Diversity Washing

We provide large-sample evidence on whether U.S. publicly traded corporations opportunistically use voluntary disclosures about their commitments to employee diversity. We document significant discrepancies between companies' disclosed commitments and their hiring practices and classify firms that discuss diversity more than their actual employee gender and racial diversity warrants as “diversity washers." We find diversity-washing firms obtain superior scores from environmental, social, and governance (ESG) rating organizations and attract investment from institutional investors with an ESG focus. These outcomes occur even though diversity-washing firms are more likely to incur discrimination violations and pay larger fines for these actions. Our study highlights the consequences of selective ESG disclosures on an important social dimension of employee diversity, equity, and inclusion.

Keywords: Diversity disclosure, Diversity washing, Human capital, Social washing, Environmental, social, and corporate governance (ESG)

JEL Classification: G30, G34, G23, M14

Suggested Citation: Suggested Citation

Baker, Andrew and Larcker, David F. and McClure, Charles and Saraph, Durgesh and Watts, Edward, Diversity Washing (December 9, 2022). Chicago Booth Research Paper No. 22-18, Rock Center for Corporate Governance at Stanford University Working Paper No. 151, Stanford University Graduate School of Business Research Paper No. 4298626, European Corporate Governance Institute – Finance Working Paper No. 868/2023, Available at SSRN: https://ssrn.com/abstract=4298626 or http://dx.doi.org/10.2139/ssrn.4298626