Diversity and firm performance: role of corporate ethics

Purpose Empirical evidence concerning the relationship between diversity and firm performance continues to produce mixed results that are context-dependent (Guillaume et al., 2017). Additionally, little is known about the relationship between workplace diversity management and corporate ethics and whether diversity management is a contextual factor to consider in ethics research. This study assesses whether diversity management's contributions to firm performance are maximized through its effects on the firm's ethical processes. This paper examines three manifestations of diversity management (diversity recruitment, diversity staffing, and valuing diversity) and their relationship with firm performance as mediated by internal and external ethics. Design/methodology/approach The study used a sample from the Fortune 500 list of companies. The variables were constructed using several relevant indicators and applied to archival data collected from corporations' websites. The hypotheses on the relationship among diversity management, corporate ethics, and firm performance were tested using regression from the data gathered on 109 firms. Findings The analysis indicated that diversity management relates to both aspects of corporate ethics (internal and external ethics) but that only external ethics relate to firm performance. Results also found that external ethics partially mediate the relationship between diversity management and firm performance. Research limitations/implications - There are limitations to using corporate websites as sources of data. Furthermore, the research design assumed that diversity is an antecedent of ethics. Nevertheless, the findings convincingly demonstrate that diversity management has a strong positive relationship with both aspects of corporate ethics. Recommendations for further research are offered. Practical implications - The paper shows the value of diversity management and its impact on corporate ethics. Knowing that diversity management efforts contribute positively beyond their intended purpose may encourage managers to continue or implement such efforts, which could lead to more diverse and ethical workplaces and increased firm performance. Originality/value The paper addresses critical gaps in research and responds to repeated calls for studies integrating the business case for workplace diversity with its moral imperative (Alder and Gilbert, 2006; van Dijk et al., 2012; Yang and Konrad, 2011). The paper also provides evidence of a link from diversity management to firm performance through external ethics.