The Instrumental Case for Corporate Diversity
UVA Law Faculty Affiliations
The moral case for diversity in businesses is compelling. The business case for diversity (that “diverse companies do better”) is mixed: studies in the business literature do not prove that simply adding diversity causes the improvement; instead, they posit that the improvement is likely to be “endogenous,” that is, the factors that encourage and sustain diversity, such as greater transparency, also improve financial performance. In this article, we make what we call “the instrumental case for diversity.” If the same factors that correlate with greater diversity also correlate with improved performance, then greater diversity can be a benchmark for better corporate management. It can make diversity metrics a tool (though not necessarily an exclusive or necessary tool) in measuring the reform of dysfunctional corporate cultures. Diversity might then become part of an iterative process; maintaining diversity will require management reforms such as greater transparency that will in turn fuel transformations in management cultures that further both greater diversity and better overall performance.