Sarah Fortt, Counsel at Vinson & Elkins LLP
By Sarah E. Fortt
Facebook, Inc. recently posted “Black lives matter. We stand with the Black community” to its own Facebook page. Starbucks Corporation is “committed to taking action, learning, and supporting our Black partners, customers and communities.” Chevron Corporation has published statements from its leaders on racial injustice and discrimination. Discovery, Inc., the parent company of the Discovery channel, hosts a conversation led by Oprah on “Where Do We Go From Here?” and posted “Discovery will always stand for mutual respect, equality and acceptance. #BlackLivesMatter” to its website. Countless other companies have expressed their #support for #racialjustice.
Statements like these have been positively received by some, but also have resulted in questions regarding the consistency between companies’ messages and their actions. A few companies have been on the receiving end of #thisyou campaigns, social media callouts that reference companies’ past controversial and sometimes racist ads or positions posted by the company itself or key employees, as well as similar tweets and messages questioning companies’ motivations and consistency. Companies that do not want their statements to be a one-time event must consider how to make concrete, long-term changes to reflect a shift in their corporate culture that aligns with those statements, and yet not all of those companies are likely to know where to start. Here, I outline five practical suggestions for how companies can match their diversity walk to their diversity talk.
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- Consider the consistency of your message across all disclosures and your litigation strategies. It is not unusual for a company to take one position with respect to its labor and employment-related litigation and shareholder engagement on matters relating to diversity — specifically, a position in which the company declines to make certain policy changes or disclosures — and another position in its “value” statements. These two positions are not necessarily incompatible. Just because a company wants to do diversity in its own way and on its own schedule does not mean that it is against the concept of enhancing and supporting diversity, inclusion and equity. However, it is a reality I raise to make a broader point: Companies often make “value” statements, including statements on diversity, sustainability and corporate culture, through their marketing or public relations groups and those statements often have not been reviewed by the company personnel charged with overseeing the legal strategy and content of required corporate disclosures. This is almost always a mistake. At best, if these statements contradict or appear to contradict other disclosures the company has made, the company is likely to be accused of “virtue signaling,” which investors and the public alike mistrust. At worst, these statements may contradict current litigation strategies or create potential litigation risk in the future, a possibility we have already seen play out in the climate change space. In order for value statements to carry real weight, companies need to do the hard work of assessing the degree to which those statements should influence their litigation strategies and shareholder engagement efforts.
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- Review your ethics reporting practices and structures. Most companies have several options for employees to internally report ethical violations or violations of the law or company policy. Because companies’ codes of conduct or ethics frequently include anti-discrimination and harassment considerations, these reporting mechanisms also often include any reports on these matters. Reporting options often include employees’ managers, the HR department, the legal and compliance department, and the audit committee of the board, and may also include an anonymous hotline. While companies frequently consider how employees can report violations or suspected violations if their managers are directly involved in the suspected behavior, companies do not always consider whether employees will be comfortable reporting issues regarding racial or gender-based discrimination or harassment to a manager who they do not believe has had similar life experiences. If employees do not have that level of comfort with a manager or other person in leadership, issues may be allowed to fester.
When I speak to clients and organizations on corporate culture, at times I touch on the power of these “bedrock” cultures. “Bedrock” cultures are the backgrounds, identities and experiences that individuals walk into the organization with — the more similar individuals’ bedrock cultures are, the more likely they are to have a shared experience of the corporate culture with minimal intentional input from the organization. However, few companies are, or should be, homogeneous from stem to stern. While diversity in leadership, and particularly at the board level, has received a fair amount of attention over the past few years, one of the benefits of diversity at every level of the organization is that it can aid in creating the opportunity for shared experiences of the corporate culture throughout the organization.
Companies that want to find ways to thoughtfully improve their practices and procedures should consider reviewing their ethics reporting structures. Do employees have options for reporting to leaders who the employees are more likely to feel have had similar life experiences? If reporting options are limited, has the company considered how to provide employees with other options for discussing race or gender-based concerns (i.e., an independent counsellor)? This may be an add-on to the company’s employee assistance program or a separation program.
Companies should also consider whether the content of their codes of conduct and ethics address the seriousness of race and gender-based discrimination and harassment. Does the company’s code of conduct or ethics stress the seriousness of race and gender-based discrimination and harassment, including microaggressions? Do the company’s anti-retaliation statements cover reports of discrimination and harassment? Treating race and gender-based discrimination and harassment as serious ethical issues, rather than simply labor or potential litigation issues, may more effectively embed a shared respect for others within the corporate culture. Any changes made to the code of conduct or ethics should be appropriately communicated to members of the company’s community.
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- Consider providing ally trainings and education. Many companies have diversity programs that include opportunities for diverse employees with similar backgrounds, identities and experiences to socialize and support each other. Diversity programs often also include nondiverse individuals who identify as “allies.” While allies generally do not share the backgrounds, identities or experience of those they aim to support, they may be included in a company’s diversity program’s efforts or events to promote community. And while nondiverse allies can provide diversity programs with powerful internal support, ally groups may also include individuals whose good intentions cannot completely make up for their lack of exposure to the stories and experiences of those they wish to support. It can be easy to assume that anyone who is a “good person” is equipped to be an effective ally, but this is unfortunately frequently not the case.
