Hiding in Plain Sight: Firm Strategic Response to Diversity Disclosure Requirements

Many environmental and social regulations emphasize disclosures as a means to hold organizations accountable. However, research shows that organizations are strategic in making disclosures, using strategies to hide a lack of effort and results. While prior work has focused on the effect of symbolic management strategies on external audiences, we consider whether these strategies are associated with outcomes targeted by the regulation in subsequent years for the organization itself. Drawing on research in symbolic management, we theorize that the strategic use of omission, obfuscation, and abstraction in disclosures may prevent organizations from making headway on the disclosure issue. We test our hypotheses using the texts of 3,005 diversity disclosures of organizations under a mandatory “comply-or-explain” regulation for women’s representation on corporate boards by the Ontario Securities Commission in Canada (2015-2018). We find that firms with fewer women on their boards are more likely to use symbolic management strategies. However, we uncover divergent findings concerning the relationship between symbolic management strategies and the number of women on their boards in subsequent years (controlling for prior progress): obfuscation and abstraction are negatively associated and omission is positively associated with progress on diversity.