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LGBTQ Workplace Inclusion before and after Obergefell V. Hodges: Association with Tobin’s Q and ROA

Journal of Accounting Ethics and Public Policy. November 21, 2020

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Diversity and inclusion advocates claim organizations benefit from diversity. Diversity is purportedly associated with many positive outcomes such as increased creativity, reduced turnover, increased productivity, a broader talent pool from which to choose, improved employee performance, increased innovation, potentially new customers and, ultimately, higher profits. Many studies support that claim, finding evidence that diversity is associated with higher company returns and market values. We examine if the association of company LGBTQ-benefits and policies with corporate returns and market value changed in the years around the 2015 Supreme Court ruling in Obergefell v. Hodges that legalized same-sex marriage nationally. The Corporate Equality Index (CEI), calculated and reported by the Human Rights Campaign ( 2020a), is used as a proxy for the level of company LGBTQ inclusiveness and support. The CEI is meant to provide a tool to rate U.S. businesses on their treatment of LGBTQ employees, investors and consumers, thereby focusing on a different aspect of diversity than simply defining diversity based on gender and/or race and ethnicity. Results indicate that higher HRC CEI ratings appear to be associated with higher Tobin’s q, a measure of long-term corporate performance. We find similar results for three time periods, pre-Obergefell, during the Supreme Court decision year, and post-Obergefell. These results indicate that diversity policies toward the LGBTQ community are associated with higher company market value, regardless of how uniformly US law has regarded same-sex marriage.