Defining the "E" in DEI: Reframing the Equity Conversation

For today’s blog entry, I highlight the keynote address by JeNae Johnson at last week’s NASPP Conference. JeNae has been working with the NASPP as we establish our own DEI initiative and we were very excited to have her present at the conference.

Women in the Workplace

JeNae highlights three key findings from the 2021 Women in the Workplace report by McKinsey & Company:

1. Women are significantly underrepresented in senior management and in the C-suite. Women make up less of the workforce than men at all levels, but while they are nearing 50% of entry level employees, they represent less than 30% of senior vice presidents and just over 20% of the C-suite.
2. Women experience more burnout than men. Among senior leaders and managers, more women than men report experiencing burnout, chronic stress, and exhaustion.
3. Women of color lose ground to White women and men at every rung of the corporate ladder. Women of color represent 17% of entry level employees but just 4% of the C-suite. This drop in representation is markedly greater than the drop for White women or for men of color (and White men represent more of the C-suite than they do of entry level employees).

The Cost of Disengagement

One risk of failing to achieve equity in the workplace is that employees will become disengaged. Employees who don’t feel like they are treated fairly aren’t as engaged and, in many cases, may be planning their exit. JeNae explains that this disengagement has a tangible cost to companies. It can be estimated using the following formula:

Number of employees x 17.2% x median salary x 34%

Why 17.2%? Gallup estimates that this percentage of the workforce is actively disengaged.

Why 34%? Gallup estimates that a disengaged employee costs an organization $3,400 for every $10,000 of salary, or 34% of their salary.

What is the cost of disengagement for your company?  

Equity Is About Systems

DEI stands for diversity, inclusion, and equity; each of these words represents something different. JeNae explains that the term “diversity” refers to representation and “inclusion” is ensuring that everyone feels valued and has a voice. “Equity” is about systems, particularly building systems that are blind, i.e., that don’t favor some individuals or groups over others.

JeNae also discusses the concept of statistical predictors, which involves examining historical data to predict outcomes. When you look at the data in the McKinsey & Company study, for example, you can predict outcomes for individuals in the groups of employees represented in the study. In fact, the study refers to a “broken rung” in the first step of the corporate ladder—from entry level to manager—finding that far fewer women are promoted to manager than men. The effect of this broken rung pervades every subsequent rung in the corporate ladder, ultimately resulting in fewer women reaching the C-suite.

Equity is about disrupting this pattern by building systems that don’t favor one group of employees over another. There are many corporate systems in which equity is critical. JeNae gives the examples of talent acquisition, talent development, and even supply chain management. 

Equity in Equity Compensation

When looking at various corporate systems that can produce inequities, one example that I keep coming back to is the use of discretion in equity programs. As a stock plan professional, you may not have a lot of influence over your company’s hiring and promotion practices (beyond your own department, of course), but you may be able to encourage your company to look at the controls the govern the use of discretion in your equity program.

In the most recent NASPP and Fidelity Investments Equity Compensation Outlook pulse survey on grant practices, we found that it is common for managers to have discretion over grant recipients and award sizes in many circumstances. We discuss these findings in the NASPP webinar, Grant Guidelines: The Fair, the Flexible, the Future.

And grants are not the only equity compensation decisions that may be subject to discretion. In some companies, the terms and conditions of awards or payouts upon retirement or other separation from service events may also be subject to discretion. This may be one area where stock plan administration can contribute to your company’s DEI goals.

Taking Action

For those of you looking to take action, one helpful bit of advice JeNae offers is to review your company’s strategic imperatives, as well as your corporate sustainability report and ESG goals. Familiarizing yourself with these strategies allows you to anchor any conversations about equity to your company’s strategic imperatives and goals.