In the middle of the recent film “42” by Universal Pictures, the Brooklyn Dodgers Owner Branch Rickey played by Harrison Ford says to his partner at the opening game of the 1947 Major League Baseball (MLB) season: “Another opening day Harold…All future, no past.” This movie, an homage to legendary barrier-breaking baseball player Jackie Robinson, can be viewed as either Hollywood at its best, or at its worst. Like the comment by Rickey, there can be tremendous optimism and opportunity ahead. But, the simple statement goes nowhere in capturing the complexity and agony that goes with any civil rights and social justice movement.
Major League Baseball has indeed made strides towards embracing diversity as with other great institutions. And, Jackie Robinson is an incredible icon for this progress. But there’s still a long way to go. What the film “42” does capture particularly well, is the fact that the institution itself is vastly better off for having evolved. It’s better off for having, albeit kicking and screaming, embraced greater diversity. When asked why he took the actions he took in bringing Robinson to MLB, Rickey aptly said: “For the love of baseball.”
For the love of the institution, he embraced the power of difference and the power of challenging the status quo. Notwithstanding the fact that to many of our readers outside the US, the passion for the great American pastime is completely incomprehensible, we argue that the film has a great message for the world’s capital markets and for the discipline of finance. For the love of capitalism, we argue that “42” highlights the inextricable link between diversity, excellence, and sustainability. Embracing the extraordinary talents of Jackie Robinson raised the bar for the entire game.
The same potential exists for capitalism and for corporations as we begin to break down silos. It is silos which dampen creativity, productivity, innovation and long-term excellence. Just like Robinson’s batting average, the empirical proof is very much at hand. As an example, in a report from last year entitled “Gender Diversity and Corporate Performance” by the Credit Suisse Research Institute, CEO Brady Dougan highlights some striking results from the analysis. Having tested the performance of 2,360 companies globally, the research shows that corporations with women on their Boards achieved a higher than average ROE, lower gearing, better than average profit growth, and higher P/BV multiples over a period of more than half a decade.
The report cites some key reasons including: greater overall efforts by the staff, a better mix of leadership skills, access to a wider talent pool, a better reflection of the consumer decision-maker, improved corporate governance, and heightened risk aversion. This research is entirely consistent with numerous other studies done in the past few years (including those of Catalyst and GMI Ratings).
In citing the work of Professor Catherine Phillips of Columbia Business School, it echoes our own thoughts reflected in an article in “Wall Street Week” Diversity: Painful, but Profitable.”
When seeing the story of Jackie Robinson unfold in the film “42”, and wearing a lens of the capital markets, we circle back to Credit Suisse CEO Brady Dougan’s comment on his firm’s research: Diversity offers “another metric for scrutinizing corporate governance.” He further argues that the trend towards greater gender diversity will be “manifested as stability in corporate performance and in share price returns.”
Finally, in a further confirmation of the extraordinary value of embracing diversity, we note the recent retirement of Mariano Rivera after 19 seasons and 5 World Series with the New York Yankees. Rivera is the “The Greatest of All Time.” He holds every relevant pitching record in MLB history.
Rivera is also the last player who will every wear the number “42” in Major League Baseball. MLB has decided to honor the great Jackie Robinson by retiring Robinson’s number “42”. Imagine if Rivera, the son of a Panamanian fisherman, had been denied access to the game. Imagine the loss. Thank goodness we do not have to.
Erika Karp is the Founder & Chief Executive Officer of Cornerstone Capital Inc. and the former Head of Global Sector Research at UBS Investment Bank.
Michael Shavel is a Research & Business Analyst at Cornerstone Capital Inc. and a former Research Analyst on AllianceBernstein’s Global Growth & Thematic team.
Matthew Daly is a Research Product Manager at Cornerstone Capital Inc. and a former Product Manager at Credit Suisse.