For decades, workforce diversity has been widely lauded—as a concept. Three years ago, theory was put to the test when some firms began tying executive compensation to DE&I progress. Now, that test is facing a new...test.
The evolution of ESG
More recently, ESG (Environmental, Social, and Governance) initiatives—which often include DE&I efforts—have been met with some resistance in the business world. One major beverage retailer last year was sued by a shareholder activist specifically for linking executive compensation to the firm’s diversity endeavors. Despite this, over 70% of S&P 500 firms reportedly have some kind of ESG metric baked into their incentive plans. “Most of them have done this by dialing in on the ‘S’ side of ESG, where DE&I sits,” says Don Lowman, Korn Ferry Senior Client Partner and Leader of its Global Total Rewards business.
Leaders who are wary of anti-DE&I shareholder activists should know that there may be just as many pro-DE&I shareholders, says Fayruz Kirtzman, Korn Ferry Senior Client Partner in its DE&I practice. Kirtzman additionally stresses that not only does DE&I increase innovation on the business end, it also can increase a company’s appeal to Gen Z as both talent and customers. Over three-quarters of the Gen Z population reportedly state that a diverse workplace is important to them when assessing a company. “You’re not going to get Gen Z if you're not standing for the right values,” says Kirtzman. “They do their homework.”