Warning: U.S. Firms Setting Up Business Abroad Must Rejigger Their Diversity Policies

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Many American companies tend to think they have it right when it comes to promoting diversity in the workforce, and for the most part, they do. But the way diversity is defined in the U.S. corporate and public spaces does not necessarily make sense in other countries, says Donald Dowling, a partner at law firm White and Case in New York, who specializes in cross-border human resources law for multinational employers.

“What is uniquely American is the way in which we define diversity,” Dowling says, “but the fact that we have four different races here in the U.S. doesn’t make sense elsewhere. You may have gender and equality issues everywhere in the world, and with maybe an exception or two, the issue of diversity in some form is culturally universal, but for U.S. companies that are expanding their businesses overseas, you can’t just take a diversity model that works here and hope to apply it elsewhere.”

As such, U.S. companies that are setting up businesses abroad – and more and more of them are – need to think very carefully about extending their diversity policy to those countries, Dowling says.

“If you want to get it right overseas, you really need to think it through and morph your policy into something that makes sense for a particular country,” he says. “You have to take into account the fact that U.S. diversity metrics only make sense here, and that other countries have important population distinctions that are not Caucassian, Native American, African-American, Asian races plus Hispanic.”

Formulating the correct diversity policy for an individual country means knowing exactly what the ethnic and demographic breakdown is, Dowling says. This requires a great deal of work and might not always be feasible, so companies need to decide if they do want to go the whole hog, or – at the outset, anyway – stick with just one diversity parameter like gender.

At home, though, there’s no question that U.S. companies have to continue to promote diversity within their workforce, Dowling says, because diversity is more important in the U.S. than it is almost anywhere else in the world. The U.S. is demographically diverse, it has a “shameful history of slavery and lynching that has to be corrected,” and it is the only nation where local employment law does not protect employees, but where employers can fire at will, Dowling says.

“We deal with this by having a system that allows people to file discrimination claims – more robust than what other nations have in this regard,” he says.  

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