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What Can Investors Do About the Devastating Impact of the Pandemic on Workplace Equity?

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Gwen Le Berre

Director, Responsible Investing

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As I write this article, with my 18-month-old (quarantined from daycare) climbing my leg and screaming for attention, I take a deep breath and ponder how much of an impact the pandemic will have on workplace inequity in the longer term and what investors can do about it.



Today feels bittersweet as we celebrate Women’s Equality Day. After decades of advancement for both women and minorities in the workplace, COVID-19 threw an enormous wrench in the works of progress. The economic and career impact the pandemic has had, particularly on working parents facing childcare challenges, has been felt disproportionally by women, who typically take on most of that burden. The Center for Global Development estimates that women took on 173 hours in unpaid childcare last year. That’s more than an additional month’s worth of full-time work and three times as many additional hours as men. We’re also witnessing an alarming drop in female participation in the workforce. McKinsey estimates that 54% of the US jobs lost during the first 10 months of the pandemic belonged to women, a much higher number than the 43% that McKinsey expected given the workforce distribution. Perhaps unsurprisingly, women of color were hit harder than any other demographic.



Equity 1.0: Diversity in the boardroom
Investors have a few tools they can use to nudge companies into making meritocracy a priority and encouraging workplace equity. It starts by putting pressure on the very top of the food chain and pushing for more diversity on corporate boards. The composition of the board is instrumental to corporate governance advocates, because the boardroom is where all strategic corporate decisions are made and overseen. Shareholder initiatives that encourage a diversity of perspectives in the boardroom aim to avoid “group think” and to spur corporate leaders to make high-quality, well-reasoned decisions.


While shareholder efforts to transform the boardroom from “pale, male, and stale” to a more vibrant group have been going on for years, this month’s SEC approval of NASDAQ’s new diversity requirements gave them a tremendous boost. Most NASDAQ-listed companies will soon be required to have at least two diverse directors, including one who identifies as female and another as an underrepresented minority or LGBTQ+. Should a company fail to meet this standard (and more than 75% failed as recently as last year, according to a NASDAQ analysis), the company would need to explain why. While that’s not a life-shattering consequence, no company wants to be in that position. Furthermore, companies will start disclosing diversity statistics about their boards in a standardized matrix detailing each director’s self-identified characteristics. This is a game changer for investors like us who have been clamoring for better boardroom demographics disclosures.


Equity 2.0: Diversity in the workforce
While it makes sense that investors started by focusing their scrutiny on the boardroom, which is accountable for the corporate culture and strategic direction, there’s recently also been an increasing push to get more thorough demographics disclosures throughout the workforce. The pandemic and the 2020 George Floyd murder galvanized investors to be more vocal in their requests for a breakdown of broader workforce demographics to assess how companies are managing diversity at various levels of seniority. Currently, this data is utterly lacking, with less than 3% of Russell 3000 companies disclosing it. These disclosures would help investors better understand companies’ efforts to recruit and retain minority employees. 


Luckily, companies and investors don’t have to start from scratch to have a standardized approach in these types of disclosures. The EEO-1 consolidated reports break down a company’s workforce by gender, race, and ethnicity among 10 prescribed job categories. They’re already required to be filed with the US government for the vast majority of companies and they are fit for purpose. Investors have focused their efforts on low-hanging fruit by asking companies to publicly disclose data that’s already been collected. This EEO-1 data is a first step to enhancing transparency, and we welcome companies to make additional disclosures that might help investors understand the company-specific narrative.


While some New York investors have been filing shareholder proposals for the past decade asking for EEO-1 data, there’s been a renewed sense of urgency in the larger shareholder community since the onset of the pandemic. More recently, investors like Parametric and Calvert have written to large-cap companies to better understand what hurdles stand in the way of disclosing this information. It isn’t just investors who are keen to have more transparency in this area; SEC chair Gary Gensler has publicly stated that one of his top priorities is looking into requiring additional human capital disclosures.

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Equity 3.0: Pay equity

The next frontier when it comes to diversity and equity disclosures may be around pay equity disclosure. After all, if you want to assess workplace equity, making sure people are paid fairly regardless of ethnicity or gender is an obvious area to focus on. Since 2015, shareholders have filed a handful of proposals asking for a report that shows the gender and racial pay disparity at companies. These tend to either ask companies to report how they’re reducing the pay gap or ask for the global median pay differential.  



This is a particularly sensitive issue—compensation always is—but we wouldn’t be surprised to see the pressure building on companies in coming years to start disclosing pay data using the EEO-1 job categories. In 2016, under the Obama administration, the EEOC announced that it would require companies to start disclosing pay data in their EEO-1 reports. In 2019, after delays during the Trump administration and a subsequent lawsuit, the EEOC was able to mandate employers start submitting pay data for the EEO-1 job categories. But while this data is collected and filed with the government, there’s no requirement to publicly disclose it. Currently, only one US company does so.


The bottom line
When it comes to diversity disclosures, it’s not all doom and gloom. Yes, we’re starting with little to no disclosure, but we’ve made great progress over the past few years. Investors are becoming noticeably more serious in their efforts to gain access to more consistent and comparable data. This is an area where we see a lot of momentum and, therefore, a lot of hope.

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