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Social Equality And Inclusion

Investing in diversity for economic and social benefit

Professionals having a discussion at a conference table

Untapped Potential

Approximately 33% of the U.S. workforce1 is made up of heterosexual white men, yet they account for 70% of the executive management ranks2. This disparity goes well beyond differences explained by education, experience, or skills, and is often attributed to organizational bias (unconscious or otherwise). While some progress has been made at improving corporate diversity, the pace of change has been glacial despite mounting empirical evidence that suggests there are measurable benefits associated with more well- rounded workforces and leadership teams. Further, the progress to date has been limited to small gains along gender lines; the overall rate of people of color serving on corporate boards, for example, has been stagnant over the past decade3.  Indeed, most U.S companies do not even measure the racial composition of their workforce and leadership2, much less publish data to enable accountability. Some companies have acknowledged this shortcoming and introduced programs to foster gender, racial, age, and sexual orientation equality. Yet the results have been underwhelming as detailed in recent research by McKinsey and LeanIn.Org4:

  • People of color are significantly more likely to leave their company than white people. But it’s not for lack of ambition: people of color are more likely to aspire to senior management roles and start their own businesses than their white counterparts.
  • Women of color face the greatest obstacles and receive the least support. Black women, in particular, receive less support from managers and view the workplace as less egalitarian than their white peers.
  • At senior levels, the gap in promotions for women is even more pronounced for women of color: 20% of c-suite executives are women, but only 3% are women of color.
  • The pay gap for Latina (46%) and black (37%) women is even wider than women overall (20%).
  • Hispanics and blacks have less access to family benefits and flexible work policies than whites, even after controlling for job type and level5.
  • 25% of LGBT workers experienced employment discrimination during the last 5 years; 10% have left a job because the work environment was unwelcoming6.

The reasons for the persistence of this uneven playing field are complex and they often start at the top. According to a study by the Center for Talent Innovation7, more than half of leaders do not value ideas that they do not personally see a need for. Given that most leaders are white men and existing workplace dynamics have enabled their success, they are less likely to see the need for the significant time, resources, and personal commitment required to effectively improve equality. It is relatively easy to update human resource policies and hire consultants to implement diversity programs. It is far more challenging to change corporate culture, especially if executive management is not fully committed. Employees see right through such empty gestures. Empirical studies have shown that employees value a supportive culture and supervisors more than a non-discrimination policy8. Further, a leading cause for disengagement among minority workers is managers who are not committed to diversity9

The Business Case for Equality

While the societal implications of the lack of workplace equality are extensive, there is also increasing evidence of tangible economic consequences. New research (Exhibit 1) reinforces that companies with strong cultures of equality, emphasized and modeled by top management, may have a competitive advantage over their peers. McKinsey conducted an analysis of companies, broken down by diversity quartile, to investigate the financial performance of more diverse companies vs. their industry peers. While more gender diverse companies were more likely to outperform peers, the difference was even more pronounced for ethnically diverse companies:

Graph representing likelihood of financial out performance

*Earnings Before Interest and Tax

Source: McKinsey & Company "Delivering through Diversity” as of January 2018.

Why can more diverse companies potentially deliver better financial performance? The advantage is manifested in several ways…

One significant drawback of a homogenous talent pool is groupthink. When executives promote new managers who look like them, went to the same schools, share the same experiences, and grew up in similar socio-economic situations, the result can be a commonality of ideas and lack of creativity. Indeed, recent academic research has found that homogeneity stifles innovation10 and can lead to less effective decisions11, while ethnically diverse leadership teams tend to offer companies more problem-solving tools, broader thinking, and potentially better solutions12. Given the U.S. economy’s transformation into the information age, companies that struggle to innovate and/or make the right strategic decisions will be at a disadvantage relative to more diverse competitors.

"Diversity is a competitive differentiator that shifts market share toward more diverse companies" 

McKinsey & Company

It has been well documented that employees are more engaged at companies they feel proud to work for, and workplace equality can be a key ingredient to productivity. This is true not just for the disadvantaged populations, but for the majority as well, as a culture of meritocracy helps bring out the best in all employees.  A series of studies4 conducted by McKinsey over the past 10 years has found the following benefits attributable to equality of opportunity in the workplace:

  • Higher employee engagement and satisfaction
  • Less turnover (the total cost of employee turnover can range from tens of thousands of dollars to 1.5-2X of their annual salary. For entry-level employees, mid-level employees, and highly skilled-level employees, the associated cost comes to 30-50 percent, 150 percent, and 400 percent of their annual salary respectively.13)
  • Higher employee productivity
  • Recruiting advantage
  • Improved customer orientation

The final point regarding customer orientation is likely to become increasingly relevant given the changing nature of demographics in the U.S.  As shown in Exhibit 2, the spending power of the four largest underrepresented groups has grown as a percentage of U.S. consumer spending, reaching 31% of total in 2015.  Given that half of all children born since 2010 are now a member of an ethnic minority group, this trend is expected to continue for the foreseeable future.

