Steadying the Ship: How Leaders Navigate the DEI Landscape in Turbulent Times

DEIDiversity & CultureLeadershipBoard and CEO AdvisoryHuman Resources OfficersDiversity, Equity, and Inclusion AdvisoryBoard Effectiveness
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Tina Shah Paikeday
July 20, 2023
9 min read
DEIDiversity & CultureLeadershipBoard and CEO AdvisoryHuman Resources OfficersDiversity, Equity, and Inclusion AdvisoryBoard Effectiveness
Executive Summary
As DEI conversations remain turbulent, how can leaders weather the storm and make continued progress on these critical efforts?
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The last three years have been turbulent, not least for leaders and organizations grappling with diversity, equity, and inclusion (DEI) in the workplace. DEI has been thrust into public attention, and just as quickly become entangled in political and legislative contention. Social movements, the pandemic, listing requirements, shareholder proposals, and legislative changes, have all carried implications for DEI. It’s unsurprising then, that this push and pull has made it challenging for leaders to strategically navigate DEI.

As friction points rise in the United States with the latest Supreme Court decision and possible knock-on effects for corporations, leaders have an opportunity to steady the ship. Remaining steadfast in doing the best by your people, business, shareholders, and communities, should remain leaders’ north-star. But knowing where and when to act, as well as sustaining momentum, can be difficult.

With over 50 years of collective expertise, RRA (Russell Reynolds Associates) has advised some of the world’s largest companies on DEI talent, leadership, and organizational challenges. Leaning on my market observations, recent client work, and research, I outline what has happened in DEI since 2020, the current pressures facing leaders and boards, and how to push progress in an upward direction, even when the load feels heavy.

2020 was a catalyst for DEI across many organizations. The tragic murder of George Floyd in 2020 shook the corporate world into action, inspiring visible displays of commitment to racial equity in the US and beyond. In tandem, the global health pandemic further entrenched inequity in outcomes for historically marginalized groups, and risked reversing the progress made around women’s representation in the workplace. Since 2020, metrics of progress have been questioned, as shareholders and listing bodies alike called for transparency around diversity and equity. Since 2020, shareholder proposals for DEI grew year-on-year and make up 35% of all shareholder proposals to Russell 3000 companies, setting a strong expectation around DEI governance. These proposals call for boards to commission analyses of their organization’s civil rights, equity, diversity and inclusion efforts, and the impacts of those issues on their business. All industries are targeted, and proposals are receiving majority support, triggering an immediate need for action. This growth is unsurprising—DEI is an undercurrent affecting much of what today’s shareholders care about, including innovation, business performance, risk management, customer connection, and ethical workplaces in support of social good.

DEI will also continue to be an important governance concern, due to its underlying role in supporting the ‘Social’ component of ESG (Environmental, Social & Governance) reporting. Whilst the US does not mandate company reporting on ESG, the SEC (Securities and Exchange Commission) is expected to release proposed updates to its human capital management disclosure rules, which could have a bearing on how companies track and report workforce demographics. In Europe, the landscape is more established, with the EU Corporate Sustainability Reporting Directive requiring large companies to disclose information on their ESG performance annually, which could include reporting on social issues such as work conditions, employment practices and diversity. Companies that are ahead of the curve are bringing their ESG and DEI leaders together to think holistically about how their DEI and ESG initiatives intertwine to aid broader business objectives.

Despite this steady drive to achieve meaningful DEI progress, C-suite leaders and boards need to be prepared for unexpected curveballs. A growing number of ‘anti-ESG’ proposals have also been submitted, calling into question corporate DEI policies. In fact, the Harvard Law School Forum on Corporate Governance reports that these types of proposals have doubled over the last three years. Boards are increasingly needing to navigate a fine line between legal compliance and driving meaningful progress on DEI that takes into account the needs of all groups. In fact, the US Supreme Court decision to overturn affirmative action policies in college admissions serves as a recent reminder that, despite great intentions, DEI efforts require evolution and change. Legal experts believe that DEI workplace initiatives may come into question as well. Since the decision aired, a review of public commentary shows that many corporate leaders have voiced contention with the Supreme Court decision, remaining resolute in their commitment to DEI. On the other hand, attorney generals from thirteen states have already threatened legal action over company diversity practices.

Equity and inclusion principles will likely remain paramount as they stand to benefit all groups. Organizations have an opportunity to reaffirm their commitments to create a diverse, inclusive, and equitable workplace through the actions they take, whilst ensuring that they undergo careful due diligence on existing policies and practices to ensure they remain fair to all employee groups.

But how prepared are boards to effectively navigate challenges today and those on the horizon? Our own Global Board Culture and Director Behaviors Study shows that 54% of board members say that their board is actively working to improve DEI within their company. But good intentions may be falling short, as only 13% of directors said their board has evaluated the potential impacts of the company’s operations on disadvantaged communities and 38% said the board has the quality data it needs to effectively track DEI outcomes and progress. To meet the demands of their shareholders, remain legally compliant, and satisfy expectations of employees and customers alike, boards and executive teams need to proactively build good governance around DEI, with the necessary infrastructure to sustain and measure progress.

 

How to keep DEI efforts steady in the face of uncertainty:

Lean on your experts to cut through the noise

Strong DEI leadership and effective functioning can help weather potential storms. Leaders should lean on DEI experts to help them navigate intricate challenges and regional differences, whilst ensuring they communicate with clarity and care on topics that impact their people, business, shareholders, customers, and the community. Increasingly, Chief DEI officers with a focus on business outcomes and legal acumen will be in high demand. These types of leaders are well positioned to navigate global and local requirements that have a strong bearing on business operations. For example, although affirmative action is in question in the US, in Germany and France, legislation continues to drive efforts for better representation of women in leadership. Leaders need guidance on pivoting language, processes, and practices across their business entities, whilst remaining rooted to common values that serve to benefit everyone.

 

Promote equity by de-biasing practices

Get ahead of changing requirements by ensuring you run a robust equity audit of your talent practices. Unlike equality, which can connote quotas or targets, equity is about leveling the playing field so that everyone can participate fully. Equity audits examine recruitment, development, and retention practices to minimize bias and ensure fairness for all. This exercise also provides an opportunity to run the necessary due diligence on talent policies that may infringe legal compliance and steers the organization towards a focus on the right behaviors that can lead to desired outcomes.

 

Strengthen authenticity and belonging through your leaders

Focus on programs that include members of both majority and minority groups as you develop inclusive leadership competencies. This includes the ability to foster belonging by creating space for authenticity, which can unlock potential, support retention, and drive innovation – all of which will be important assets to resilient organizations. Building inclusion into leadership development elevates the relevance of this competency in today’s world. Inclusion can act as a safety net at times when change is on the horizon.

 


 

Author

Tina Shah Paikeday leads Russell Reynolds Associates’ Diversity, Equity, and Inclusion Capability. She is based in San Francisco.

Nisa Qosja is a member of Russell Reynolds Associates’ Diversity, Equity & Inclusion practice Knowledge team. She is based in London.