Working to create diversity in the workplace is an important message to share with employees and with the general public, but it also could be having a greater affect on the
bottom line than most I/R counselors realize.
Many, perhaps most, companies are doing very little to let their investors in on the success stories they share so freely internally through newsletters, hiring reports and
reprints of laudatory press coverage. Because it does not appear to directly affect the bottom line, workplace diversity is not a subject that communicators feel a need to share
with investors. Yet it offers a golden opportunity to communicate with investors, to share corporate values, and to demonstrate how best practices strengthen financial
performance.
For the past three years Fortune has published a list of "America's 50 Best Companies for Minorities, " taking into account such factors as the number of minorities
serving on boards of directors, and percentages of minority officials, managers, employees and new hires. The list is one sign that the issue is becoming important to external
stakeholders such as investors.
Another report, published earlier this year by the Business for Social Responsibility Education Fund, found that 83% of Fortune 100 companies include some social and
environmental information on their Web sites; 42% of them report on diversity and equal opportunity (whether of employees or suppliers). Yet only 14% of the companies included
investors among stakeholders with an interest in these reporting topics.Linda Descano, director and portfolio manager for social awareness investment at Smith Barney Asset
Management (which controls approximately $2 billion in screened management), agrees there is a communications shortfall between the successful practice and the message.
"Companies often collect information on diversity regarding numbers of people, but they don't communicate to the investment community the relevance of how their customer base
is changing, how that affects their product line [and] how they're using their understanding of diversity to shape their strategies," Descano says.
Even more basically, she considers understanding changing demographics and workplace diversity as fundamental to business success, whether measured by lower turnover rates or
increasing market share.
"We see this as directly connected to the bottom line," she says. "If you don't understand how your customer base is changing, you can wake up one day and lose that base,"
because a competitor will do a better job of tracking the changes and incorporating them into its business plan.
From the Top
A more common way for the diversity message to be communicated to investors is through the quality and depth of the management team leading a company, says Nancy Humphries, VP
of investor relations for BellSouth Corp., and board member of the National Investor Relations Institute. Anything that strengthens a company's overall image is attractive to
investors. That's why she is so pleased her company ranked No. 23 on the Fortune list.
The plug provides that third-party validation that BellSouth is doing a good job, she says, and it gives the company additional visibility.
BellSouth is likely to share the Fortune ranking with its investors in the newsletter it sends out after each quarterly earnings release, and it may be included in the
company's annual report, in a sidebar listing yearly accomplishments. Diversity, as a search topic, brings up more than 100 references on the BellSouth Web site, including a
statement of principle pledging support for diversity policies, signed by the company's chief legal officer - joined by more than 130 other CLOs from America's largest companies.
"It's not a quantifiable thing," Humphries says, "but it cannot, QED, do anything but bolster us. It's another stone on our side of the scale."
Nick Hill, director of corporate information for Marriott International Inc. (No. 37 on the Fortune list), points to how diversity's internal benefits - such as higher
retention rates and better-qualified new hires - show positive results for investors.
"We put the subject on our intranet, send both electronic and hard copies [of the Fortune article] out to the field worldwide," Hill says. The college relations
department will use it as a recruiting tool, just as the recruiters use Fortune's ranking of the 100 best companies to work for. Anything that provides a competitive
advantage will be noted by investors, he believes.
Chase Manhattan (No. 18), does not target investors specifically with its diversity success story, according to Jill Blumenfeld, VP of PR. It is included as a subject on the
company's Web site, which gives Chase's diversity vision statement, but otherwise the financial giant's focus on diversity is internal. Blumenfeld believes investors see the worth
of the effort through recognizing the strength of the management team.
On the other hand, she points out, just about every company has to make an effort in this arena. "If [diversity] is not being taken care of properly, all kinds of fallout will
show up," Blumenfeld says. "It's almost like damage control." Others agree Wall Street does not pay attention to a company's reputation for workplace diversity until or unless
there is a problem (e.g., Nextel and Coca Cola's recent entanglements with discrimination lawsuits).
Kay Breakstone, president and CEO of Breakstone & Ruth International, a New York-based investor and media relations company, says things began to change in the late 1960s
and early 1970s, as "green" mutual funds were created, taking aim at environmental and social issues. The trend has continued, and now there are organizations that look at
specific issues, just as the number of funds which pursue socially responsible investment goals has multiplied. "But you still can't move away from the fact that Wall Street is
concerned with the bottom line," she finishes.
"When these issues affect the company's bottom line, then Wall Street cares."
Best in Show
Workplace diversity is just one of the many ways companies get measured, ranked and listed these days. Now Best Practices in Corporate Communications and Diversity Best
Practices have combined the results of a dozen of the most respected "best in class" reports to arrive at the best of the best - 38 companies that most consistently demonstrate
excellence and commitment to success.
The studies used to calculate the best overall companies include Fortune's 500, America's Fastest Growing Companies, e-50, Most Admired, Best Companies to Work For, and
Best Companies for Minorities. Also on the list: Adweek's America's Top Brands; The Financial Times World's Most Respected Corporations; PC Magazine 100 Most
Influential Companies; Red Herring's Top Companies in the Digital Economy; Working Woman's Best Companies for Working Women; and Working Mother's Best
Companies for Working Mothers.
The study does not rank the 38 companies, but a quick perusal shows that none of them made every list. The top four companies, included on eight lists apiece, are Dell
Computer, IBM, Intel and Lucent Technologies. Other notables include:
- Amazon.com
- Cisco Systems
- Eli Lilly and Co.
- General Electric
- Hewlett-Packard
- McDonalds
- UPS
- Xerox
(Descano, 212/783-6928; Humphries, 404/249-3428; Hill, 301/380-7484; Blumenfeld, 212/270-9828; Breakstone, 917/639-4110)