The Advisors' Blog

I blogged last week on TheCorporateCounsel.net about changes to “corporate diversity” messaging that some companies are making in the wake of the SCOTUS ruling in Students for Fair Admissions v. Harvard. In our informal “Quick Poll,” people were split on whether companies will soften DEI-related disclosures in proxy statements (feel free to add your two cents).

Over half of S&P 500 companies consider diversity metrics in some way in executive incentive plans, according to this WTW article. The article gives tips for how to respond to the ruling in the context of setting these goals. Here’s an excerpt:

3. Be specific in measurement. There are many ways DEI progress can be measured. While leadership and workforce representation goals may be a common approach, they also arguably present the highest reputational and litigation risk, especially if the company does not have strong documentation on career and pay decisions. Some other impactful ways to measure DEI progress include engagement score gaps for under-represented groups or participation in DEI enablement programs such as employee resource groups. In addition, companies should evaluate the pros and cons of using quantitative vs. qualitative measurement, especially in countries where demographic information is often self-reported and can be inaccurate. Companies that choose to assess DEI performance qualitatively should take note that investors strongly prefer quantitative and outcome-based metrics over activities-based and qualitative metrics.

4. Bolster the supporting infrastructure. It is important to acknowledge that litigation risks with DEI programs have existed since before the SFFA decision, and many other corporate programs and policies are exposed to similar litigation risks. It is unrealistic to expect elimination of all risks associated with DEI programs, and companies should know that the benefits of DEI programs far outweigh the potential risks. A more reasonable approach is to proactively assess, quantify, and manage these risks. Companies should review practices in recruiting, career development, training and development, managerial enablement and performance management to ensure robust governance and documentation for how decisions are made and communicated.

I’ll add my own tip, too: in addition to working with DEI practitioners, always consult an employment lawyer on this stuff!

– Liz Dunshee