Jul 5, 2023 - Economy

Why companies should worry about the Supreme Court's affirmative action ruling

Illustration of a pattern of briefcases in different skintones.

Illustration: Maura Losch/Axios

Companies could see serious downstream effects for businesses stemming from the Supreme Court's decision overturning the use of affirmative action in college admissions — even though the court didn't directly address company diversity efforts.

The big picture: Companies will face a talent pipeline problem.

  • When states have banned affirmative action, enrollment of Black students in universities declined — and that decrease in campus diversity could translate into a less diverse workforce.
  • Indeed, one 2013 study from economist Fidan Ana Kurtulus found that workplaces became less diverse in states where the practice was outlawed.

What they're saying: "Over the next decade, traditional talent pipelines will become less diverse because of this ruling," writes Joelle Emerson, the CEO of Paradigm, a diversity consulting company.

  • The ruling is "a problem for our economy because businesses often rely on colleges and universities to provide a diverse pipeline of talent for recruitment and hiring," said Charlotte Burrows, the chair of the Equal Employment Opportunity Commission, in a statement Thursday.

Why it matters: U.S. businesses have a strong interest in hiring a diverse workforce to remain maximally competitive in an increasingly diverse country.

  • More than 20 top companies, including Accenture, Apple, General Motors, Google and United Airlines, made that argument in an amicus brief before the Court.
  • Attending a diverse school helps prepare students for the experience of working with different kinds of people as clients, colleagues, and customers, they note.

Plus: The amici point to research that finds diverse teams are better at decision-making, creativity and communications.

  • "Diverse groups can better understand and serve the increasingly diverse population that uses their products and services. These benefits are not simply intangible; they translate into businesses’ bottom lines."

Zoom out: In the run-up to the decision and in its aftermath, there's been much hand-wringing about a chilling effect on corporate diversity efforts.

  • There's a concern that businesses will scale back on DEI fearing they'll be next up in the crosshairs of those who argue such efforts discriminate, Axios' Eleanor Hawkins reported.

Reality check: As Burrows emphasized in her statement, diversity efforts in companies are untouched by this decision.

  • "It remains lawful for employers to implement diversity, equity, inclusion, and accessibility programs that seek to ensure workers of all backgrounds are afforded equal opportunity in the workplace," said Charlotte Burrows, the chair of the Equal Employment Opportunity Commission, in a statement Thursday.

Between the lines: Companies don't treat race in hiring the way colleges handle it in admissions practices, Emerson points out.

  • Corporate DEI efforts are typically more focused on reducing bias in hiring — recruiting from a broader talent base, figuring out how to reduce discrimination in the interview process, etc.
  • Only 2% of companies in Paradigm's database set race/ethnicity goals for new hires, Emerson writes.

Bottom line: "Companies are right to be concerned, just not necessarily for the reasons they might think," Emerson writes.

Go deeper: Listen to the Axios Today podcast, where host Niala Boodhoo and Emily Peck explain why companies are opposed to affirmative action at the collegiate level.

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