Workplace discrimination continues today as the corporate approach to diversity, equity, and inclusion is in flux.
In recent years, American businesses have ramped up their Diversity, Equity, and Inclusion (DEI) initiatives to combat racism in the workplace. Organizations appointed DEI executives, changed their hiring practices, and introduced new training programs aimed at:
- Bolstering diversity, or the number of employees in federally protected categories such as race, sex, or sexual orientation.
- Creating greater equity to ensure all employees are given the customized resources and opportunities they need to succeed. This is not to be confused with equality, which ensures everyone receives identical resources and opportunities regardless of how their needs may differ.
- Enhancing inclusion or fostering a welcoming, respectful, and engaging professional environment for all staff, regardless of their backgrounds.
The U.S. Equal Employment Opportunity Commission (EEOC) reported 81,055 new workplace discrimination charges in 2023, a 10.3% increase from the year prior. Also, according to the EEOC, employment discrimination can cost an employer up to $300,000 in compensatory and punitive damages, not including attorney, court, and expert witness fees.
The Economics of Workplace Discrimination
Racism in the workplace can be costly for any business. It can also affirm or damage the brand’s reputation and improve or alter the course of brand public relations. According to Edelman’s 2024 report For Business, consumers in the U.S. are 4.5 times more likely rather than less likely to buy brands that commit to ending racism and inequality. Nike was lauded in 2020 when President and CEO John Donahoe responded to the protests following George Floyd’s death by committing $40 million over four years to supporting Black communities.
Not all businesses can afford to make such sizable donations. However, it is the legal responsibility of all U.S.-based companies to prevent race-based discrimination in their places of work. Title VII of the Civil Rights Act of 1964 makes employment discrimination based on race, color, religion, sex, and national origin illegal. This includes employers implementing anti-bias practices during hiring and throughout employment. That is, excluding potential job candidates based on certain characteristics or excluding them from promotion opportunities and raises for the same discriminatory reason.
Employers can also be legally liable if an employee talks about another employee in racially derogatory terms, even if they do so on their social media channels. One way to mitigate the risk of racism in the workplace is to educate all employees, including leadership, on their role in maintaining a professional, harassment-free work environment and the consequences of not doing so.
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The Benefits and Risks of Workplace Diversity Efforts
The “business case for diversity” is typically one of the strongest arguments to support implementing DEI initiatives in the workplace. A more diverse staff leads to higher profitability. Diversity Matters, the annual report from management consultancy McKinsey & Company, found that of the 1,265 companies polled in 23 countries, top-quartile companies of ethnic representation had a 39 percent greater likelihood of financial outperformance than their bottom-quartile counterparts.
A LinkedIn analysis found that the chief diversity officer was the fastest-growing C-Suite hire in 2020 and 2021. Hiring a diversity officer combined with a solid strategy for creating a diverse and inclusive work environment can result in multiple advantages for the business. It is essential to provide your team with the resources needed to effect positive change—or else, you risk putting the company at risk of workplace racism litigation.
In July 2024, Bloomberg Law News reported that Frustrated DEI Officers Risk Tackling Workplace Bias in Court, citing several Fortune 500 companies named in lawsuits by former diversity officers accusing the companies of race discrimination. The accusations stemmed from the officers feeling they were not given adequate resources to do their jobs.
To mitigate the risk of accusations of workplace racism, diversity executives should have a defined reporting structure and specific job descriptions and responsibilities that go beyond HR initiatives.
Building Your DEI Strategy
Hiring a diversity officer is a sound first step towards eliminating racism in the workplace. Providing executives with the resources they need to do their jobs effectively from day one is equally important. According to the Society of Human Resource Management’s (SHRM) 2022 article Diversity Officers to CEOs: This is What We Need, diversity officers need:
- A supportive leadership structure that will provide them with a seat at the table, with regular access to the CEO and other decision-making executives to discuss current and future initiatives. These executives also need to verbally share their support of an inclusive work environment with the rest of the organization.
- A budget for clearly defined long-term and short-term initiatives and support staff.
- Software with the ability to identify demographic data such as trends and outlooks, which can inform the organization’s future initiatives to prevent workplace racism.
For small and mid-sized businesses, budgetary requirements may not allow such a software investment. Yet, the first two points are essential. Before bringing on a diversity officer, leadership should have clear objectives as to how they want to deter workplace racism. This may mean providing all staff with the same resources, benefits, and bonus structures, using the same exacting standards to evaluate job performance annually, and implementing hiring practices that will result in a more diverse team. Creating specific metrics is one way to onboard more staff from federally protected classes.
To complement that practice, consider raising the company’s visibility with these potential job candidates. Work with your diversity officer to source local organizations and events that attract non-white community members. Then, create initiatives for your business to support and participate in the efforts of these groups. But know that building these relationships is a long-term endeavor. Once that trust level is established, it could lead to a new talent pipeline and a more diverse client base for your business.
Also read: Can an Employee Refuse Sexual Assault Training
Racism in the Workplace, DEI, and Shareholder Involvement
Consultancy experts and customers are not the only ones taking notice of DEI efforts in the workplace. Shareholders are also demanding accountability reports of DEI initiatives and their outcomes. However, the reasoning for it is complex. In November 2023, the Harvard Law School Forum on Corporate Governance issued the paper Shareholders Pose Growing Risk to Companies’ DEI Initiatives. According to this research, in some instances, investor groups put forward recommendations or requirements in the form of proposals to the board of directors. There have also been cases where shareholders request records to evaluate the organization’s actions concerning DEI and their subsequent financial impact. This is often viewed as a precursor to litigation, another investor approach to DEI. In some circumstances, shareholders have gone so far as to allege that the organization’s DEI commitments violate various civil rights statutes.
While racism in the workplace continues, Diversity, Equity, and Inclusion has evolved from a corporate mission and value to a risk factor. Yet, it’s a tool that can have value in combating workplace discrimination and prove a best practice for businesses. That will depend on how organizations execute DEI initiatives and the potential federal regulations and local legislation that may govern them.
Partner with McGowanPRO to Protect your Business
McGowanPRO’s Employment Practices Liability Insurance (EPLI) safeguards small and mid-sized employers from the legal fees and damages that result from charges of discrimination and other exposures brought about by daily staff interactions. A single EPL lawsuit puts an estimated half of all small businesses with fewer than 100 staff members and without a stand-alone EPLI policy at risk of bankruptcy.
Download our e-book to learn more about the future of DEI and how it could play a more effective role in creating more integrated work environments.
