Author: Esther Yang | UC Berkeley School of Law | J.D. Candidate 2020 | Posted: February 14th, 2019 | Download PDF

As the investor community agreed and acknowledged, diversity makes companies more productive and retains talent.[1]  A study by McKinsey & Company also showed that it was “increasingly clear that [diversity] makes sense in purely business terms.”[2] After examining proprietary data sets for 366 in public companies across a range of industries in Canada, Latin America, the United Kingdom, and the United States for several years, McKinsey found that “companies in the top quartile for racial and ethnic diversity are 35 percent more likely to have financial returns above their respective national industry medians.”[3] The research showed that in the United States, “there is a linear relationship between racial and ethnic diversity and better financial performance: for every 10 percent increase in racial and ethnic diversity on the senior executive team, earnings before interest and taxes rise 0.8 percent.”[4] While correlation doesn’t equal causation, there is a general consensus that diversity is and will continue to be an increasingly important to institutional investors, pension funds, employees, and other stakeholders. (more…)