48 Pages Posted: 26 Jan 2021 Last revised: 1 Jun 2021
Date Written: January 21, 2021
This time is different. This time the death of another Black man at the hands of white police officers prompted calls for change not only within police departments, but across all aspects of American life. Those calls for change resulted in significant displays of support for the Black Lives Matter movement and interest in how to eliminate systemic racism and promote racial diversity and justice within one’s daily life and workplace. For the most part, corporations were quick to publicly align themselves with the movement. When carefully examined, however, many of the statements issued by corporations in support of the Black Lives Matter movement look more like marketing campaigns than like blueprints for the implementation of specific strategies aimed at tackling issues of race within firms’ own corporate structures and their contracting partners.
Yet, there are concrete steps that can be taken to incentivize corporations to more meaningfully contribute to the Black Lives Matter movement. This Essay addresses steps the market, via institutional investors, can take to encourage firms to move past mere statements and towards the implementation of strategies crafted to address discrimination, bias, and racism within firms’ own organizational structures and supply chains. Building on social movement, corporate governance, compliance, and organizational behavior literatures, this Essay argues that institutional investors should require that firms adopt “equality metrics.” Equality metrics refer to systematized corporate disclosure of the current demographic diversity of the workforce and supply chain, as well as measurable, specific plans to improve racial equity. Specifically, institutional investors should incentivize firms to (i) measure the state of (in)equality in their organizations and supply chains; (ii) identify a list of specific, assessable equality goals; (iii) implement policies and procedures aimed at achieving those goals that can be tested and measured; (iv) disclose their progress toward meeting these goals at regular intervals; and (v) use their own and others’ measured performances on these metrics to direct future efforts at creating a more equitable organization. Corporations have demonstrated general support for the Black Lives Matter movement, but firms often need incentives to alter their behavior. Institutional investors are well-placed to apply pressure likely to encourage firms to enact meaningful change. To properly align corporation’s incentives, institutional investors must demand more than marketing campaigns; they must demand empirically proven strategies targeted at specific and measurable objectives aimed at eliminating inequality within firms.
Keywords: corporate governance, discrimination, diversity, inclusion, equity, corporate law, corporate social responsibility, securities, institutional investors, disclosure
JEL Classification: K00, K10, K19, K2, K20, K22
Suggested Citation: Suggested Citation