510 Research Project
Ethics Research Analyses BY E S
A C C T 5 1 0 – B U S I N E S S E T H I C S
COMPANIES’ BACKGROUND INFORMATION
Kellogg Company Profile
Years in Business: Founded in 1906, 114 years in business
IPO Date: Incorporated in Delaware in 1922
Current CEO: Amit Banati
Current CFO: Steven A. Cahillane
Total Number of Employees: 31,000
Current External Auditor: PricewaterhouseCoopers LLP
Uber Technologies Inc. Profile
Years in Business: Founded in 2009, 12 years in business
IPO Date: March 2009, San Francisco, CA
Current CEO: Dara Khosrowshahi
Current CFO: Nelson Chai
Total Number of Employees: 22,800
Current External Auditor: PricewaterhouseCoopers LLP
TESLA Inc. Profile
Years in Business: Founded in 2003, 18 years in business
IPO Date: July 1, 2003, San Carlos, CA
Current CEO: Elon Musk
Current CFO: Zachary J. Kirkhorn
Total Number of Employees: 70,757
Current External Auditor: PricewaterhouseCoopers LLP
CVS Health Corporation Profile
Years in Business: Founded in 1963, 57 years in business
IPO Date: May 8, 1963, Lowell, MA
Current CEO: Karen S. Lynch
Current CFO: Shawn Guertin
Total Number of Employees: 256,500
Current External Auditor: Ernst & Young LLP
Executive Summary Statistics Performance
SEC’S DIVERSITY DISCLOSURE UNDERSTANDING
•The Securities and Exchange Commission adopted rule amendments last August 26th, 2020, to modernize disclosures of business, legal proceedings, and risk factors under Regulation S-K.
•As a result of these amendments, public companies are now required to disclose number of employees and a description of its human capital resources on their Form 10-Ks and other filings subject to Regulation S-K.
•However, the new requirements do not include a clear definition of human capital or specify a list of measures to be disclosed.
SEC’S DIVERSITY DISCLOSURE MORAL INTENSITY
•In my view, the SEC’s new regulation on diversity disclosure for public companies constitutes a combination of an ethical, moral, and legal obligation.
•In Jones' six dimensions or moral intensity, the magnitude of consequences seems to be the most applicable for the SEC's disclosure requirement for public companies. I think the SEC thought about how society will benefit from these new requirements as public companies will be encouraged to have a more diverse workforce and consequently, provide equal opportunities to their employees.
•The moral intensity of the SEC’s new regulation influenced ethical decision making and, in this case, the SEC has gone a step forward by converting it into a mandatory requirement, a legal obligation.
SEC’S DIVERSITY DISCLOSURE CORRELATION WITH PUBLIC COMPANIES’ PROFITABILITY
•Tesla, and CVS Health disclosed number of employees by gender in 2020. 21% of Tesla workforce were women and 79% men. CVS’s gender diversity differ from Tesla’s, whose workforce is 70% women and 30% male. Both companies are doing great financially.
•Uber Technologies also disclosed number of employees by gender in 2020. 59.7% of Uber workforce is male and 40.3% is female. Uber's financial performance declined in 2020, with a negative return on equity, earnings per share, and profit margin ratio. This was due to the Pandemic, in which everyone was adversely affected, and Uber had to reduce its workforce. In 2021 Uber's financials are still negative perhaps as a result of legal actions filed in the UK regarding racial discrimination claims.
•Kellogg Company didn’t disclose number of employees by gender in 2020. It just disclosed that 42% of managers at Kellogg’s are women. Kellogg is doing great financially too.
•I see an obvious correlation between my selected companies' diversity disclosure and their respective profitability, as the companies that are enforcing EDI practices within their organization show excellent financial performance.
COMPANIES’ NARRATIVE ON DIVERSITY DISCLOSURES COMPLIANCE
•Kellogg Company, Uber Technologies, Tesla, and CVS Health disclosed number of total employees and their initiatives to improve Equity, Diversity and Inclusion enforcements in their
10-Ks for year end 2020.
