accountable.

Despite decades of pushing for wage equality, women and minorities still fall short of the pay of their White male colleagues, according to the Economic Policy Institute.

"Incentives to close the gender gap are evident ... companies focused on gender diversity at a board, C-suite and firm level have consistently achieved higher ROE [return on earnings] and lower earnings risk," Bank of America analyst Haim Israel wrote in a recent note to clients. "Moreover, companies focused on diversity have generally traded at premia to more homogenous counterparts.

The findings were even more compelling for ethnic and cultural diversity, where companies in the top 25% outperformed those in the bottom quarter by 36% in terms of profitability.Inequality and a lack of diversity in the workplace are certainly not new topics, but the recent protests have prompted companies to speak out, condemning racism, and recommitting to doing better when it comes to fostering inclusive work environments.

"These events are symptoms of a deep and longstanding problem in our society and must be addressed on both a personal and systemic level, wrote Larry Fink, CEO of BlackRock, the world's largest asset management firm. "This situation also underscores the critical importance of diversity and inclusion within BlackRock and society at large. We will continue to push forward in our efforts as a leadership team to build a more inclusive and diverse firm.

 

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