How compliance and diversity can work together to build a more inclusive organization
Here are a few challenges that HR and compliance teams are likely to encounter as they expand diversity, and how best to overcome them.
By Carrie Penman and Cindy Raz
October 29, 2021
Organizations today have a compelling interest to take both compliance and diversity beyond paper initiatives. Both are essential to ensuring a fair and safe workforce, and both need to be enforced from the top down to be successfully administered. However, businesses still struggle to find the common ground between the two, and more specifically, how compliance can (and should) improve diversity efforts – and vice versa.
In August 2021, the US Securities and Exchange Commission (SEC) approved a new listing rule from the Nasdaq Stock Exchange (NSE) that mandates all companies trading on Nasdaq to have at least two diverse directors on the board. This, as one of the first official listing rules that cracks down on diversity efforts, is now one of the driving forces for both public and private sector companies to rethink how they are shaping their corporate culture, both from a compliance and diversity standpoint.
As with anything, there are critics to the new rule wondering how regulating the diversity of a board is supposed to help a business solve its problems. But, the other side of the argument begs an even more important question; how could diversity not help?
The latter is the stance that many HR and ethics & compliance teams are taking today recognizing that having an executive team that encompasses diverse voices and perspectives – whether it be the C-suite, board, or management – means there is less of an opportunity to make culturally tone-deaf decisions or become blind to bad practices within their organization. Frame the issue that way and almost no executive leader would disagree with it.
While executives always want to make good decisions, there will always be challenges. Here are a few that HR and compliance teams are likely to encounter, but more importantly, how best to overcome them.
Defining Diversity Objectives
One challenge is simply to define what your organization’s diversity and inclusion objectives are. Many do the bare minimum to make them legally compliant, however, it’s likely not enough to support a strong and diverse corporate culture and this will lead to organizational cynicism about both the compliance and diversity initiatives.
The best way to raise the bar for diversity standards is to set clear objectives. This means sitting down with board directors and senior executives to determine what you want to achieve for diversity initiatives (regulations aside), while also considering what makes sense based on current customer and employee base, and how a company’s core ethical values can shape those objectives. These can be uncomfortable conversations but are necessary for real change to occur.
From there, policies and processes can be defined and managed at an organizational level, and then can be tracked through reports and data to inform improvements.
Being Transparent with Data
From a compliance perspective, most companies already track and report data to the Equal Employment Opportunity Commission (EEOC), requiring them to disclose diversity figures such as race and gender of executives, managers, administrators, and more.
However, tracking and reporting challenges still arise as reports can be kept away from employees, or not reflect the true state of how employees identify within an organization. For example, public companies are not required to release their EEOC reports publicly, therefore they can choose to keep the data private to avoid any backlash. Secondly, the EEOC reports don’t track more specific minority identifications – for example, sexual orientation – as this type of data would be too personal and invasive to report on.
As more companies report on Environment, Social, and Governance Metrics (ESG) metrics, we will see more transparency here. That said, the onus is still on leaders to be transparent when it comes to their stance on diversity. Whether it’s allowing employees more visibility into reporting metrics, or supporting them through honest intentions and practices, diversity initiatives need to be clear and present throughout the organization so that all employees feel valued and supported.
Building a Speak-Up Culture
One of the most important elements of a corporate compliance program is giving employees multiple ways – and encouraging them – to speak up when they feel something is not being handled properly. This doesn’t just apply to diversity concerns, but anything they see going amiss within a business.
To build a successful speak-up culture, there are multiple processes that need to be properly implemented. First, there needs to be proper training in place for managers, or those who receive complaints, as well as reporting mechanisms such as whistleblower hotlines for employees to report incidents to higher levels of management or anonymously. There also needs to be investigation protocols to assure that any issue reported is investigated fairly, accurately and in a timely manner. The positive result of having these processes in place is employees feel empowered to speak up when necessary, and managers have the tools and training they need to escalate the issue further, if needed.
The bottom line is that compliance can, and should, help improve diversity efforts within an organization. While there are a number of challenges that HR and compliance teams will face – such as the need to rethink and define objectives, increase transparency in reporting systems, and fostering a speak-up culture – having more, thorough processes in place will only improve efforts across the business. When it comes to diversity, organizations should not be thinking of it as a compliance metric, but rather a way to positively impact their business decisions and further progress their mission.
Article link: https://www.benefitspro.com/2021/10/29/how-compliance-and-diversity-can-work-together-to-build-a-more-inclusive-organization/