27/07/2020 9:16 AM IST | Updated 27/07/2020 4:11 PM IST

The Evidence Is Clear, Caste Hurts Corporations In India And Abroad

Emerging research suggests caste-based losses to companies are similar to those due to a lack of gender and race diversity.

ASSOCIATED PRESS

Recent analyses on the State of California’s lawsuit against Cisco have indicated widespread, yet unrecognized casteism among companies in the Silicon valley. The discourse so far has only focused on how caste operates within South Asian-dominated workplaces in the United States, but there is reason to believe that this is a global phenomenon. A study commissioned by the UK government in 2010 documented caste-based discrimination in British workplaces. Anecdotal and journalistic evidence have highlighted instances in Canada and Australia. Several cases have been documented in India, even among institutions that implement caste-based reservations. 

Still, like Cisco, many institutions deny the existence of caste and the pervasive role it plays in shaping organisational practices. Recent arguments have focused on pointing out that caste-based discrimination, in any form, is morally wrong. This is not incorrect. People from caste-affected communities are constantly at risk of being discriminated against. They are often not recruited, citing ambiguous unquantifiable terms like “culture fit”, and even if they are, a conducive environment does not exist for their growth along the organisational hierarchy. As a result, decision-making positions remain out of reach even for those who demonstrate consistent performance. 

But, isn’t caste a problem for companies as well?

Research into how caste affects businesses is nascent, but emerging evidence indicates that caste-based losses for companies are similar to those that occur due to a lack of gender/race diversity. 

How caste operates inside companies

Due to historic reasons, upper castes possess high economic, social, and cultural capital, which allows them to access economic opportunities and derive disparate benefit from them. This is partly the reason why there is minimal presence of individuals from caste affected communities within corporates. Neither do affirmative action policies, formally as reservations, nor as diversity initiatives mandate the recruitment of Dalit, Bahujan, and Adivasi candidates. 

In 2009,  Sukhadeo Thorat and Paul Attewell discovered through a research experiment that for every 10 upper caste Hindu applicants, only 6 Dalits and 3 Muslims received an interview call although all candidates had the same education and experience . Applicants with a typical Muslim or a Dalit name had a lower chance of success than their upper caste Hindu counterparts. Another study conducted by a research team led by Nobel laureate Abhijit Banerjee found similar results. 

When companies are staffed with upper castes in executive positions, they tend to use company practices, such as recruitment, compensation, and corporate social responsibility, to benefit people similar to them. Hiring managers and recruiters, who are mostly upper-caste in South Asia (and  in companies across the world that employ South Asians in these roles), subconsciously or even consciously, also look for those that are similar to them or people that fit certain stereotypes

Professors Jodhka and Newman found that some hiring managers believed upper caste people are more suited for jobs in elite companies in a 2007 study. In the study, a manager is quoted to have said, “Jats are arrogant. They do not listen to anyone. Ahirs are tamed. Brahmans are more learned and can speak well. Scheduled castes (Dalits) are not vocal”. Another had said, “Among scheduled castes, there is a lack of technical skills and their attitude is unmatchable for the company.” 

Caste-discriminatory practices such as isolation, exclusion, bullying, and harassment are also commonplace within Indian corporates, or in multinationals that have a sizable south-Asian population. Biases that exist against caste affected communities are translated into assumptions about language proficiency (bad English) and performance (quota candidate), and negative judgments on political affiliations, food choices, and socio-religious markers. 

These perceptions have real-life consequences for Dalit, Bahujan and Adivasi (DBA) employees, such as being passed over for opportunities, appraisals, and promotions. They are considered to be far from the ideal high-performing archetype: an upper class, highly-networked, light-skinned, upper-caste cis-hetero male or its white/female equivalent. 

This has led to a severe lack of DBA representation in C-suites, board appointments, and leadership teams. Despite upper castes constituting only 14% in India’s overall population share, they occupy over 94% of corporate positions in India. OBCs (Bahujans) account for less than 2% and SC/STs (Dalits and Adivasis) account for a mere 0.01%, according to a 2019 paper by Ajit Dayanand, Han Donker, and John Nofsinger at the University of Alaska, Anchorage.

Caste is a problem for companies, not just for DBA employees

Yet, individuals and employees aren’t the only ones who suffer; emerging research illustrates that caste is a problem for companies as well, in much the same way that the absence of gender or racial diversity hampers organisations.

