510 Research Project
Business Ethics Research Analysis
Equity, Diversity, and Inclusion
by
Student T K
Company’s background
u Wells Fargo & Company is an American multinational financial services company that was
founded in 1852 (Wells Fargo & Company). The company offers banking, investment and
mortgage products and services. Charlie Scharf is the company’s CEO while Mike
Santomassimo is the CFO. The company has an approximately 270,000 employees in 2020
(Wells Fargo & Company, 2020).
u Sony Group Corporation is a Japanese multinational that was founded in 1946 (Sony, 2020).
The company offers a variety of products such as electronics , video game console company
among others. Kenichiro Yoshida is the Company’s CEO while Philip Rowley is the CFO The
company has an approximately 180,000 employees.
Continuation………..
u Comcast Corporation is an American multinational telecommunications conglomerate that
was founded in 1963 (Comcast, 2020). The company offers global media and technology
services such as high-speed Internet among others . In 2020, the company had an
approximately 190,000 employees (Comcast, 2020). Brian Roberts is the Company’s CEO
while Michael J. Cavanagh is the CFO(Comcast, 2020).
u Shopify Inc. is a Canadian multinational e-commerce company founded in 2006 (Shopify,
2020). The company operates as an e-commerce platform for online stores and retail point-
of-sale system. Shopify has employed only 7000 employees (Shopify, 2020).Tobias "Tobi"
Lütke is the CEO while Amy E. Shapero is the CFO.
New SEC Diversity Disclosure Requirements u Securities and Exchange Commission (SEC) Requirements are regulatory documents required of all public
companies to give information to the potential investors. The information includes financial statements, cash
flow, compliance reports among others.
u SEC Requires public companies to file a periodic financial statements and other disclosures. Investors usually
uses and relies on the filled information for them to make informed decision on whether to invest on
companies.
u Securities and Exchange Commission (SEC) Requirements represents a combination of ethical, a moral and
legal obligation as it ensures that all organizations are treated with due care and engage only in fair and open
competition.
u Securities and Exchange Commission (SEC) Requirements also mandates public companies to disclose in the
Forms 10-K whether it adhere to code of ethics for its principal accounting officer or controller, principal
financial officer as well as principal executive officer. This ensures organizations are legally obliged.
New SEC Diversity Disclosure Requirements
u SEC now requires details of human capital that are material to the business be disclosed in a companies 10-K
u The SEC has chosen to leave the requirements vague, allowing companies to choose what is important
u The SEC requirements represents a new ethical and moral obligation for companies, but not a legal one
u Disclosure requirements have been introduced for the benefit of stakeholders, who companies have an ethical and moral obligation to be honest with
u “The amendment requires new descriptions, where material to an understanding of the business, of (1) a company’s “human capital resources” and (2) “any human capital measures or objectives that the registrant focuses on in managing the business (such as, depending on the nature of the registrant’s business and workforce, measures or objectives that address the development, attraction and retention of personnel).” https://corpgov.law.harvard.edu/2020/10/14/the-new-sec-regulation-s-k-rules/
Jones’ model of moral intensity
u The SEC disclosure requirements are most applicable to what Jones describes as “Social Consensus”
u The requirements push companies to address topics that society views as relevant, such as workplace diversity, safety, employee benefits, and COVID-19 impact
u The SEC hopes that revealing these details will force companies to make decisions that align with the interests and values of society without legal enforcement
u Companies that also choose to not reveal these details will also be revealing in itself
Correlation that exist between the companies u All the company have tried to maintain diversity, equity and inclusion in their organization and adhered to
discrimination acts during recruitment and selection processes.
u Wells Fargo & Company has 25% of nominated directors being women (Wells Fargo & Company 2020).
The 25% of the directors are further racially diverse. 3 out of 12 Director Nominees are Women, 2 out of
Director Nominees are African-American while 1 of 12 Director Nominees is are Hispanic (Wells Fargo &
Company 2020). Generally, 42% of the company’s director nominees are Gender and/or Racially/Ethnically
Diverse (Wells Fargo & Company 2020).
u In correlation, Sony corporation has strongly encouraged women in leadership with women in leadership
from the company roles increased Return on Equity (ROE) by 35% and Total Return to Shareholders (TRS)
by 34% (Sony, 2020).
u In Spotify, females in the leadership position occupies 38% of the positions (Spotify, 2020).
u In Comcast corporation, women in leadership occupies 37% while males occupies 67% (Comcast, 2020).
Continuation……………..
Correlation Evaluation
(diversity disclosure analysis
Wells Fargo & Company
Sony Comcast Corporation
Spotify
2020 2020 2020 2020
Number of employees 270,000 180,000 190,000 7000
Number of female employees 56% 41% 35% 44%
Number of male employees 44% 58% 65% 55%
Diversity or EDI Index
Profit margin ratio 19.79% 12.41% 13.09% 25.6%
Return on investment (ROI)
Year (%)
Diversity and Earnings Company:
% of non-white employees
% of female employees ROE EPS
Company-1 33% 32% 61.06% 4.37
Company-2 44% 55% 13.97% 3.77
Company-3 42% 30% 160.09% 4.67
Company-4 31% 62% 7.04% 5.81
u With a sample size of four companies, its challenging to draw any conclusions between a company’s level of diversity and its effects on profitability
u Other factors such as the industry and the economy play a much more obvious role
u For example: Company#1 is a software company, an industry that skews male and has seen a huge surge in growth and profitability
u Studies do indicate that a more diverse workforce of employees is more productive and successful, but this was not shown in the four companies due to other factors.