•SEC’s new requirements do not include a clear definition of human capital or which measures must be disclosed in the 10-Ks of public companies; therefore, I believe that the four public
companies’ narrative on diversity disclosures chosen for my research are compliant with SEC’s
new regulations.
COMPANIES’ DEGREE OF ETHICAL STANDARDS RELATIVE TO DIVERSITY DISCLOSURE
•Kellogg Company, Uber Technologies, Tesla, and CVS Health have shown a high degree of ethical standards as they all four have complied with the SEC’s new regulation to disclose number of
employees and a description of its human capital resources on their Form 10-Ks.
•I do believe, however, that the disclosure of their total workforce should also provide how diverse their workforce is. For instance, disclosing the gender, race, and ethnicity of a company's
workforce will provide financial information users with useful data about the diversity of the
company's workforce.
COMPANIES’ DEGREE OF ETHICAL STANDARDS RELATIVE TO DIVERSITY DISCLOSURE
Companies’ Description of their Human Capital Resources
•Kellogg Company has enforced practices of Equity, Diversity and Inclusion since 2005 by establishing an Office of Diversity & Inclusion to focus on recruiting and retaining diverse employees, creating awareness of diversity issues, and fostering a supportive and positive work environment where inclusive behaviors are the norm. Several leading organizations recognized Kellogg for its commitment to building and supporting equity, diversity and inclusion in its workplace. These include Diversity Inc., Social Corporate Equity Index, Diversity Best Practice Index and Human Rights Campaign (HRC) Best Places to Work for LGBTQ Equality, to name a few.
•In July 2020, Uber Technologies, publicly committed to becoming an anti-racist company. Uber also has the Integrity Helpline, where its employees can notify any discriminatory actions against them. Uber reports its Diversity and Inclusion efforts on its 2020 People and Culture Report and 2020 ESG Report, which are available on their investor relations website.
COMPANIES’ DEGREE OF ETHICAL STANDARDS RELATIVE TO DIVERSITY DISCLOSURE
Companies’ Description of their Human Capital Resources
•Tesla’s key human capital objectives in managing their business include attracting, developing and retaining top talent while integrating diversity, equity and inclusion principles and practices into their core values. Tesla have provided thousands of job openings in local communities, for capable workers from various backgrounds to learn valuable skills in critical operations such as in manufacturing, vehicle service and energy product installation. Tesla is also working on diversity efforts to support suppliers from underrepresented communities.
•CVS Health has a Diversity Management Leadership Council and a Strategic Diversity Management leadership team to integrate diversity practices across all facets of their business. CVS Health has been recognized as a DiversityInc Top 50 Company, named to Bloomberg’s 2019 Gender-Equality Index and earned a 100 percent score on the Disability Equality Index, meaning the company is recognized as a “Best Place to Work for Disability Inclusion.”
RANK OF COMPANIES BY ETHICAL STANDARDS
1. Kellogg Company
I have ranked Kellogg Company number 1 as Kellogg has enforced practices of Equity, Diversity and Inclusion since 2005. Also, Kellogg has been recognized for its commitment to building and supporting equity, diversity and inclusion in its workplace by several leading organizations like DiversityInc.
2. CVS Health
I have ranked CVS Health number 2 as CVS has earned a 100 percent score on the Disability Equality Index, meaning that the company is recognized as the best place to work for disability inclusion.
3. Tesla
Tesla has been ranked number 3 since it has a huge gender disparity on its workforce: just 21% of Tesla's workforce are women, while 79% are men. Moreover, Tesla revealed in its Diversity report on December 4th, 2020, that employees in leadership roles with a director level or higher accounted for 83% men and 59% Whites, showing a disparity not only in gender but also in race.
