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Affirmative Action


Affirmative Action refers to policies and practices that aim towards improving opportunities for historically excluded groups within a society, typically in relation to employment, education, and business. It is not a financial term, but rather a policy-related term often implemented in industries, including finance, to promote diversity and equality. It often involves measures to increase representation through mechanisms such as quotas or preference systems.


The phonetic spelling for “Affirmative Action” is /əˈfɜːrmətɪv ˈækʃən/.

Key Takeaways

  1. Affirmative Action refers to policies and practices aimed at improving opportunities for groups historically or socially excluded, especially in relation to employment or education. This often means favoring those suffering from discrimination.
  2. Despite aiming to create equal opportunities, Affirmative Action is often seen as controversial. Critics argue it can lead to reverse discrimination, where the majority group claims they are being discriminated against.
  3. Despite its detractors, Affirmative Action has proven to be an effective tool in promoting diversity and integration in educational institutions and workplaces, leading to richer environments and enabling traditionally marginalized groups to access opportunities they might otherwise miss.


Affirmative Action is an important business/finance term because it is a policy or a program designed to counteract historical discrimination against certain groups in business and other facets of public life. Companies often enact Affirmative Action strategies in recruitment and hiring practices to increase diversity and equal representation, striving to ensure opportunities are given to historically marginalized groups such as women or minorities. This concept is critical in promoting social and business fairness, driving diversity and inclusion, and discouraging discriminatory practices. It’s more than just a tool for leveling the field; it’s a strategy aimed towards enhancing business operations by drawing from a variety of skills, talents, and perspectives.


Affirmative Action is a significant policy largely utilized by businesses and educational institutions to enhance opportunities for underrepresented groups, primarily focused on reducing discrimination based on race, ethnicity, gender or nationality. It was implemented with an intent to counter the effects of past societal discrimination by allocating opportunities to certain sects that have previously endured prejudice. By ensuring a diverse environment, companies aim to build a workforce that not only benefits from a variety of perspectives and abilities but also mirrors the wider society in terms of representation.In business context, Affirmative Action is used to ensure a balanced workforce where no one is left out due to their background. This policy encourages organizations to work toward proportional representation in areas of recruitment, promotion, training and salaries. It ultimately fosters diversity and equal opportunity, creating an inclusive environment where everyone is given a fair chance to thrive. Affirmative Action is not about giving preferential treatment, but about leveling the playing field by acknowledging and addressing the historical trends of discrimination.


1. University Admissions: Many universities and colleges in the U.S. have affirmative action policies designed to increase the number of students from historically underrepresented groups, such as minority races, ethnicities, and women in certain fields of study, in their institutions. The goal is to ensure a diverse student body, enriching the educational experience for all students.2. Government Contracts: In the United States, the Federal Government has implemented certain affirmative action laws that promote the involvement of minority-owned businesses in federal contracting. These policies aim to help traditionally disadvantaged companies gain access to economic opportunities, thus leading to a more equal distribution of wealth and promoting economic empowerment for minority communities.3. Corporate Hiring: Many corporations implement affirmative action plans in their hiring and promotion policies. These can include both training programs designed to improve job skills among underrepresented groups, and also proactive hiring processes that take into account the racial, gender, or ethnic diversity of their workforce. For instance, tech companies such as Google have been public about their efforts to hire and retain female employees and employees of color to address historical underrepresentation in the tech industry.

Frequently Asked Questions(FAQ)

What is Affirmative Action in business?

Affirmative Action is a business and human resources policy that aims to increase opportunities in the workplace for historically marginalized groups, including people of specific ethnicities, women, and people with disabilities.

What is the purpose of Affirmative Action in business?

The purpose of Affirmative Action is to ensure fair employment opportunities and create a disparate workplace. It’s intended to foster diversity and mitigate discrimination that certain groups have experienced in the past.

How does Affirmative Action affect hiring practices?

Affirmative Action shapes hiring practices by encouraging employers to consider candidates from diverse backgrounds and avoid discrimination. It may involve proactive efforts to reach out to underrepresented groups during the hiring process.

Is Affirmative Action mandatory for all businesses?

No, Affirmative Action is not required for all businesses. It primarily applies to government organizations and private companies with government contracts exceeding a certain monetary threshold. However, many private companies voluntarily follow Affirmative Action policies to foster diversity.

Can Affirmative Action lead to reverse discrimination?

Critics argue that Affirmative Action can occasionally lead to reverse discrimination, whereby individuals belonging to the majority are disadvantaged. However, proponents believe that Affirmative Action policies are necessary to balance historic disadvantages faced by the targeted groups.

How does Affirmative Action impact financial decisions in a business?

Some financial implications of implementing Affirmative Action may include the costs of diversified recruitment and potential litigation costs associated with non-compliance. However, by fostering diversity, companies can reap economic benefits such as a more varied set of skills, enhanced creativity, and better market understanding.

Can a business face legal repercussions for not implementing Affirmative Action?

Yes. Businesses that are required to implement Affirmative Action can face legal repercussions if they do not comply. This can include penalties, fines, or being barred from government contracts.

What types of businesses are affected by Affirmative Action laws?

Public entities, educational institutions, and private companies with a significant number of government contracts are primarily affected by Affirmative Action laws. But many companies follow these policies voluntarily to enhance diversity.

Related Finance Terms

  • Equal Employment Opportunity (EEO)
  • Diversity & Inclusion (D&I)
  • Discrimination
  • Underrepresented groups
  • Employment Equity

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