Diversity and Earnings
Whether the companies narrative on diversity disclosure are compliant
u Wells Fargo & Company is ethically compliant based on the available information shared on its annual
meeting report. The company has not been involved in green washing but remained compliant to
policies related to the diversity, equity and inclusivity such as discrimination and labour acts. Besides,
the DE&I actions and commitments of the company shows Wells Fargo & Company have developed a
diverse and inclusive culture that award all the employees in the organization equal opportunity
regardless of ethnicity. This is evident by ability of the company to recruit employees from different
areas of world in both low and upper leadership positions.
u Sony is ethically compliant with consideration of the R10 reports of 2019 and 2020 on the diversity
disclosure. It is clear that the high rates of innovations experienced by the company have resulted
from workforce that Possesses different personalities, racial backgrounds, nationalities, religions and
beliefs, disabilities, sexual orientations, values and work styles, our diverse human resources.
Continuation……………………………..
u Spotify is somehow ethically compliant with consideration that its 10-K reports listed in
the Securities and Exchange Commission (SEC) somehow differs with other publication
from secondary sources. The company has a lot of work to be done with consideration of
its huge gaps in workforce between men and women. Besides, the Corporate Social
Responsibility of the company indicates that the company is doing a lot to disclose positive
data in the year 2021’s annual meeting.
u Comcast Corporation is ethically compliant according to its R10 reports of 2019 and 2020.
The company has disclosed accurate data. Besides, the availability of women in all
leadership positions indicate that comcast is compliant to laws and regulations governing
issues of diversity and inclusion.
Degree of ethical practices (standards of the companies)
u The degree of compliant for Wells Fargo & Company is very high. The company has a high
number of women in leadership demonstrating adherence to discrimination policies during
recruitment and selection proccess. Besides, the R10 reports have also indicated that Well
Fargo Company has have put in place an effective policies and measures for reporting un
ethical practices.
u The degree of compliant for Sony corporation is also very high with the company remaining
complaint in diverse regions across the world where it operates. The company has effective
strategy for ensuring there is transparency and accountability among its stakeholders.
Continuation……………..
u The degree of compliant for Comcast Corporation is medium. Although the company has
adopted the contemporary measures for ensuring it adheres to its code of conducts, there have
been some complains regarding unethical practices from its stakeholders. For example, in 2016,
the company was finned over $2.3 billion on the case that involved fraud charges on customers
accounts.
u The degree of compliant for Spotify is also very high with the company having faced very few
accusation on different ethical issues such as cyber crimes. Besides, the company ahs also
implemented polices such as “hateful conduct policy “ to ensure its practices aligns effectively
with the code of conduct.
Comparative Analysis of Companies’ DD
Strong Diversity Disclosure Weak Diversity Disclosure
u Sony released a lengthy Diversity and Inclusion report laying out the ways they hope to improve their workforce and setting goals for the future
u Sony’s 10-k includes sections titled “Social Impact and Sustainability” and “Human Capital” that comply with the SEC’s new rules
u Wells Fargo outlines the information on the company’s diversity within their 10-k
u Their Diversity and Inclusion report provides the goals the company hopes to achieve and outlines the process they will take
u Comcast's 10-k and Diversity and Inclusion report provide the bare minimum of information about the employees and the company
u Comcast states that they aspire for a more diverse, engaged, and talented workforce, but no actual goals are set up or provided
u Spotify also does lay out things that they hope to achieve but do not provide any goals or milestones they hope to achieve
u The Diversity and Inclusion report provides some information but is overall not great
Rank of companies by Ethical Standards)
1. Wells Fargo & Company
2. Sony corporation
3. Comcast Corporation
4. Spotify
Existing Violations Ethical Practice Category
Ethical Practices
Questions for company’s management regarding Ethical standards
u What are the management’s views on this new SEC requirement?
u What is the company doing to make sure there is consideration of gender equality in
the strategic management and executive as it is evident that males are dominant?
u Does the company adhere to code of conducts? And if yes, what are the current policies
and measures in place to report the unethical practices?
u What are the company’s current major SEC violation(s).
u What steps are currently in place to resolve these violations?
u Do you think a stronger ethical culture would mitigate some of these violations?
What I Would Change to Improve the Company’s Ethical Standard and Culture?
References
Spotify. (2020). Annual Reports, Diversity, Inclusion & Belonging | Life at Spotify. Retrieved 8
October 2021, from https://www.lifeatspotify.com/diversity-equity-impact/diversity-inclusion-
belonging
Sony. (2020). Annual reports, Women in leadership. Retrieved 8 October 2021, from
https://www.sony.com/content/dam/sony/landing-pages/SonyWhitepaperFinal_s.pdf
Wells Fargo & Company 2021. Annual meeting report. Retrieved 8 October 2021, from
https://www08.wellsfargomedia.com/assets/pdf/about/investor-relations/annual-
reports/2021-proxy-statement.pdf