Diversity disclosures – The
effect on capital markets
Staff diversity issues rarely feature in
accounting conversations, however, the recent
year-end enforcement priorities announced by the
European Securities and Markets Authority
revealed an unusual focus. This year, it will pay
close attention to how companies implement a
new accounting directive that requires various
disclosures on staff diversity.This approach
to enforcing ‘rainbow’ resources into
the current working environment is most
foolish. In 3rd World and emerging economies
an attempt was made to ensure that the
‘rainbows’ are in majority. To date all have failed.
If history is a guide, these disclosures could
have a tangible impact – unlike many of the other
corporate governance disclosures companies are
required to make. In fact, they could force
investors to prioritise non-financial information
into their stock analysis.Investors who fall
for the bait , ie ‘rainbow economics’ are
likely to lose all their investment. Diversity has
never been a strength of companies , focus has been
better. Investment companies to manufacture
plastic buckets. Airlines dont manufacture steel.
Why should the owners of economic enterprises
be forced to ‘diversify’ the HR pool.
Specifically, the rules require most listed
companies to at least disclose their diversity
policy, or ‘rainbow status’, something that
will no doubt cause some
companies to draft one. Companies that don’t
disclose will have to explain why but the negative
publicity associated with non-disclosure may
undoubtedly push most firms into disclosure.
Findings have shown , that most big companies that
push ‘Rainbow reporting’ , usually have a monopoly
over resources in their area of operations. Thus
if they force others to take on ‘rainbows’, then
those who dont have control over their resources
fail over time.
Many companies already disclose much more
than this and additional investor attention in this
area will no doubt push companies towards
best-practise norms. However , ‘Rainbow reporting’
is merely a tool to fool companies into
additional costs and politicking , ultimately
causing loss to the shareholders themselves.