Fiduciaries know very well their obligation is to make decisions that are in the best financial interest of their institutions. Often, this fiduciary obligation is cited to justify a lack of investment with minority and women asset managers and MWBE (Minority- and Women-Owned Business Enterprise) firms. Yet, significant academic research on diversity and business suggests the opposite – there is a link between racial and gender diversity and shareholder value.
For example, a 2015 McKinsey study, titled Why Diversity Matters, found that companies in the top quartile of racial/ethnic and gender diversity were 35% more likely to have above median financial returns.1 Another study, Board of Director Diversity and Firm Financial Performance, found a significant positive correlation between diverse racial and gender representation on boards and both return on assets and return on investment.2
While it has become more mainstream (though not prevalent enough) for institutions to consider racial and gender diversity with regard to boards, employees, senior leadership, and suppliers, few institutions consider diversity with regard to the management of their assets. Yet, failing to overcome possible biases that screen out high performing diverse managers and firms could come at the expense of higher returns.
Academic research on diversity and business suggests there is a link between racial and gender diversity and shareholder value.