The American Spectator reports that "The DEI Business Case Is Falling Apart," noting studies that DEI hiring practices and policies, at best, do not provide any benefit to businesses, and generally harm businesses.
For instance, the article relates, influential reports published by McKinsey "claim[ed] that companies with more racially and ethnically diverse executive teams earn higher returns." Yet when researchers attempted to replicate these studies, "the alleged advantage of diverse executive teams largely disappeared." That is:
The replication study found no meaningful difference in profitability between firms with highly diverse executive teams and those with little diversity. Whether using earnings, returns on assets, revenue growth, or shareholder returns, the relationship was basically flat.
Moreover, the replication study found that the McKinsey data could actually be interpreted not as more diverse boards do better, but that "more successful firms hire more diverse executives later on, not that diversity drives financial success." But even that is not the end of the story, because other studies have found that more diverse boards lead to more monitoring of executives. The result?
One major study of almost 2,000 American firms finds that when boards increase gender diversity, they impose noticeably stronger monitoring of executives. While oversight is necessary, too much of it slows decision-making, restricts managerial autonomy, and makes firms less responsive to changing conditions. The study concludes that the average effect of gender diversity on firm performance is negative and can reduce value in well-managed firms because heightened monitoring becomes a burden rather than a benefit.
And this is for companies that voluntarily diversify their boards of directors. What about when corporations are forced to diversify their boards?
... When Norway introduced a law requiring corporate boards to be 40 percent female, firms had to rapidly appoint new directors from a limited pool of qualified candidates. Stock prices of affected companies fell immediately following the announcement and did not recover in subsequent years. The same pattern occurred when California implemented its board diversity law. Research shows that markets responded by marking down the value of companies forced to replace experienced board members with individuals selected primarily to satisfy demographic quotas. These findings suggest that rapid, mandatory diversification weakens board quality by reducing the emphasis on experience and expertise.
The results are even more dire for a company that implements DEI practices to its general hiring. Studies show that "[c]ompanies with higher Diversity Scores experience dramatically more workplace accidents" and "face more consumer complaints, more controversies relating to customer health and safety, and lower overall customer satisfaction." Moreover, "[p]roduct recalls, quality controversies, and delays are also more common in these firms. Such problems point to a drop in average employee competence and operational discipline."
How to remedy the situation? The CEO of a company called Bolt had a solution:
When Ryan Breslow’s fintech company Bolt lost $10.7 billion in value, he had a radical diagnosis: HR needed to go. “They were creating problems that didn’t exist,” Breslow, 31, said at Fortune’s Workforce Innovation Summit. “Those problems disappeared when I let them go.”
Breslow, who stepped down as CEO in 2022 but returned in 2025, cut 30% of the workforce in April and replaced HR with a smaller “people operations” team focused on training.
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