Open MIC Releases New Report Showing Lack of Racial Diversity in Tech Could Mean Lower Returns for Investors

Report highlights diversity issues plaguing the tech industry that have implications for companies, investors, and public

Click to read Breaking the Mold: Investing in Racial Diversity in Tech

Click to read Breaking the Mold: Investing in Racial Diversity in Tech

A new report released by Open MIC today finds that the lack of racial diversity in the tech industry undermines financial performance, demanding investors’ attention. The report titled, “Breaking the Mold: Investing in Racial Diversity in Tech,” highlights existing data showing that black, Latino, and Native Americans are unrepresented in the tech industry by 16-to-18 percentage points compared to their presence in the U.S. labor force overall. The report provides recommendations intended to address significant shortcomings with respect to workforce data transparency as well as increasing diversity at all levels of the industry.

“In a country with a population growing more diverse each day, the U.S. tech community remains a bastion of white, male privilege that has largely excluded people of color,” said Michael Connor, executive director of Open MIC. “Given the growing social, political and economic influence of tech companies, the lack of diversity in the sector has implications that extend far beyond the industry itself.”

Recent studies present compelling evidence that a more diverse tech industry could translate into stronger financial performances for companies. For example, McKinsey & Company found that companies in the top quartile in terms of racial diversity are 35 percent more likely to have higher financial returns than the national median in their industry. Another estimated that the tech industry “could generate between $300 - $370 billion each year if the racial and ethnic diversity of tech companies’ workforce reflected that of the talent pool.”

“Investors are beginning to wake up to the diversity problem that has plagued the tech industry for so many decades,” said Tony Maldonado, an Apple shareholder who has put forward a proposal asking the company to implement an accelerated recruitment policy that would require Apple to increase the diversity of senior management and its board of directors. “A lack of diversity not only shapes the culture and future of the company but hurts its bottom line and has larger long-term ripple effects given how embedded technology is in our daily lives,” said Maldonado.

Despite this, tech companies’ efforts to address the problem have yet to result in significant change. And while the industry often points to the need to diversify talent pipelines, research suggests the pipeline isn’t the only issue. For example, black people and Latinos earn nearly 18 percent of computer science degrees, but hold barely five percent of tech jobs. What’s more the American Institute for Economic Research found in 2014 that people of color were paid less than white people for the same tech jobs.

This disparity is more evident for women of color. According to the National Center for Women & Information Technology, women hold 25 percent of all computing jobs, yet black women hold only three percent and Latinas one percent.

“The truth is that the talent pipeline is just one small aspect of a much larger systemic problem, that's led to Latinos and other people of color leaving the industry at more than three times the rate of white men,” said Carmen Scurato, Director, Policy & Legal Affairs for the National Hispanic Media Coalition. “From a business perspective, tech companies would benefit from diverse leadership that will foster a more inclusive work environment and better understand the needs of their consumer base - which is growing increasingly diverse by the day."

This reality is part of the reason that “Breaking the Mold” focuses on increasing representation of people of color within the tech industry, especially with respect to leadership roles. Currently, only two percent of tech executives are black and three percent are Latino. The report recommends companies look to foster more diversity at the top to ensure that the products and services built by the tech industry meet the needs of a diverse consumer base, and do not perpetuate existing forms of racial bias and discrimination, which can pose legal, financial, and reputational risks for companies.

Beyond this, “Breaking the Mold” also outlines the following recommendations for tech companies to tackle the problem of diversity:

  • Collect and disclose more detailed data on the workforce, filtered by demographics (both gender and race, aggregated) to help display the specific challenges each company faces related to race and equity. As with any other business challenges, tracking a comprehensive set of metrics can help companies understand whether the efforts in place to address the problem are working, and where additional efforts are needed;
  • Develop and publicly disclose time-bound goals for racial diversity to ensure that tech companies not only make public commitments – they also produce timely outcomes that reflect those commitments;
  • Link executive compensation and employee incentives to the achievement of goals related to increasing racial diversity, as one way of instilling accountability; and
  • Engage white employees – especially executives – in making change to help ensure that the responsibility to increase racial diversity falls on those who currently hold the most power and influence, rather than on the tech professionals who are most directly affected.

KYLE MOLER, 202.478.6173