1 of 19

Diversity, Equity and Inclusion: What Is It Good For?��Quantifying Impact, Preparing for Disclosure Requirements��March 2023�

Place cover photo here

1

2 of 19

Experience

Entrepreneur – HCMoneyball, Charas Consulting
CHRO – Havas Worldwide, Benfield, Praetorian Financial Services Group
Consultant – Hay Group, Towers Perrin, Ernst & Young, Arthur Andersen
Board Director – Able Energy, Bakken Resources, Thirty Percent Coalition, TCB
Advisor – TCB – Distinguished Principal Research Fellow
ISO – Member of the 30414 Standard Technical Committee
Educator – NYU: MS in HR&D; USC: MS in HRM; UW: MSIT
Author: More than 300 by-line articles and citations, 80+ academic citations, book chapters and book!

Research Topics

Finance for Human Capital Management, Transforming Total Rewards, Quantitative Methods and Models for Decision-makers, HC Analytics, Anticipating the Future of HC

Education:

Case Western Reserve University, Ph.D. in Designing Sustainable Systems (Corporate Governance/Teams)
Cornell, MBA in Accounting and Finance, minor in Taxation
UC Berkeley, BA in International Political Economy

Solange Charas, Ph.D.

2

3 of 19

Who wants to make more money through ethical means? DE&I is a driver of value-creation!
Stakeholders demanding transparency related to DE&I performance
Standards – they’re out there!
Prevalence of reporting
Are you measuring and quantifying impact?

Agenda

3

4 of 19

Material Impact of DE&I Performance

1. DE&I is a driver of value-creation

Decades of academic research and practitioner evidence show that DE&I accountability drives value-creation

SOURCE: REFINITIV GLOBAL DIVERSITY AND INCLUSION INDEX

4

5 of 19

SOURCE: MORNINGSTAR MINORITY EMPOWERMENT INDEX

1. DE&I is a driver of value-creation

Decades of academic research and practitioner evidence show that DE&I accountability drives value-creation

5

6 of 19

1. Unpacking What’s Measured

HCROI

HCROI = Total Revenue – (Total Expense – Total Cost of Human Capital)

Total Cost of Human Capital

Simpson Diversity Index (Employee Diversity Index)

These measures are strongly correlated! The prior slide demonstrated the relationship between Diversity Performance and HCROI performance

Where D = Diversity Value

n = total number of employees in a specific category

N = total number of employees

6

7 of 19

1. DE&I correlates to HCROI, HCROI drives profitability

Transportation Company

7

8 of 19

2. Stakeholders demanding transparency – The Genie is Out of the Bottle

Stakeholder	Issue
Investors	“Woke-washing” is prevalent and not representative of actual progress Upcoming disclosure requirements are confusing (SEC/IFRS)
Customer	68% of consumers surveyed by TCB indicate that DE&I goes into their purchase intent
Vendor	Pressure to trade only with organizations with a commitment to and proven progress against DE&I goals (ESG disclosures)
Community	Evaluating whether workforce demographics “mirror” the local labor supply and supports economic development progress
Employee	Missouri – “don’t tell me, show me”. Evidence that DE&I workers have the same opportunities as white males in pay, training, promotions

8

SEC to release updated disclosure requirements, expected mid-year will require the disclosure of at least 4 human capital performance areas:

Employee demographics (diversity)
Employee by job category (full time, part time, gig, seasonal, etc.)
Attrition rate and average tenure
Auditable total cost of workforce (all human capital program costs), aggregated and tied to financial statement line item

Legislation: Pressures from all stakeholders (investors, employees, vendors, communities, customers, law-makers)

Senators Warner (D-VA) and Brown (D-OH) sponsors of the Workforce Investment Disclosure Act (WIDA) in active letter-writing to SEC
Advocacy: Working Group on Human Capital Accounting Disclosure comprised of

Harvard and Stanford Law School scholars calling for extensive human

capital disclosures against this worksheet

Human Capital Management Coalition still active with SEC-IAC

EFRG release of required reporting in compliance with ESRS S-1 Own Workforce and ESRS S-2 Workers in the Value Chain standards

9 of 19

3. Standards and Certifications

2022

Summary of the governance monitoring agencies
All want to see information about diversity – qualitative and quantitative performance
ISO 30415: Human resource management - Diversity and Inclusion

9

10 of 19

3. Standards and Certifications

ISO 30415: Human resource management - Diversity and Inclusion

Highlights of the standard:

Recognizing diversity
Governing Effectively
Acting accountably/leadership
Working inclusively
Communicating inclusively
Advocating and championing D&I

How is this aligned to your decision matrix and investment criteria
How would having information about performance in these areas impact your actions?
Would it influence you if the company had ISO 30414 certification?

10

11 of 19

4. Prevalence of Reporting

ISO Standard: “Developing an inclusive workplace requires an ongoing commitment to diversity and inclusion (D&I) to address inequalities in organizational systems, policies, processes and practices, as well as people’s conscious and unconscious biases and behaviors.”

A review of the Dow 30 organization’s ESG reports shows

DE&I Aspect	Prevalence
Initiatives	79%
Accountabilities	76%
Framework	68%
Culture	70%
Pay Equity	80%
HR Programs	65%
External Stakeholders	63%

11

12 of 19

5. Are you Measuring, Benchmarking, Paying Attention?

12

13 of 19

EXAMPLES: HCROI AND COST OF ATTRITION

13

14 of 19

14

15 of 19

How HCROI drives EBITDA performance�trend over time and benchmarked to competitors

15

16 of 19

16

17 of 19

DE&I Indices and Other Resources

There are several indices available:

17

18 of 19

Special Offer to Intentional Endowments Network Members

DE&I Audit offered at a 15% discount

Over 70 analytics performed
Over 40 dashboards included
Benchmark information from the EEO database for competitors
Benchmark from Bureau of Labor Statistics for diversity labor supply by geography

For more information about this audit or the materiality and pay equity audits, contact Joseph Olewitz jolewitz@hcmoneyball.com

18

19 of 19

Questions and Answers��For more information about any of the audits, contact Joseph Olewitz jolewitz@hcmoneyball.com�

19