Why companies don't always reveal employee data

For decades, conversations about workforce diversity have been shaped by what companies chose to reveal rather than what the data could genuinely tell us. Despite the scale of the issue, most discussions were conducted in the dark. As Assistant Professor of Accounting Rachel Flam explains on The Why Podcast, “for years we were trying to understand diversity without the one thing that actually mattered: firm-level evidence.”

That evidence finally arrived in 2023. After a years-long legal battle initiated by journalist Will Evans from the Center for Investigative Reporting, more than 19,000 Equal Employment Opportunity (EEO-1) reports were released under a court order. These annual reports – required from US firms with more than 100 employees – offer a detailed breakdown of workforce composition across ten job categories. It was the first time researchers could look inside organisations rather than rely on aggregate industry or regional figures. And what they found was eye-opening.

Looking behind the curtain

Flam’s research with co-authors Thomas Bourveau and Anthony Le shows that industry, geography and time explain roughly 60% of the variation in diversity across firms. The remaining 40% comes down to something harder to quantify: what happens inside the organisation. Culture, processes, promotion dynamics – factors that are rarely disclosed publicly – have a tangible influence on who progresses and who does not.

The newly available data reveals stark patterns. While racial minorities make up around a third of the overall workforce, they account for just 21% of managers. Representation for Black employees is particularly low: 65% of companies employ fewer than 5% Black middle managers, and over 85% report similarly low numbers at executive level. Hispanic employees face similar barriers. By contrast, women remain relatively well represented until the very top of the organisation, where the familiar ‘glass ceiling’ emerges.

Crucially, the most significant drop-off for racial minorities occurs at first and middle management – precisely the layer that shapes day-to-day experience and opportunities inside a firm. Flam argues that this is where organisations need to focus if they want to build genuinely inclusive cultures. It is no longer enough to look at boards and executives. There needs to be visibility across the full managerial pipeline.

The puzzle of disclosure

If companies prepare these reports every year, why did so few disclose them voluntarily? Flam’s research found that before the court ordered release, just 6.4% of public firms chose to publish their EEO-1 data. And the pattern was consistent: firms with stronger minority representation were significantly more likely to disclose; those with lower diversity were more likely to withhold.

This was not a question of data quality or effort – the reports already existed. Rather, it reflected strategic behaviour. Firms appeared more comfortable revealing their numbers when they compared favourably with their industry, geography or internal promotion pool. In other words, companies were not just disclosing diversity – they were disclosing good diversity.

Transparency as a catalyst for change

Public expectations are shifting. Since the release, voluntary disclosure among large firms has risen sharply. Investors increasingly treat diversity performance as financially relevant, and stakeholders – from employees to consumers – are asking tougher questions.

For Flam, the immediate opportunity is clear. If reports are already prepared every year, the first practical step is simply to disclose the report proactively. Transparency forces firms to confront the reality of their workforce and gives the public a way to distinguish genuine progress from polished statements.

But the deeper challenge is cultural. Data alone won’t close representation gaps, especially those that emerge early in the managerial pipeline. Data provides the information, but it is firms who must act on it. Closing the gap requires mentorship, fair promotion practices and structural support that lifts underrepresented employees into leadership.

What the new research provides is a baseline – a way to see what was once hidden. And with visibility comes accountability. As Flam’s work shows, the story of workforce diversity is not solely about labour markets or talent shortages. It is about the choices organisations make every day, and the transparency needed to ensure those choices drive lasting change.