Diversity Washing

69 Pages Posted: 12 Dec 2022 Last revised: 7 Sep 2023

See all articles by Andrew Baker

Andrew Baker

Berkeley Law School

David F. Larcker

Stanford Graduate School of Business; Stanford University - Hoover Institution; European Corporate Governance Institute (ECGI)

Charles McClure

University of Chicago Booth School of Business

Durgesh Saraph

Jump Trading

Edward M. Watts

Yale School of Management

Date Written: August 21, 2023


We provide large-sample evidence on whether U.S. publicly traded corporations use voluntary disclosures about their commitments to employee diversity opportunistically. We document significant discrepancies between companies' external stances on diversity, equity, and inclusion (DEI) and their hiring practices. Firms that discuss DEI more than their actual employee gender and racial diversity (“diversity washers”) obtain superior scores from environmental, social, and governance (ESG) rating organizations and attract more investment from institutional investors with an ESG focus. These outcomes occur even though diversity-washing firms are more likely to incur discrimination violations and have negative human-capital-related news events. Our study provides evidence consistent with growing allegations of misleading statements from firms about their DEI initiatives and highlights the potential consequences of selective ESG disclosures.

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

JEL Classification: G30, G34, G23, M14

Suggested Citation

Baker, Andrew and Larcker, David F. and McClure, Charles and Saraph, Durgesh and Watts, Edward, Diversity Washing (August 21, 2023). 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

Andrew Baker

Berkeley Law School ( email )

United States

David F. Larcker

Stanford Graduate School of Business ( email )

Graduate School of Business
518 Memorial Way
Stanford, CA 94305-5015
United States
650-725-6159 (Phone)

Stanford University - Hoover Institution ( email )

Stanford, CA 94305
United States

European Corporate Governance Institute (ECGI) ( email )

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels

Charles McClure (Contact Author)

University of Chicago Booth School of Business ( email )

7737024885 (Phone)

Durgesh Saraph

Jump Trading

600 W Chicago Ave #825
Chicago, IL 60654
United States

Edward Watts

Yale School of Management ( email )

165 Whitney Ave
New Haven, CT 06511

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