RANK OF COMPANIES BY ETHICAL STANDARDS
4. Uber Technologies
Uber Technologies has been ranked number 4 because the company is currently facing legal actions in the UK concerning racial discrimination claims, even though it publicly committed to becoming anti- racist in July 2020. The claims are over its use of facial recognition software that allegedly discriminates against people of color. Furthermore, Uber did poorly with its analyses of gross revenue profitability, showing negative rates and EPS for 2020.
RANK OF COMPANIES BY ETHICAL STANDARDS
If I were hired as a consultant for the company with my worst assigned ranking in the previous slide, I
would have some questions for the company’s management regarding ethical standards as it relates to
the SEC’s diversity disclosure requirement.
To: Uber Technologies’ Management
vHow are you meeting your commitment to become an anti-racist organization?
vWhat steps are you taking to diversify your workforce, which currently shows a large gender gap?
vIs it possible that your poor financial results in 2020 may be due to your lack of ethical standards
when implementing diversity practices in your company?
CERTIFICATION OF AUTHORSHIP:
I certify that I am the author of this work and that any assistance I have received in its
preparation is fully acknowledged and disclosed. I have also cited any sources from
which I used data, ideas or words, directly quoted or paraphrased. This work was
prepared by me specifically for this course.
References: Kellogg Company’s 10-Ks, Profitability Ratios, and other information related to its diversity practices:
https://www.sec.gov/ix?doc=/Archives/edgar/data/55067/000162828021002660/k-20210102.htm
https://www.macrotrends.net/stocks/charts/K/kellogg/number-of-employees
https://www.macrotrends.net/stocks/charts/K/kellogg/roe
https://www.macrotrends.net/stocks/charts/K/kellogg/net-profit-margin
https://finance.yahoo.com/quote/k/analysis/
https://fortune.com/company/kellogg/fortune500/
References: Uber Technologies’ 10-Ks, Profitability Ratios, and other information related to its diversity practices:
https://www.sec.gov/ix?doc=/Archives/edgar/data/0001543151/000154315121000014/uber- 20201231.htm
https://www.macrotrends.net/stocks/charts/UBER/uber-technologies/roe
https://www.macrotrends.net/stocks/charts/UBER/uber-technologies/number-of-employees
https://www.macrotrends.net/stocks/charts/UBER/uber-technologies/net-profit-margin
https://www.macrotrends.net/stocks/charts/UBER/uber-technologies/eps-earnings-per-share-diluted
https://www.statista.com/statistics/693807/uber-employee-gender-global/
https://www.cnn.com/2021/10/07/tech/uber-racism-uk-lawsuit-facial-recognition/index.html
References: Tesla’s 10-Ks, Profitability Ratios, and other information related to its diversity practices:
https://www.sec.gov/ix?doc=/Archives/edgar/data/1318605/000156459021004599/tsla- 10k_20201231.htm
https://www.macrotrends.net/stocks/charts/TSLA/tesla/eps-earnings-per-share-diluted
https://www.macrotrends.net/stocks/charts/TSLA/tesla/number-of-employees
https://www.macrotrends.net/stocks/charts/TSLA/tesla/roe
https://www.macrotrends.net/stocks/charts/TSLA/tesla/net-profit-margin
https://www.cnbc.com/2020/12/04/tesla-publishes-its-first-diversity-report-here-are-the-key- numbers.html
References: CVS Health’s 10-Ks, Profitability Ratios, and other information related to its diversity practices:
https://www.sec.gov/ix?doc=/Archives/edgar/data/64803/000006480321000011/cvs- 20201231.htm
https://cvshealth.com/news-and-insights/press-releases/cvs-health-appoints-shawn-guertin- chief-financial-officer
https://fortune.com/company/cvs-health/fortune500/
https://www.macrotrends.net/stocks/charts/CVS/cvs-health/net-profit-margin
https://www.macrotrends.net/stocks/charts/CVS/cvs-health/roe
https://www.macrotrends.net/stocks/charts/CVS/cvs-health/eps-earnings-per-share-diluted