Document Type

Article

Publication Date

2022

Abstract

There is a growing body of literature discussing the proper role of diversity, equity, and inclusion efforts by and within public firms. A combination of forces brought renewed energy to this topic over the past few years. The #MeToo movement demonstrated a whole host of inequities faced by women within workplaces. Business Roundtable’s 2019 Statement on the Purpose of a Corporation rejected the view that the purpose of the corporation was solely to be focused on the maximization of shareholder wealth. And, in 2020, the murder of George Floyd ignited a racial reckoning within the United States, which prompted many firms to rethink and reaffirm their commitments to creating diverse, equitable, and inclusive workplaces. Chris Brummer and Leo E. Strine, Jr.’s Duty and Diversity, the subject of this Response piece, takes on the issue of diversity efforts within public firms directly. They argue that “the pursuit of Diversity, Equity, and Inclusion is solidly authorized by the operation of traditional corporate law principles and can even be easily squared with the views of those who embrace what has come to be known as ‘shareholder primacy.’ ” Their piece is an excellent and comprehensive addition to the current literature.

This Response focuses on how concerns about risk may influence firms as they evaluate how to best engage in more robust and meaningful diversity, equity, and inclusion efforts. It highlights the tension that can be created when members of a firm fail to take certain risks seriously enough while simultaneously allowing potential risks to block a subset of potentially impactful reforms. First, the failure by a firm to act in accordance with its public statements regarding diversity could create risks for the firm over the long term. Second, members of firms may sometimes be deterred, whether implicitly or explicitly, out of concerns that taking certain actions might create new zones of risk for the firm. These two realities can create a sort of risk paradox. This Response argues that for a firm to properly address the diversity risk paradox, it must consider what actions are likely to lead to the creation of a culture of equity and inclusion throughout the firm. By prioritizing equity and inclusion, firms can engage in more productive risk assessments about what diversity efforts to prioritize and pursue.

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Library of Congress Subject Headings

Diversity in the workplace, Business ethics, Corporate governance, Racial justice

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