Something very notable, and rather surprising, is happening around transparency in corporate America. Last summer, the killings of George Floyd, Breonna Taylor, Ahmaud Arbery and other Black Americans led to a nationwide movement of racial reckoning. With it, an obscure form, required by an obscure (but critically important) federal agency, has become a harbinger for companies’ commitments to advancing racial equity. And with it, I believe there are real lessons to learn for transparency and disclosure advocates.
All businesses in America with over 100 employees are required to file a form called the EEO-1 Report, with the Equal Employment Opportunity Commission (EEOC), annually. The EEO-1 Report is a list of a company’s workforce composition, and includes the gender and racial/ethnic breakdown of employees at different levels within the company. The EEOC is charged with ensuring that there isn’t discrimination in the workforce, and this form is intended to do just that on a company level, based on race/ethnicity and gender. The EEOC was created in 1965 as part of civil rights legislation, and it’s been using this form since ’66.
It’s interesting, then, that it’s only been in the last few years that organizations focused on standards and transparency have called for its information to be released publicly as a way to report on workforce diversity. The reasons are, however, straightforward. The EEO-1 data is already gathered and compiled by companies. Companies, in addition to the federal government, have been looking at the numbers for a long time to benchmark and analyze progress. That means companies could release it immediately if they wanted to, and releasing the information could signal a company’s commitment to racial equity. The EEO-1 form has rapidly become the gold standard of disclosure, and the numbers and metrics within it have taken on meaning and impact. Through companies publicly sharing this information, any person could see how a company compares to its competitors, and to the population overall, on diversity.
Why it’s been embraced
Since JUST Capital started tracking corporate disclosure of EEO-1 information in 2019, the number of America’s largest companies disclosing this information has remained small – but there has been a wave of companies taking the step in the last several months. As my colleague Kavya Vaghul found in a recent analysis, only 32 companies of the thousand largest publicly traded U.S. companies reported this level of diversity data as of December 2019. By late January, that number had grown by 84%, with 27 more companies disclosing, for a total of 59. That number has already been ticking up since, and we expect it to continue to grow significantly this year.
There has been a conscious effort by corporate leaders, institutional investors, nonprofits like us, and reporters to compel companies to disclose. New York City Comptroller Scott Stringer, in his role as steward of New York City workers’ pension funds, announced in July 2020, for example, that he was launching an engagement campaign to ask companies to disclose the form. PwC US chair Tim Ryan is compelling CEOs he works with to do the same, and 14 of the world’s largest asset managers are releasing their data and urging companies in their portfolios to do so. Journalists at Bloomberg are in the midst of an extensive effort to ask companies for the same information, and are seeing real progress. And companies are increasingly using it to tie executive compensation to what it reveals over time.
As for where that data stands right now, in our most recent analysis, we explored what these disclosures reveal about the state of gender and racial diversity at America’s largest companies – something we will continue to track as more companies release demographic data through their EEO-1 forms.
Given the lack of standardization on human capital metrics in corporate reporting, the existing standardization of the EEO-1 makes it highly meaningful and helpful toward benchmarking and tracking progress. It’s standardized because of government requirements, and that also makes it credible and verified. We know that companies have a lot of choices in what to examine in human capital metrics, and that data is often collected and analyzed differently. Because of the existing standardization, the form was also something that stakeholders like investors knew would be useful – so that it wasn’t just a signal of something bigger but a material resource to understand the broader context for diversity within companies.
What this push for diversity disclosure means for corporate America
So what does this all mean? And what can learn from it to advance progress on other human capital metrics?
First – and this is a bit counterintuitive for a conversation about measurement – we need to remember that we’re talking about people’s lives and livelihoods. The racial uprisings that blasted into the American consciousness created a desperate need to address equity within workplaces. This reality grounded the dialogue in people’s lived experiences and showed the real world impact of tracking this information. The risks associated with having bad human capital management involves discrimination, injuries, harassment, etc. The upsides are creating business and economic value. While reporting on diversity data is not a panacea, it is a place to start to benchmark where companies are today, and to begin tracking progress toward advancing racial equity goals. We can’t manage what we can’t measure, so it all starts with identifying and tracking meaningful data.
Second – we need to identify other methods of data collection that could be repurposed. On the “quick win” side of things, we should do an assessment of what may already exist. We know that the IRS, OSHA, and other federal bodies collect relevant information, as do state governments and other national governments (there’s an interesting parallel example around gender pay gap reporting in the United Kingdom). One of the reasons the EEO-1 form has gained momentum is because it already exists, but other forms and assessments do as well. Organizations focused on developing new and universal standards should consider the benefits of what’s available as they work on potential paths forward.
Finally, the standardized data gives all of us significant opportunities to answer research and impact questions. Can we continue to build the business case for investing in a diverse workforce? How are industries’ demographics changing over time, especially at a leadership level? What does the talent pipeline actually look like? When we have standardized data, there’s a world of opportunity.
Transparency matters because it is a key tool to understand the state of play, and to work toward something better. With it, we can define and redefine corporate leadership. The early successes around disclosure of the EEO-1 form show that there may be ways to mimic this in other areas of human capital and environmental disclosure. Let’s create a strategy and a system that allows for a lot more of that.