Investors, Diversity & Inclusion
By Rory Sullivan | December 10, 2019
Investors have a key role play in how companies are run. The issues that investors raise with company management and considering their investment decisions have a direct influence on how companies manage these issues. If investors place a high importance on an issue, it is more likely that company management will also see the issue as important. The converse also applies. Issues that are not seen as important by investors are much less likely to get management time and attention.
The reasons for companies and investors to focus on diversity and inclusion are clear. They include regulation (in particular, relating to non-discrimination), the evidence that organisational diversity can contribute to better financial performance, and the better data on diversity, on inclusion, on opportunities and on pay that are being provided by companies.
While these drivers support the argument that investors should be supportive of companies that wish to take a lead on diversity and inclusion, this is not a blank cheque. As with any issue, investors expect companies to clearly set the costs and the benefits of action, and to link these costs and benefits to their short and long-term business priorities and needs (e.g. recruitment, developing their pool of talent, meeting client and customer expectations, complying with the law).
In communicating with investors, companies need to recognise that investors are not necessarily experts on diversity and inclusion and are most unlikely to be experts on the practicalities and realities of developing and implementing an effective strategy. This is particularly the case when dealing with those aspects of diversity and inclusion that are not yet well understood or that have not yet received the same level of attention as, say, gender diversity. Examples could be the effects of social background on employment prospects within Ireland, the barriers to employment faced by people with disabilities, and the importance of providing pathways to work for refugees,asylum seekers and migrants. It is therefore important that companies are prepared to invest time in educating their investors about these issues.
While the general case for action is clear, there is a critical need to build an evidence base - data and case-studies – that is relevant to the Irish business community and to the particular challenges faced by Irish society today. There is a need to demonstrate that a proactive approach to diversity and inclusion can provide real commercial benefits to Irish businesses. There is also a need to provide case-studies from Irish companies of the practicalities of implementation, highlighting the challenges encountered and explaining how these might be overcome.
In conclusion, investors have the potential to play an important role in supporting and enabling the Irish business community to make progress on diversity and inclusion. To enable them to do this, there is a need to both build and proactively communicate the business case for action.
Dr Rory Sullivan is Director and Co-Founder, Chronos Sustainability and an internationally recognised expert on responsible investment.