To put it simply, more diverse companies tend to be more successful companies. 

McKinsey’s Diversity Matters report from 2015 shows that companies in the top quartile for racial and ethnic diversity are 35 percent more likely to have financial returns above national industry medians, and companies in the top quartile for gender diversity are 15 percent more likely to beat the median. McKinsey’s more recent Diversity Wins report concludes that even in the COVID-19 crisis, diversity and inclusion matter more than ever, with higher representation leading to higher likelihood of outperformance. If diversity - gender, ethnic, and racial - generates benefits to companies, it is reasonable to assume the same for caste diversity as well. 

Although multinational companies are not exposed to caste in the countries they are headquartered in, they are still at high-risk when operating on Indian soil or when employing South Asians in India and elsewhere. From an operational perspective, companies, themselves, or via contractors, are at risk of exploiting workers from caste affected communities, discriminating in their product and service offerings, and engaging in violation or misappropriation of marginalised people and their heritage. If these risks are not adequately assessed, quantified, and mitigated, it could result in hefty economic or reputational losses in the form of compensation for victims of discrimination, negative media coverage and the loss of public and employee goodwill.  

More direct costs are also incurred. Research shows that inter-organisational relationships between companies are influenced by caste, rather than merit and efficiency considerations. For example, firms in India are more likely to acquire target firms that have directors of the same caste backgrounds, invariably resulting in suboptimal decisions. Acquiring firms end up paying a premium over the market price, and acquired firms perform poorly, with its directors receiving higher compensations.

Low caste diversity on corporate boards results in lower market value for firms. This is also true when CEOs and the board share caste affiliations. Novel ideas tend to originate outside of our social bubbles. So, firms with no Dalit, Bahujan, Adivasi individuals in its leadership ranks are deprived of information from diverse parts of the social system. This results in low efficiency and a lower firm value.

Similar caste backgrounds of employees can play a detrimental role in innovation, problem-solving, and conflict resolution. Lack of caste diversity leads to groupthink and poor recognition of  market needs and sentiments. Recent advertisements of Facebook, Kent RO, and Shoppers Stop - all withdrawn following criticism - are consequences of companies not having Dalit Bahujan Adivasi professionals in decision-making positions. Not only does this result in a huge reputational loss, it can also lead to a smaller customer base. 

Accusations of racism have led to a loss in business for companies globally. Starbucks lost nearly 16 Mn USD in lost sales due to a racist incident in Philadelphia. There is enough reason to predict that companies that practice casteism will suffer similar losses. 

While the above shows how poor caste diversity affects companies, there are a number of other ways in which societal inequalities inflict losses - low employee morale, poor entrepreneurship, and hostile socioeconomic environment - all of which can impose costs on firms.

Next steps for companies

Given how caste is intrinsically linked to South-Asian populations, companies that have business operations in the Indian subcontinent and/or employ South Asians, must create caste-inclusive organisations for better business. Most multinationals have company policies that address discrimination based on sexual orientation, disability, race, gender, and age, few have included caste in the list.

Exclusion of caste from discrimination policies makes companies caste-blind, particularly so when they are staffed with managers from privileged castes. Companies need to conduct company-wide audits to begin understanding caste compositions of individual companies/teams, and examine how caste influences corporate culture and managerial decision making. Many other steps need to be taken, modelling on diversity and inclusion initiatives around the world to create truly inclusive organisations.

There is a long road ahead for companies that want to make a difference with respect to caste. The good news is there is no dearth of tools, resources, or data to help guide the way. But the question is, will companies take the lead now and reap the benefits or will they continue to ignore and bear the losses?

Christina Dhanaraj is a corporate professional with over 12+ years of experience working and living in India, Singapore, China, the United States, and the Netherlands. She is currently an advisor for Smashboard. She was formerly the co-founder of the Dalit History Month project and a volunteer for #dalitwomenfight. She is currently based in the Netherlands. She tweets @caselchris1.

Dr. Hari Bapuji is a Professor of strategic management and international business at the University of Melbourne, Australia. His research is predominantly focused on how societal economic inequality affects business organizations, and vice versa. His research appeared in leading management journals and media around the world. He has over 10 years of industry experience in information technology and human resource management. He has lived and worked in Australia, Canada, India, and Singapore. He tweets @HariBapuji.