Diversity Washing

60 Pages Posted: 12 Dec 2022 Last revised: 13 Jan 2023

See all articles by Andrew Baker

Andrew Baker

Berkeley Law School

David F. Larcker

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

Charles McClure

University of Chicago Booth School of Business

Durgesh Saraph

Jump Trading

Edward M. Watts

Yale School of Management

Date Written: December 9, 2022


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

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

Andrew Baker

Berkeley Law School ( email )

United States

David F. Larcker

Stanford University - Graduate School of Business ( email )

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

European Corporate Governance Institute (ECGI) ( email )

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

Stanford University - Hoover Institution ( email )

Stanford, CA 94305
United States

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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