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How to Advance Corporate Diversity and Comply With the Law

Oct. 8, 2021, 8:01 AM

George Floyd’s murder led many in corporate America to ask what they could do to address centuries-old social injustices. For many, the initial response has meant committing to increased diversity, equity, and inclusion within their own employee ranks, boards of directors, and third-party business relationships.

But meaningful change will require more than simply wanting to do the right thing. It will require conscious effort, commitment, and a plan. It also requires strategies that comply with the law to protect the company and to obtain buy-in from key company stakeholders that will ensure the long-term success of inclusive strategies.

In 2020, supporters of racial equity from some of the nation’s best-known corporations approached the Joint Center for Political and Economic Studies—a Washington, D.C., think tank focused on issues affecting Black communities—for ideas on how to effectively counter racial bias in compliance with the law.

Accordingly, the Joint Center asked WilmerHale to create a toolkit for companies intent on diversifying their ranks and addressing systemic bias while minimizing legal risks.

Why Do We Need This?

Today, only four Fortune 500 CEOs are Black—there have been fewer than two dozen in the list’s 66-year history. Black professionals hold only 3.2% of senior leadership roles at large U.S. companies. And research suggests the scarcity of Black professionals in companies puts them at a higher risk of social isolation and attrition, worsening the problem. This remains true despite the rapid increase of Black professionals in the workforce.

Absent intervention, we can expect that the Covid-19 pandemic with the economic stress it has spawned across the country, especially in communities of color will further contribute to the growing disparities between Black and White professionals.

Our five-part toolkit aims to inform employers of the barriers to equal employment for Black professionals and offers achievable recommendations. It provides insights on understanding bias and aligning incentives to values; best practices for improving hiring, recruitment, and retention of Black professionals in corporate America (from entry-level positions to the boardroom); and guidance on third-party business relationships—all while minimizing legal risk.

Understanding Workplace Bias & Establishing Responsibility for Diversity

Companies can reduce workplace bias by first promoting an organization-wide understanding of how bias impedes professionals from historically underrepresented groups. For example, employees responsible for recruitment and hiring should participate in implicit bias training and learn action-oriented strategies for managing bias.

A second step requires increasing transparency through collecting and analyzing diversity metrics and data about experiences of inclusion or exclusion. To increase accountability, companies should bolster in-house responsibility by, among other things, tying executive compensation to efforts toward progress. Creating a plan to overcome barriers to equal employment opportunities is critical to long term success.

Establishing Initiatives to Improve Diversity and Promote Hiring & Retention

Recruitment and hiring, followed by promotion and retention, are the greatest levers for change. Research on racial discrimination in hiring since 1990 shows that Black applicants experience far greater bias than Whites throughout the hiring process, and hiring rates for Black applicants have not significantly changed.

Broadening the applicant pool through strategic partnerships with educational institutions, organizations, and executive pipeline programs focused on diversity, requiring final applicant pools to include multiple diverse candidates, and establishing a standardized interview and selection process are essential to successfully increasing the rate of Black hires. Once hired, reducing social isolation for Black professionals through formal mentoring programs, employee resource groups, retention equity programs, and increasing the visibility of Black employees within organizations will help retain talent.

Why Expanding Diversity on Corporate Boards Is Critical

Diversity at the highest levels of organizations—their boards of directors—has the propensity to drive diversity initiatives. But it continues to lag. In 2019, 37% of S&P 500 companies lacked a single Black director, and in 2020, only 9% of Fortune 500 board members were Black. The exclusion of Black professionals from corporate leadership and boardrooms has a cascading effect on communities of color, further expanding the class and wealth gap.

Again, broadening the candidate pool, creatively identifying potential candidates, and supporting and creating opportunities for Black directors to lead is critical.

Promoting Diversity Among Suppliers and Service Providers

It will come as no surprise that companies can, through contracting and retention practices, effectively persuade suppliers of goods and services to prioritize racial equity in hiring and promotions. Corporate clients increasingly request that service providers engage diverse teams or risk not being retained—an approach that could be used far more widely. Other approaches include having concrete spending goals—such as Facebook’s commitment of at least $1 billion annually to diverse suppliers, including $100 million annually to Black-owned businesses (from facilities and construction to marketing agencies and more).

Minimizing the Legal Risk of Diversity Initiatives

Finally, the affirmative steps companies take to increase racial equity may cause some employees to file lawsuits alleging reverse discrimination—a risk that will presumably only increase as the percentage of Whites in the U.S. declines. Designing a plan that increases opportunities for Black professionals, while not unduly burdening traditionally overrepresented communities or triggering legal exposure under Title VII and other laws, is a challenge we tackle in this part of the toolkit.

Title VII, for example, permits diversity initiatives designed to expand opportunities for all applicants. Thus, companies should avoid implementing policies that limit, rather than expand, the pool of candidates. Companies should also consider tying compensation to D&I efforts rather than results. The toolkit provides guidance and analysis on strategies that can greatly reduce the risk of successful litigation challenges.

Improving the representation of Black professionals in corporate America requires companies to be committed, strategic, and decisive. Not only is this important for achieving racial equity, but it is essential to improving business performance and operating at maximum efficiency in today’s competitive global environment. Corporate America cannot wait to engage in these efforts.

This column does not necessarily reflect the opinion of The Bureau of National Affairs, Inc. or its owners.

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Author Information

Ronald Machen, a WilmerHale partner, co-chairs the firm’s White-Collar Defense Practice and previously served as the U.S. Attorney for the District of Columbia.

Spencer Overton is president of the Joint Center for Political and Economic Studies, a Washington, D.C.-based nonprofit dedicated to creating ideas to improve the socioeconomic status and civic engagement of African Americans. He’s also a tenured professor of law at George Washington University Law School.

Cadene Russell Brooks, a WilmerHale senior associate, represents clients in internal and government investigations, complex litigation, and white-collar defense matters.

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