In August 2024, Harley-Davidson Inc announced an apparent substantive shift in its policies and practices regarding its workplace diversity strategy. These included no longer operating a diversity, equity, and inclusion (DEI) function, dropping supplier diversity spending goals, and ceasing to participate in the Human Rights Campaign’s corporate survey.[1]

Many investors view a company’s management of DEI-related topics as a material topic. If Harley-Davidson has dismantled DEI policies and practices, this may expose it to legal, financial, and reputational risks that will undermine its long-term growth.

Legal:

Racial and gender discrimination is prohibited under the Civil Rights Act of 1964. Furthermore, researchers have noted that reducing DEI program efforts may expose companies to greater risk. Companies must maintain harassment policies that are “reasonably designed and reasonably effectual.” If an employer should have known that harassment was taking place, it can be held responsible. Reducing or eliminating DEI initiatives might indicate a lack of corporate commitment to managing discriminatory behavior.[2]

Financial:

Many studies indicate that investors benefit from companies with management diversity. McKinsey studies have consistently found that companies with higher diversity in corporate leadership are more likely to outperform peers on profitability. This includes a 39 percent greater likelihood of outperformance for companies in the top quartile for diverse representation in their executive teams versus those in the bottom quartile.[3]

A review by As You Sow and Whistle Stop Capital of the manager diversity of over 1,600 companies found statistically significant positive correlations to key financial performance indicators, including: return on equity, return on invested capital, revenue growth, and share price performance.[4]

A 2024 meta-analysis found that companies with DEI initiatives experience benefits that include: increased innovation, enhanced employee engagement and satisfaction, and improved decision-making.[5]

Long-term growth:

Harley-Davidson's riders’ current average age is 44 years old.[6] Per the U.S. Census, while almost 63% of Americans 45-64 are currently White, in 20 years the 45–64-year-old demographic will comprise less than half of the U.S. marketplace.

Investors are concerned that, if the Company is not actively managing DEI considerations, it risks alienating an important future consumer base and its possibility for future growth.