Mandated Diversity Reporting and Perverse Incentives

How adding organizational hoops probably won't help anyone

It’s been a while since my last post. I’m afraid I was occupied earning a living. The thought of my tender children anxiously worrying about their next meal simply overcame me. Although, since my youngest is 17 and is perfectly capable of ordering Uber Eats on his own, I’ll acknowledge I wasn’t all that overcome.

“Earning a living” in this case, meant finishing up a video course for Pluralsight on “image segmentation using deep learning models” and responding to my publisher’s copy editor’s notes to my “The Complete Obsolete Guide to Generative AI” book.

Thanks for asking.

But bureaucrats and apparatchiks at various levels certainly haven’t been sitting idle. They’re all pushing back heroically against all ills, modern and ancient. As we’ll see though, they don’t seem to be making a lot of progress.

Consider the Canadian Securities Administrators (CSA) corporate diversity reporting rule.

Wait: there’s a legally binding corporate diversity reporting rule in Canada? Also, wait: the “Canadian Securities Administrators” is a real thing?

To answer both questions: not really.

The CSA does exist and it’s there to facilitate collaboration and information sharing among its members (Canada’s provincial and territorial securities regulators). But it's the individual regulators who have the legal authority to take enforcement action. So, breathless public claims to the contrary, the corporate diversity reporting “rule” actually appears to be nothing more than a suggestion.

Nevertheless, it’s a suggestion that carries risk. Checkbox-compliance requirements often distract company officers from their primary fiduciary and legal responsibilities. And there’s evidence that adding yet another file-and-forget process to the organizational workload won’t end up helping the intended populations anyway.

In fact, none of the diversity-is-our-strength efforts have led to consistent success in Canada’s employment market. As Statistics Canada data shows us, improvements in average annual incomes for visible minorities vs non minorities in Canada have been ambiguous.

As you can see below, the average individual belonging to a visible minority earned nearly 19% less than the average non minority in 2006. But by 2021, the disparity had dropped by only a couple of points.

You’d think that years of failure would inspire fresh and original thinking, not Olympic-scale doubling down.