61 Pages Posted: 23 Dec 2022 Last revised: 27 Nov 2023
Date Written: November 21, 2022
From 2008 to 2020, 180 of S&P 1500 have disclosed employee diversity targets. We conduct the first analysis of firms’ employee diversity targets and ask three research questions: (i) who announces diversity targets? (ii) do firms deliver on their diversity targets? (iii) what are the implications of disclosure of such targets for employee hiring and investors? We find that firms with a greater willingness (proxied by past ESG penalties, higher CEO-to-median employee pay ratio, more media coverage, and after #Metoo and BLM movements) and ability (proxied by financial strength, a blue-collar heavy labor force, and gender and ethnic minorities on boards) to improve employee diversity are more likely to disclose diversity targets. Exploiting the Revelio dataset of 15,639 firm-years for 1,203 distinct firms from 2008 to 2020, we observe that firms that disclosed a diversity target have indeed hired more diverse employees, but such diversity levels have already increased substantially prior to the target disclosure. Firms with numerical, forward-looking, and rank-and-file employee-targeted goals are associated with greater employee diversity relative to firms that announce other types of diversity goals. Moreover, improved diversity performance does not appear to occur at the cost of employee quality, as measured by the Revelio dataset. Overall, our results have practical implications for how investors and stakeholders might want to interpret corporate diversity targets.
Keywords: Diveristy Targets, ESG Disclosure
JEL Classification: M14,M42
Suggested Citation: Suggested Citation