Equal Employment Opportunity in Supply Chains

An equal employment opportunity (EEO) policy is an essential practice of workplace diversity, equity, and inclusion. Using a novel measure of workplace EEO based on the textual analysis of online job postings, we show a lead–lag pattern of EEO practice between principal customers and their dependent suppliers. The leadlag effect is more pronounced when principal customers enjoy greater bargaining power, consistent with the view that dependent suppliers adjust EEO policies to cater to customer preferences. We use the 2017 Diversity Campaign of the “Big Three” institutional investors as our main identification strategy to support a causal interpretation. We demonstrate that the diffusion of EEO policies along supply chains improves the likelihood of retaining female employees, implying the presence of social benefits in addition to economic advantages.