In my professional years, I have heard of countless examples of careless words and moments — self-identified allies who suggested to a gay colleague that he did not “seem gay,” asked a Latina employee whether she had come to the U.S. the “right way,” misgendered a nonbinary employee, told a Black colleague that the ally in question “did not see color,” asked an Asian employee where she was “from, from,” and worse — much of which could have been avoided had appropriate training opportunities been provided. While companies often provide anti-discrimination and harassment trainings, limiting employees’ options to these leaves a critical gap — the cultivation of empathy and understanding regarding the experiences of other people — that can be filled through thoughtful trainings and education that equip self-identified allies to become allies that diverse people recognize as such.
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- Reconsider your approaches to employee reviews. Approaches to employee reviews vary about as widely as organizational structures, however, it is not unusual for reviews, to the extent they take place at all, to be highly subjective. And it is easy for unconscious bias to hide in the subjective nature of performance reviews. In early 2019, the Harvard Business Review published an article titled “Why Most Performance Evaluations Are Biased, and How to Fix Them.”[1] In describing what the article refers to as the “problem of the ‘open box’,” the authors state:
The ambiguity of these questions is by design: They are general and open-ended precisely because they must apply to everyone in the organization, regardless of level or function. So when the form states “Describe the ways the employee’s performance met your expectations,” managers are expected to remember or figure out on their own what the specific expectations were for that particular employee.
The trouble is, when the context and criteria for making evaluations are ambiguous, bias is more prevalent. As many studies have shown, without structure, people are more likely to rely on gender, race, and other stereotypes when making decisions – instead of thoughtfully constructing assessments using agreed-upon processes and criteria that are consistently applied across all employees.
The articles goes on to suggest (1) creating a rubric for evaluations, (2) creating better prompts, and (3) running consistency checks. These are great suggestions, but they fail to address the problem of unconscious bias at its source, and so they put the onus on the company to find ways to circumvent or mitigate its effects. Build a more effective mouse trap is effectively the article’s advice. I suggest doing that and better — train the mouse. Increasingly, there are methodologies, assessments and trainings to help us recognize and overcome the effects of our own unconscious biases. Companies that want to find ways to shift their corporate culture to be more inclusive of diverse peoples should do both — review and improve the performance review process and provide those with responsibilities for completing reviews with unconscious bias training. Reviewing and improving the performance review process should include encouraging managers to provide real-time feedback in addition to (or even instead of) written reviews, but managers must first be equipped to recognize and address their unconscious bias. Taking these steps may not only improve the ways in which diverse people experience the organization’s culture, it may also improve productivity and retention of diverse individuals.
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- Have the hard conversations about “sacred cows.” As I mentioned in my last article, “Three Things Crisis Can Teach Us About Corporate Culture,” when I engage with companies on the topic of corporate cultural wellness, I often discuss the importance of identifying “sacred cows” and exploring whether they are creating risks that are going unmanaged and unmitigated. “Sacred cows” are people, products, or principles that an organization will go to any lengths to protect. A sacred cow may be a charismatic or particularly powerful leader or founder, a product or customer that makes the company more money than any other, a strategy or business approach that the company uses to distinguish itself in its industry, or any other thing that the company prioritizes and protects. It is not unusual for a company’s culture itself to become a sacred cow. Have you ever worked at an organization where you regularly heard this or something similar? — “Our culture is our biggest strength,” or “Our culture is our number one asset.” Often companies that idealize their corporate culture in this way fail to explore the ways in which their cultures are not working for a subset of individuals. Other sacred cows that may put creating an inclusive culture at risk include particularly powerful leaders or customers who do not support the organization’s goals with respect to diversity and inclusion. Often companies do not have the hard conversations about a sacred cow until there is a crisis brought on by the unwillingness to explore the risks that that sacred cow is creating — a leader who is “caught on tape,” a whistleblower who claims the company has a culture of discrimination or harassment, a prized company process or procedure that is reported as having a significant disparate effect on a subset of employees. A company that is willing to explore sacred cows in advance of such a crisis is likely to have a healthier approach to supporting and including diverse members of its community.
Companies should not remain silent on issues of importance, they should speak not only to their value but to their values. But statements should always be meaningful, and companies should be fully equipped, and proud, to be able to back up those statements with verifiable practices. In other words, make the walk match the talk.
Sarah Fortt is Counsel at Vinson & Elkins in Austin, TX. Her practice is focused on board-level matters and she regularly engages with boards, public and private, on matters regarding corporate governance, disclosure and regulation, and provides board education, representation and engagement on topics including corporate culture and disclosure, reporting requirements, “ESG” (environmental, social and governance) matters, investor engagement, board composition and board and c-suite succession planning and transition management.
[1] Lori Mackenzie , JoAnne Wehner & Shelley J. Correll, Why Most Performance Evaluations Are Biased, and How to Fix Them, Harv. Bus. Rev. (Jan. 11, 2019), https://hbr.org/2019/01/why-most-performance-evaluations-are-biased-and-how-to-fix-them.
