McKinsey Study That Spawned Corporate DEI Programs Unravels1

Guest Editorial: Jarrett Stedman

As the wind slowly goes out of the sails of corporate diversity, equity, and inclusion programs, it’s worth noting how much purveyors of this nonsense have peddled their ideology under the false premise of data, science, and research. The Wall Street Journal published an article Friday about the consulting firm McKinsey’s 2015 announcement that it had “found a link between profits and executive racial and gender diversity.” This research was “used by investors, lobbyists, and regulators to push for more women and minority groups on boards and to justify investing in companies that appointed them.”

It certainly has paid big dividends for peddlers of DEI.

Within five years, there was a massive shift in how many companies hired and conducted their business. In 2020, the DEI ethos metastasized. Companies not only embraced the “racial reckoning,” they began to implement full-scale—and almost certainly illegal—racial quotas.

The study gave corporations air cover to promote ideologically motivated diversity programs, saying it was simply “good for business.” It wasn’t. What it was suitable for was transforming the world of Big Business into an outpost of academia. In that sense, it worked. But the original pro-business justification has turned out to be a scam. According to The Wall Street Journal, “academics have tried to repeat McKinsey’s findings and failed, concluding that there is no link between profitability and executive diversity.”

The study only found that profitable companies ended up with more diversity after they had succeeded, not before. That makes sense in many ways. Big, highly profitable companies could more easily afford to promote DEI with fewer consequences. A company scrambling to launch itself doesn’t have that luxury.

The authors of the McKinsey study say they’ve found a way to prove the correlation between DEI programs and profitability, but even that is in doubt. The Wall Street Journal noted that McKinsey won’t release the names of the companies it used for the study, and it could not show benefits from diversity on an extensive range of metrics. There was just no link at all between diversity and corporate success. Now, that may not seem like a big deal. What’s one sham study among many other spurious studies? One would think it would take more than one study to persuade companies with billions of dollars on the line that using race, gender, and identity over merit is a risky proposal.

But in this case, it matters a lot. Not only did many companies adopt the research as accurate, but the most powerful financial and governmental institutions with vast market powers picked it up and used it to impose DEI on corporate America.

From the Journal:

McKinsey’s research figures first in BlackRock’s references for supporting a board diversity target of 30% in its proxy voting guidelines.

It featured prominently among studies a Securities and Exchange Commission commissioner used in 2020 to explain why she supported corporate disclosure of diversity metrics. Nasdaq cited it as evidence when the exchange applied to the SEC for a rule requiring companies it lists to have minimum diversity on boards or explain why they don’t.

Dozens of campaign groups have cited it in support of rules allowing pension funds and others to consider social issues.

According to the Journal, BlackRock cited the study as evidence that diversity created financial benefits when it created an exchange-traded fund that tracked a diversity index. That index has done poorly, “returning about 55% against more than 70% for the global index without diversity conditions.”

BlackRock has been in trouble over its corporate practices and has announced that it is stepping away from environmental, social, and governance investing. We’ll see if that continues. What’s been clear to me from the beginning is that DEI is not merely about “diversity” in the general sense. It’s about ensuring a certain mindset. Paradoxically, the DEI industry is about creating a conformity of worldviews where every institution, every CEO, and every employee is roped into the same left-wing beliefs and swims in the same direction.

Those who dissent are punished and ostracized. There is now a growing counter-movement to prevent this full-scale transformation. And it’s getting harder for businesses to justify their ideological commitments when they are bleeding money. Nevertheless, despite its increasing unpopularity, the DEI ethos has dug deep into America’s powerful institutions—including corporate America. Please don’t count on its purveyors suddenly giving up after real-world failures. They undoubtedly will say that true DEI hasn’t been tried and will find new ways to impose their ideology on the American people.

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