This Article builds upon prior works which articulate an objective standard for corporate ethics and compliance that furthers shareholder wealth maximization: A firm should only engage in conduct that acclimates itself as optimally as possible to the full range of its constituencies, including investors, workers, consumers, and regulators. Further, because of the deep racial and social divisions within the United States today (and present in most business environments), a firm can achieve optimal acclimation only if it includes the full range of cultural diversity within its constituencies, as those diverse voices influence the behavior of the firm. This allows the firm to import the conscience of those constituencies due to differences in ethical sensitivities among discrete segments of the population. This Article argues in favor of an SEC disclosure guidance release requiring the disclosure of ethical and compliance governance structures and practices. Such a disclosure mandate should include: disclosure of governance structures at the board level and below; the role of cultural diversity in the ethics and compliance function; the degree to which the ethics and compliance function is independent of senior management; and how reports of potential misconduct are encouraged. These facts would be material to a reasonable investor given the history of shareholder losses (particularly in recent history) suffered at the hands of unethical and non-compliant management. This disclosure mandate could trigger a competitive race-to-the-top as firms search for those ethical and compliance practices that lead to the highest gains in sustainable financial performance. In short, competitive capitalism can lead to a race-to-the-top, in terms of ethicality and compliance practices, as well as a firm’s embrace of cultural diversity. The Article concludes that financial market competition can thereby foster superior financial performance, superior management of ethical and compliance risk, and superior embrace of cultural diversity all at once. This would further secure investment within the American economy.

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