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Workforce Diversity and Religiosity

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Abstract

Workforce diversity has received increasing amounts of attention from academics and practitioners alike. In this article, we examine the empirical association between a firm’s workforce diversity (hereafter, diversity) and the degree of religiosity of the firm’s management by investigating their unidirectional and endogenous effects. Employing a large and extensive U.S. sample of firms from the years 1991–2010, we find a positive association between a measure of the firm’s commitment to diversity and the religiosity of the firm’s management after controlling for various firm characteristics. In addition, after controlling for endogeneity with the dynamic panel generalized method of moment, we still find a positive association between the firm’s diversity and management’s religiosity. We interpret these results as supportive of the religious motivation explanation that views the firm as a human community and considers religion as a factor that influences managers to more positively embrace diversity. Our results, however, provide no support for the resource-constraint hypothesis that views the firm as a nexus of contracts and sees managers as aiming to maximize shareholder returns under resource constraints that force them to invest only in projects that have a positive net present value (NPV) and reject diversity initiatives since these do not have a positive NPV.

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Notes

  1. This kind of diversity is generally called “demographic” diversity, a term we define below.

  2. We define religiosity, following McDaniel and Burnett (1990), as a belief in God accompanied by a commitment to follow principles believed to be set by God. Also following McDaniel and Burnett we measure religiosity in behavioral terms as frequency of church attendance.

  3. The exact origin of the term Protestant is unsure, and may come either from French protestant or German Protestant (Online etymology dictionary 2012). However, it is certain that both languages derived their word from the Latin: protestantem, meaning “one who publicly declares/protests”, which refers to the letter of protestation by Lutheran princes against the decision of the Diet of Speyer in 1529, which reaffirmed the edict of the Diet of Worms in 1521, banning Martin Luther’s 95 theses of protest against some beliefs and practices of the early 16th century Catholic Church..

  4. Popes were writing encyclicals long before the nineteenth century, of course, but the first encyclical to explicitly address social issues was the 1891 encyclical The Condition of Labor. Other sources of Catholic Social Teachings besides the encyclicals include the teachings of Church Councils such as the Second Vatican Council, the addresses of the popes, and official publications and summaries such as the Compendium of the Social Doctrine of the Church.

  5. Another issue that may seem to clash with the idea that the Christian denominations in the U.S. are supportive of diversity is the fact that most U.S. congregations today are racially segregated. However, although congregations remain segregated, during the last two decades they have made substantial efforts to integrate themselves, particularly through the “reconciliation” movements the churches launched during the 1990s. The reasons why they remain segregated in spite of the efforts both white and black congregations have made to integrate their memberships are not completely clear. However, we note here that our claim is that the Christian denominations have supported diversity in business organizations, even if they have failed to make their own organizations more diverse.

  6. Because KLD increased its sample size substantially by including the Russell 1000 in 2001 and the Russell 2000 in 2003, the results for the diversity measures in 2001 and 2003 may not be stable due to the large increase in the number of firms in the sample. As a robustness check, we have also excluded 2001 and 2003 from the sample. Overall, our untabulated results are robust to the exclusion of 2001 and 2003.

  7. To check the existence of potential interpolation bias, we conduct our regressions using only the years for which we have direct survey data on religiosity (1990 and 2000) in our unreported results. Though the sample size is much smaller, the significant association between diversity and religiosity measure suggests that our linear interpolation does not create systematic noise in our main results.

  8. The dynamic panel GMM model, in particular, enables us to estimate the diversity-religiosity relation by dealing with (i) past diversity scores due to autocorrelation problem of diversity ratings, (ii) fixed-effects to account for the dynamic aspects of the diversity-religiosity relation, and (iii) time-invariant unobservable heterogeneity, respectively.

  9. As suggested earlier, based on direct survey data on religiosity (1990 and 2000), we find the significant and positive relation between diversity and religiosity measure, indicating that our linear interpolation process does not create systematic bias in our main results..

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Acknowledgments

We appreciate special issue guest editor, Joan Fontrodona for his excellent guidance, and three anonymous referees for many valuable comments

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Authors and Affiliations

  1. Leavey School of Business, Santa Clara University, 500 El Camino Real, Santa Clara, CA, 95053-0388, USA

    Hoje Jo & Manuel G. Velasquez

  2. School of Business, Korea University, Seoul, Korea

    Jinhua Cui & Haejung Na

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  1. Jinhua Cui
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  2. Hoje Jo
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  3. Haejung Na
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  4. Manuel G. Velasquez
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Correspondence to Hoje Jo.

Appendix: Diversity Categories

Appendix: Diversity Categories

Diversity Strengths (DIVERSITY_STRENGTH)

CEO. The company’s chief executive officer is a woman or a member of a minority group.

Promotion. The company has made notable progress in the promotion of women and minorities, particularly to line positions with profit-and-loss responsibilities in the corporation.

Board of Directors. Women, minorities, and/or the disabled hold four seats or more (with no double counting) on the board of directors, or one-third or more of the board seats if the board numbers less than 12.

Work/Life Benefits. The company has outstanding employee benefits or other programs addressing work/life concerns, e.g., childcare, elder care, or flextime. In 2005, KLD renamed this strength from Family Benefits Strength.

Women & Minority Contracting. The company does at least 5 % of its subcontracting, or otherwise has a demonstrably strong record on purchasing or contracting, with women and/or minority-owned businesses.

Employment of the Disabled. The company has implemented innovative hiring programs; other innovative human resource programs for the disabled, or otherwise has a superior reputation as an employer of the disabled.

Other Strength. The company has made a notable commitment to diversity that is not covered by other KLD ratings.

Diversity Concerns (DIVERSITY_CONCERN)

Controversies. The company has either paid substantial fines or civil penalties as a result of affirmative action controversies, or has otherwise been involved in major controversies related to affirmative action issues.

Non-Representation. The company has no women on its board of directors or among its senior line managers.

Other Concern. The company is involved in diversity controversies not covered by other KLD ratings.

Source: KLD Research & Analytics, Inc. The KLD original diversity strength scores also include the Gay & Lesbian Policies: The company has implemented notably progressive policies toward its gay and lesbian employees. In particular, it provides benefits to the domestic partners of its employees. In 1995, KLD added the Gay & Lesbian Policies Strength, which was originally titled the Progressive Gay/Lesbian Policies strength. The problem with this item, however, is that a good number of the Christian denominations do not support policies that benefit gays and lesbians. In fact, several of the Christian denominations have officially taken the position that such policies should be rejected. Consequently, we remove the item of Gay & Lesbian Policies from our measurement of DIVERSITY scores because of continuing controversy.

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Cui, J., Jo, H., Na, H. et al. Workforce Diversity and Religiosity. J Bus Ethics 128, 743–767 (2015). https://doi.org/10.1007/s10551-013-1984-8

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