Race & Ethnicity Disclosure: US Companies’ Rocky Start
- One-fourth of MSCI USA IMI constituents have disclosed employee breakdowns by race or ethnicity. Of these, there were at least 70 variations of workforce demographic categories.
- The lack of standardization in reported data — based on age, gender, race, ethnicity, disability and sexual orientation or gender identity, or some combination thereof — has greatly hindered comparability.
- The utilities sector had the highest percentage of companies reporting employee breakdowns by race or ethnicity (65.6%), as well as by gender (86.9%). Health care had the lowest for race or ethnicity (14.8%) and gender (68.3%).
Workforce Breakdowns by Gender and Race or Ethnicity
This chart includes the 2,327 constituents of the MSCI USA IMI as of February 2021. Source: MSCI ESG Research LLC
Thematic Categories | Demographic Groups based on: | Workforce Groups based on: | Geographical Scope |
Board | Age | Job Function | Global |
Employment | Gender | Seniority | Regional |
Pay | Race | Department | Country |
New hires | Ethnicity | Employment Status | State |
Employment Status | Employment Status | State | None |
State | None | None | None |
Attrition | Sexual Orientation or Gender Identity | None | None |
Sexual Orientation or Gender Identity | None | None | None |
Sexual Orientation or Gender Identity | None | None | None |
We collected thousands of diversity data points related to four fiscal years (from 2017 to 2020) under broad thematic categories. Companies have reported on a range of different demographic and workforce groups. Similarly, companies used varying geographies when reporting diversity data.
Employment Status |
State |
Attrition
Sexual Orientation or Gender Identity |
Sexual Orientation or Gender Identity |
Sexual Orientation or Gender Identity |
Unstandardized Reporting Leads to Unstructured, Hard-to-Use Data
While granular information is valuable and can be helpful in certain contexts, including investors' engagement initiatives, the main problem with such voluntary, unstandardized reporting is that it can result in unstructured data of limited value. Instead of shedding light on broad corporate diversity practices, inconsistently defined data can impair investors' ability to make comparisons.
For example, many companies have used the categories under the EEO-1 report3 to disclose workforce breakdowns by race or ethnicity, while others combined the categories, creating different demographic groups. Moreover, some companies opted to use broader definitions such as ethnic minorities, People of Color or BIPOC (Black, Indigenous and People of Color). In addition, some companies reported race and ethnicity breakdowns separately from gender breakdowns, whereas others combined these data sets. Among companies that have disclosed diversity data thus far, we have identified at least 70 variations of demographic categories related to the race or ethnicity of their workforces.
Meanwhile, as of February, only 5.9% of MSCI USA IMI constituents reported hiring or workforce diversity targets as a way to implement change. In addition, we found evidence of career development plans targeted at underrepresented groups among only 2.1% of MSCI USA IMI constituents.
Sector-Level Analysis: Highs and Lows
At the sector level, utilities had the highest percentage of companies that reported employee breakdowns by gender (86.9%) and by race or ethnicity (65.6%). It also had the highest percentage of companies that have established employee resource groups (24.6%), adopted hiring or workforce diversity targets (11.5%) and disclosed career development plans targeted at underrepresented groups (4.9%).
In contrast, the health care sector had the lowest percentage of companies that have disclosed employee breakdowns by gender (68.3%) and by race or ethnicity (14.8%), the energy sector had the lowest percentage of companies that have disclosed career development plans targeted at underrepresented groups (0%) and the real estate sector had the lowest percentage of companies that have adopted hiring or workforce diversity targets (1.4%) and established employee resource groups (2.1%).
Diversity at Sector Level: Best and Worst
This exhibit is based on 2,327 constituents of the MSCI USA IMI as of February 2021. Source: MSCI ESG Research LLC
While most companies reviewed have disclosed workforce breakdowns by gender, workforce breakdowns by race and ethnicity remained sparse. Of those companies that did disclose racial and ethnic data, many have used a variety of different demographic categories, workforce groups and geographies. Such limited transparency and unstructured data can impair investors' ability to assess companies' diversity efforts. However, with racial injustice and systemic discrimination in the global spotlight, pressure for companies to increase transparency and accountability is bound to increase.
Further Reading
1For example, see: Friedman, G. “Here’s What Companies Are Promising to Do to Fight Racism.” , Aug. 23, 2020 Kerber, R,. Coster, H., McLymore, A. “U.S. companies vow to fight racism but face critics on diversity.” Reuters, June 10, 2020 Fitzhugh, E., Julien, J.P., Noel, N., Stewart, S. 2020. “It’s time for a new approach to racial equity.” McKinsey & Co., Dec. 2, 20202Lower thresholds apply to federal contractors.3Companies are required to provide workforce breakdown by gender and by the following categories: (1) Hispanic or Latino; (2) White; (3) Black or African American; (4) Native Hawaiian or Other Pacific Islander; (5) Asian; (6) American Indian or Alaska Native and (7) Two or More Races.
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