Graph representing Spending power

Source: Selig Center for Economic Growth as of March 2017.

Social Equality Outside the Workplace

Of course, U.S. workers do not live in a vacuum where a more equal workplace unilaterally evens the playing field for society at large.  There are still systemic challenges involving equal access to transportation, clean air/water, health care, education, housing, financial services, and legal justice that continue to hinder disadvantaged populations.  At the macro level, the International Monetary Fund has found that increasing income inequality can inflict harm on a country’s long-term economic prospects, particularly its capacity for sustainable growth.  The key reasons cited include the potential for financial market imbalances and political instability, both of which are said to discourage business investment.  Another important factor is the limited ability of lower income families to invest in education, which can stunt economic mobility14.  Over the past 30 years, the United States has experienced economic growth heavily tilted toward the wealthy.  According to the Economic Policy Institute, between 1979 and 2013, the top 1 percent’s share of income doubled nationally, from 10% to 20%.  This trend appears to be worsening as the top 1% captured 85% of total income growth between 2009 and 2013, compared to 50% for the period from 1979 to 2007.

Forward-thinking corporations are making investments in their communities with the goal of raising the economic bar and standard of living, while providing a meaningful outlet for employees to “give back” as well.  Employees, particularly millennials, are increasingly attracted to companies that are making a positive impact on society.  The indirect benefits of healthier local economies include a more prosperous workforce, greater local demand, more stable local institutions, increased worker mobility, higher tax base to provide services, and overall higher quality of life.  For some companies, there are also direct economic benefits to fulfilling unmet needs around access to health care, rebuilding inner cities, and providing emergency back-up childcare.   

Bank of America Private Banks Social Equality & Inclusion (SEI) Strategy

Bank of America Private Bank has designed its Social Equality & Inclusion strategy to identify leading companies that are actively building a culture of equality and have demonstrated success at promoting disadvantaged populations into leadership positions. We conduct a comprehensive assessment of human resource policies, employee benefits, disclosure practices, and objective performance data to determine which companies we believe have demonstrated success along the factors outlined below:


Image showing Social equality portfolio

Companies are held accountable for performance across their supply chain, as well as how they impact their local communities (both positive and negative).  Our goal is to look beyond simple head count numbers, to determine which companies have built a sustainable culture of social equality that will likely translate into tangible economic results.  We then conduct a traditional fundamental review to help ensure we are buying attractive stocks, not just social “do-gooders” on behalf of our clients.  Finally, we conduct a portfolio construction exercise to ensure that the portfolio has appropriate diversification and risk management.  The end result, we believe, is a portfolio of companies well positioned to compete for talent, manage operational risks, invest in innovation, and serve unmet needs in the marketplace.


  • Higher employee engagement and satisfaction
  • Ranked on two of Fortune’s best workplaces lists: #26 on the 100 Best Workplaces for Diversity and #46 on the 50 Best Workplaces for Parents15
  • Recognized by American Banker as having one of the “Top Teams” of women leaders, and ranked five female executives among the Most Powerful Women in Banking and Finance16
  • Included forth third time in the Bloomberg Financial Services  Gender-Equality  Index,  for demonstrating Leadership in policies, practices and disclosures in support of gender  equality17
  • Among the top ten companies in Diversity MBA Magazine’s ranking of 50 Out Front Companies for Diversity Leadership: Best Places for Women & Diverse Managers to Work18
  • Recognized with Out & Equals Workplace Excellence 2017“Outie” award for programs, policies, and actions to support LGBT teammates and communities19
  • Included on the 2018 Working Mother Magazine’s 100 Best Companies list; 30th consecutive year on the list20
  • Ranked #1 by JUST Capital in industry as most “just” bank, taking into account factors including customers, employees, communities, environment, products, leadership, and jobs21
  • 45% of Board of Directors is female or ethnically diverse22

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