The Business Case for Diversity

Being at the top of this Top 50 list delivers bottom-line value.
Apr 01, 2005

For the third year in a row, Abbott Labs has made it into the top 10 companies judged by DiversityInc magazine to have the most diverse workforce. According to DiversityInc co-founder Luke Visconti, that makes Abbott, number five in the ranking, extraordinary. Merck is the only other pharma company to make the cut, but comes in at number 24, and is on a downturn—it was ranked 13 last year.

Making the Cut Visconti says determining the Top 50 is a complex process involving absolute metrics that yield relatively objective results. This year, the 203 companies that entered the competition (21 were pharma) were asked 200 detailed questions that were weighted differently, but divided evenly into the following four areas: CEO commitment, human capital, supplier diversity, and corporate communications.

"Roughly 10.9 percent of the American population over the age of 16 is African-American," says Visconti. "So a company doesn't get extra points for having 30 percent African-Americans in its workforce. We roll the points on a bell curve to avoid giving companies an advantage that are just doing what is convenient for them." Black Enterprise, for example, is not the most diverse company in the United States because 99 percent of its employees are African American."

Diversitylnc Top 50 lndex
Bottom-Line Value What sets this Top 50 apart from other lists that spotlight companies doing a good job in the equal-opportunity realm is the DiversityInc Top 50 Stock Index, which comprises the stock values of 43 publicly traded companies on the list. (See "DiversityInc Top 50 Index.")

"These companies are especially well run and that's where the return to shareholder part comes in," says Visconti. "It also says that pharma companies are involved with the subject, but their diversity management is not as robust or sophisticated as financial services, for example. Abbott is the exception."

Abbott landed at the top of other important lists in the breakdown: number three in recruitment and retention, seven for Latinos, six for Asians, and number one for executive women.

Trickle Down Theory Visconti says that one of the most important questions in the survey asks whether a company's chief executive officer signed off on executive compensation tied to diversity.

"Wal-Mart is number 29 on our list this year," he says. "As Esther Parker Silver, who is responsible for African-American programs there says, 'Things really change when you tie compensation to diversity.'" That's an idea that has not been taken very seriously by most pharma companies today.

"Most companies are doing nothing about this," Visconti says. "You'll come across companies who'll say, 'Sure we have diversity programs, we have Cinco de Mayo day.' That's like saying, 'Of course we're into technology, we have fax machines.' If you've got a pharmaceutical company that isn't dealing with [diversity] at this point, I would question whether or not it's a well run company. And if I were a shareholder, I'd be questioning that as well."

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