Sustainability reports from banks and insurance companies promise more diversity in the workforce. However, the real challenge lies in practicing diversity in a way that actually contributes to enrichment, writes finews.com editor Peter Kuster.
This is a buzzword that appears in most sustainability reports, which Swiss public companies had to present for the first time at their 2023 General Meetings for approval.
However, behind it lies a concept that divides opinions: namely, the idea that more diversity will automatically reflect positively on business success and, consequently, on the performance of a company’s, bank’s, or insurance company’s stock. We are talking about diversity.
A Flashy Term
Even the term itself is flashy. Today, diversity is often simply equated with variety. This is always associated positively, partly because its counterpart, uniformity, is exclusively negatively connoted.
An example of this is another magic word that also often appears in sustainability reports, although in the environmental/ecological section: biodiversity, that is, the diversity of animals, plants, and their habitats—a concern against which there is hardly any objection.
A Controversial Buzzword
But the term diversity itself is not so harmless and straightforward: it also points to differences and even opposites; it is no coincidence that spies were referred to as «diversants» in the infamous GDR, a term not meant to be flattering.
The Swiss legislator, who embedded the obligation to file sustainability reports into the Swiss Code of Obligations (Art. 964a to c CO), avoids using the word. He doesn't even use the term sustainability, but rather dryly refers to a «report on non-financial matters.»
(Image: Shutterstock)
In it, a company must «report on environmental matters, particularly CO2 targets, social matters, employee matters, respect for human rights, and combating corruption.»
Pragmatic Legislator, Chatty Sustainability Reports
So, no mention of diversity and no indication of what it actually means. Here, the sustainability reports, especially those from banks and insurance companies (which have been voluntarily publishing such reports for years), provide some guidance.
When it comes to diversity, it is about the composition of the workforce and the different life experiences that employees (as it is politically correct, but grammatically awkward to say today) bring to the table—at least implicitly including diversity of opinion.
These reports are brimming with diversity or diversity, usually accompanied by equity and inclusion—terms that sound somewhat sexier (a word that shouldn’t really be used anymore) than the legislator’s jargon, which categorizes these topics under «employee matters.»
Meticulous Pursuit of a Colorful World
For example, meticulous measurements are taken to track how the proportion of women (especially in higher management) has developed over the years, how many men work part-time, how many nationalities are employed by the company, and how age groups are represented.
The principle «the more diverse and colorful, the better» applies here, vividly expressed in the rainbow flags of the LGBT movement that adorn the headquarters of many Swiss companies, banks, and insurance companies during Pride Month in June.
From the perspective of a shareholder or a bank customer, this can be quite interesting and relevant information. Many institutional investors only invest in a public company if external specialists check off the ESG criteria, meaning sufficient ecological, social, or corporate governance targets are met.
The Risky Heights of Diversity Strategies
Admittedly, a bit of fanfare and well-sounding platitudes are part of the craft of investor relations and marketing.
Nevertheless, the authors of sustainability reports should always be aware of the gap between aspiration and reality, for instance, when employees experience corporate culture quite differently from what the diversity strategy promises.
Stress tests with reality also reveal that the thesis claiming more diversity, especially in leadership bodies, improves performance and thus the value of a public company, stands on shaky ground.
The Best Arguments from Both Sides
A recent article in the «Wall Street Journal» questioning the scientific basis of this thesis further fueled the controversy. Unfortunately, fronts have hardened in recent years, increasingly overshadowed by the furor of the new cultural wars (keyword wokeism), which did not necessarily lead to a productive and civil dispute.
On one side are those convinced that societal diversity must be reflected in companies, among other reasons, so they can understand and respond to developments and trends in their markets.
This camp believes there is a positive relationship between diversity and performance. Besides the monetary argument, diversity is also important for reputation, demonstrating that everyone, regardless of their background and characteristics, has good advancement opportunities and that we do not function as a caste society.
(Image: Shutterstock)
A Dead End?
On the other side are those who argue that competing companies would promote diversity in their self-interest without much fuss if it were indeed a substantial performance driver. Diversity of opinion has nothing to do with external characteristics like skin color, gender, or age of employees.
Moreover, more diversity is not always better; a certain degree of homogeneity is sometimes necessary for a company to function. And thinking in diversity categories ultimately leads to the dead end of a modern tribal society.
Neither Castes nor Tribes
Both sides have at least partly convincing arguments. Indeed, neither a caste nor a tribal society would be Swiss. And a certain homogeneity can sometimes be beneficial for performance—for example, thinking back to the (admittedly also thanks to strict banking secrecy) glorious days of private banking, when Arab and Jewish clients alike brought their money to Swiss banks.
They were received by discreet middle-aged gentlemen who were similarly socialized but significantly different from their clients in many ways—and perhaps were seen as particularly trustworthy for that reason.
The Not Diverse Old «Swiss Banking»
The financial sector's success (and partial continued success) was therefore not due to the diversity of bankers. Crucial factors—in addition to Switzerland’s reputation as a stable haven and trustworthiness—were the ability to empathize with clients, show empathy, and offer individually tailored solutions. Traditional virtues that must continue to be nurtured and sharpened if the Swiss financial sector is to remain successful in the future.
Back to the controversy. In the corporate world and especially in the financial sector, the first camp clearly dominates today, even here in Switzerland. The sensible strategy for those in charge who disagree usually involves remaining silent. However, skeptical voices have become a bit louder, and international developments, such as the outcome of the US elections, could encourage critics.
Reality Will Bring Relaxation
The debate may gradually relax naturally, as more realism will eventually take hold on both sides.
Anyone who looks around in primary schools in the city and suburbs with open eyes, or attends graduation ceremonies of secondary schools below university level, knows that the ethnic composition of the working-age population in Switzerland will change at a pace in the coming decades that will surpass the high cadence of the last 30 years.
(Image: Shutterstock)
Valuable Integration Effort
In other words, diversity is a fact and thus not a suitable goal for entrepreneurial action. The major challenge for the management bodies and various leadership levels of banks, insurance companies, and businesses is not to force diversity.
Rather, efforts should focus on managing the inevitably increasing diversity of the workforce in a way that preserves corporate culture and identity. In doing so, the economy also provides a valuable societal integration effort.
Side Issue of LGBT Matters
Useful reference points are, particularly in the interest of genuinely lived, essential internal diversity of opinion for the long-term prosperity of a company, the aforementioned traditional virtues of Swiss banking, the time-honored meritocratic principle blind to all externalities, and the legislator's refreshing pragmatism in the Swiss Code of Obligations.
Quotas, grandiose diversity strategies, broad-brush international standards, and a fixation on culturally contentious side issues like LGBT matters are not very helpful.
Only if the Swiss financial sector manages to master the challenges associated with the already present and growing diversity of the population can diversity truly become a sustainable enrichment.
