This article is part of a two-part series on recent ESG-related developments in Hollywood. This article focuses specifically on Hollywood's recent efforts to boost diversity in front of and behind the camera. Another part on efforts to incorporate sustainability in film and TV production can be found here.

Very recently, in a galaxy not at all far away, Hollywood had a gender and racial diversity problem. And many industry groups, including the Academy of Motion Pictures Arts and Sciences, believe it still does.

The movie business has made major gains regarding inclusion in the past five years, leading to films with casts that are more proportionately representative of the U.S. and world populations. But much of those efforts have been targeted at on-screen representation, where there is often a clear financial case for inclusion and diversity.

Behind the camera and in the studio offices, however, white men are still overwhelmingly the majority.

The Academy, which is responsible for the annual Oscar awards, in September took steps to effect change on this front when it announced new inclusion rules for films to be eligible for the Best Picture award, widely considered the most prestigious honor in the industry.

Some industry sources believe that the rules are appropriate as a measure to encourage a reasonable amount of diversity without making Oscar eligibility overly exclusive. Meanwhile, others argue that they will stifle creative freedom or perhaps not go far enough, given that most Oscar winners in the past 20 years would still qualify.

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The picture, in motion

"The most recent changes are a direct response to the racial reckoning happening around the world," said Franklin Leonard, producer and founder of online digital marketplace Black List, a platform that facilitates networking between burgeoning scriptwriters and producers.

Leonard, also a voting member of the Academy, was referring to the recent civil unrest associated with protests following the death of George Floyd in Minneapolis. That unrest gained steam globally as protesters sought justice in other minority deaths associated with police and championed civil rights movements like Black Lives Matter.

The new Academy rules require films vying for the best picture Oscar from 2024 onward to include minorities or women in two of four categories, which cover a cross-section of roles in the industry, including executives, talent, crews, financial backers and marketers. One of the two rule requirements can be satisfied if the distribution or financing partner on a film has a paid internship or apprenticeship held by a female or minority, regardless of the studio's own professional opportunities.

Though Leonard is sympathetic to claims that the rules do not guarantee adequate representation, he believes the rules are appropriate for the times and the role of the Academy.

"What the Academy is signaling is that you cannot be a responsible corporate citizen … unless you're making sure that in five years there is going to be a more diverse industry than there is now," he said. "No one wants a Black face on every movie. They just want to know you're not going to have a harder career just because you're Black."

Not everyone in the industry is as supportive of the new rules, however. Some have argued that the rules will erode creative freedom and increase costs, particularly for independent studios and filmmakers already strapped for resources.

"The more I look at these new AMPAS rules, the more I think their only effect, as written, is to favor large companies. Studio filmmakers will literally not have to do a thing to meet these standards,” media journalist and historian Mark Harris said in a Twitter thread. "That isn't just an unanticipated bad side effect of these new rules; as far as I can tell, it will be the ONLY effect."

However, Anthony Palomba, media expert and visiting assistant professor at the University of Virginia's Darden School of Business, said in regards to inclusion, independent studios do not likely have a material hurdle in resources. While it is true major studios and their partners have internship and mentorship programs that probably already satisfy the rules, given current technology and the number of people self-promoting online, it is relatively easy to access a range of diverse production talent, he said.

Finding the talent may not be the only obstacle, though. All filmmakers, including those behind indie films, prefer to include a diverse range of professionals, said Daria Jovicic, independent producer and owner of production company Latitude Media, "but we have other people that dictate many decisions, so we couldn't always be as inclusive as we wanted to." The new Academy rules could clear the way for agreement on that.

The fact that these rules had to be handed down at all, however, has upset some filmmakers. For instance, Mexican Oscar-winning director Alfonso Cuarón called it "disappointing" that diversity in Hollywood is "not coming naturally," telling IndieWire in September that these changes "should just be a natural process of societal evolution." Another producer and film investor in an interview agreed that "it's sad it has to happen like this."

"We're 6,000 years into human civilization, and we are being forced to work with each other," he said.

'Pursuit of profit'

The pursuit of a best picture Oscar may be what drives some filmmakers to create, but nearly all in the movie business are also looking for profits. Perhaps unsurprisingly, recent data indicates that a move toward diversity is also a move toward larger audiences.

In 2019, films with 41% to 50% minority cast representation were the most financially successful by a range of metrics, including global sales, global profits and domestic screens and opening gross, according to an annual Hollywood Diversity Report that the University of California, Los Angeles, began publishing in 2014. Films with the lowest diversity, with 11% or less minority cast, had the poorest financial results.

According to Leonard, more so than any kind of "cultural awakening," this type of data linking profits to diversity and inclusion will lead to better representation in the long term.

"I have faith in people's pursuit of profit," Leonard said.

The profitability should not come as a shock, according to Darnell Hunt, UCLA dean of social sciences and professor of sociology and African American studies, who also was a co-author on the UCLA report. Rather, it should be surprising that the industry doubted that correlation for so long, given that in the U.S., Latino people go to the theater more than others, and Latino and Black populations consume more media in general, he said.

The UCLA study also has shown that among the top 200 titles of the year by box office gross the number of lead actor roles held by minorities has jumped to 27.6% from 12.9% since 2014. In that same time period, female lead actors have grown to 44.1% from 25.8%.

Though that still does not accurately reflect the U.S. population, which is approximately 40% nonwhite and 50% female, it illustrates a big step toward better representation.

Room at the top

Though it is rapidly gaining ground on screen, diversity is still significantly lagging in the decision-making positions among writers, directors and executives.

The UCLA study, for instance, showed that women constituted just 15.1% of directors among the highest-grossing 2020 films. The same percentage of directors were represented by minorities.

Those gender and race representation figures were similar for writers among the top-grossing films; however, the situation was even less representative in studios' corporate offices. In 2019, 91% of studio chairs or CEOs were white and 82% were male. Other senior executives were 93% white and 80% male, according to the study.

Though Hollywood is getting the message in other areas, Hunt said it needs to "look as intently at what's going on behind the camera, in the executive offices and writers' rooms … which we would argue would make better product."

John Gibson, deputy chief of staff and senior director of diversity and inclusion initiatives at the Motion Picture Association, cited "Black Panther" as a standout example. Not only did the superhero film have a Black director and a majority-Black cast, but Black representation went all the way up to Nate Moore, the film's executive producer. The movie won several Oscars and became the highest-grossing film for The Walt Disney Co. domestically in 2018, according to data from Kagan, a media research group within S&P Global Market Intelligence.

But films like "Black Panther" are more than just valuable from a financial standpoint, said Gibson, who grew up in inner-city Washington, D.C. They can be life changing, providing inspiration to underserved groups short on positive reflections of themselves in media.

"As an African American man, I did not see the best of my community represented on screen," Gibson said. "It's a personal cause — that people get to see the best in themselves."