Social Washing or Credible Communication? An Analysis of Corporate Disclosures of Diversity, Equity, and Inclusion in 10-K Filings

Abstract

Starting in 2020, the SEC requires firms to disclose human capital information material to their operations. Many firms discuss their commitment to employee-level diversity, equity, and inclusion (DEI) in their human capital disclosures. We examine whether these disclosures reflect credible communication about a firm’s commitment to DEI or whether they merely reflect social washing. We find that these firm-provided DEI disclosures are associated with higher employee ratings on DEI. Consistent with the positive economic implications of committing to DEI, the DEI disclosures are also associated with higher employee productivity. In additional analysis, we document that the market responds positively to a firm’s general or quantitative DEI disclosures for smaller firms. Our findings provide novel evidence on the credibility and the informativeness of the new DEI disclosures in 10-K filings, suggesting that firms, on average, credibly communicate their commitment to employee-level DEI.

Keywords: ESG; Diversity, Equity, and Inclusion; DEI; Disclosure; Human Capital; Social Washing.