One of the big quasi-empirical drivers to “DEI” (Diversity, Equity and Inclusion) in the business world was a McKinsey consulting study from almost ten years ago, whose results claimed that diversity was strength, not just for virtue-signaling purposes, but in bottom line terms.

If it seemed like a stretch – it was. A new study can’t reproduce McKinsey’s results:

However, when we revisit McKinsey’s tests using data for firms in the publicly observable S&P 500® as of 12/31/2019, we do not find statistically significant relations between McKinsey’s inverse normalized Herfindahl-Hirschman measures of executive racial/ethnic diversity at mid-2020 and either industry-adjusted earnings before interest and taxes margin or industry-adjusted sales growth, gross margin, return on assets, return on equity, and total shareholder return over the prior five years 2015–2019. Combined with the erroneous reverse-causality nature of McKinsey’s tests, our inability to quasi-replicate their results suggests that despite the imprimatur given to McKinsey’s studies, they should not be relied on to support the view that US publicly traded firms can expect to deliver improved financial performance if they increase the racial/ethnic diversity of their executives.

Full study here.

This doesn’t mean, of course, that corporate America is going to stuff the toothpaste back into the tube; that would be a free market response, and Human Resources is a little bit of government, with all the attendant hidebound inflexibility and mulishness, embedded into the market.

This entry was posted by by Mitch Berg on Tuesday, April 2nd, 2024 at 11:00 am and is filed under Business, The Economy and The Markets, PC / "Woke" Culture. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.