- A highly visible campaign against DEI is underway against companies like Costco.
- Political pressure is putting execs into a delicate balancing act over how to run their businesses.
- Experts said diversity and inclusion are more baked into corporate culture than ever.
Costco has found itself in the political crosshairs over DEI, and now some corporate leaders are left wondering who could be next.
In the meantime, some are choosing to make tweaks or changes.
On Tuesday, Disney’s HR chief told employees the company is rebranding its DEI metrics and programs, as well as changing the language of some content advisories.
And last week, Google linked changes to its DEI initiatives to concerns over compliance with executive orders, as the tech giant is a federal contractor.
Although many lawsuits and shareholder proposals against diversity, equity, and inclusion have failed, experts told Business Insider that the highly publicized challenges, including executive orders from the White House, could still have a chilling effect.
Companies are walking a line. They don’t want to get into legal hot water, and yet they likely don’t want to be seen as retreating from the values they’ve espoused for years.
At the same time, the experts — two lawyers and a business researcher — say the growing pressure on CEOs to eliminate their DEI practices might ultimately amount to little practical change in some workplaces.
While some companies, most notably Costco, are digging in their heels in defense of DEI, others, like McDonald’s, are taking a more conciliatory approach to the issue.
DEI policies get a facelift
The main changes companies make will likely boil down to how they communicate about their policies, both internally and externally, said Michael Thomas, a California attorney specializing in corporate diversity practices at the law firm Jackson Lewis.
Thomas said his firm has seen an increase in requests from companies to review their DEI initiatives for legal risks from clients who are also concerned about how they are perceived by employees and customers.
A major piece of the firm’s legal review is examining how companies communicate about their policies and practices in websites, reports, and other filings, he said.
Indeed, some of the changes at Disney appear to be more about how the company talks about DEI.
“What won’t change is our commitment to fostering a company culture where everyone belongs and everyone can excel,” Disney’s chief human resources officer, Sonia Coleman, said in a memo obtained by BI.
Emphasizing style more than substance could suggest a likely path forward for companies that see diversity and inclusion as beneficial to their business.
“Even Walmart and McDonald’s have conceded less than meets the eye,” Yale School of Management’s Jeffrey Sonnenfeld told BI. “They’re keeping the same principles and objectives. It’s just a question of nomenclature, metrics, and bureaucracies.”
McDonalds, for example, said in its memo to franchisees earlier this month that it was retiring “aspirational representation goals,” swapping a broad vendor DEI pledge with direct discussions with suppliers about inclusion, and changing the name of its diversity team to be the Global Inclusion Team.
Sonnenfeld pointed to the way terms like sustainability, climate change, and pollution abatement have cycled through the corporate lingo while generally sharing a common objective of protecting the environment.
Diversity and inclusion, in many cases, have been around long enough at this point that they’re often deeply embedded in corporate cultures, making it significantly harder to regulate, he said.
“It’s impossible to the point of insanity to try to ferret that out,” he added. “So the less modular it is, the less vulnerable they are.”
Some companies may pull back
Still, the anti-DEI pressure could have other companies taking a more drastic shift, said Jon Solorzano, a partner at the law firm Vinson & Elkins who advises public and private companies on areas related to ESG and risk management.
Under this new administration, companies that may have been on the fence about DEI may decide to pull back some programs, he said.
“Different companies view this differently,” he said. “Those that are probably in the more consumer-facing world are particularly sensitive to the reputational risks on both sides.”
Among the major companies that BI has tracked as retreating on DEI over the past year, most follow a similar pattern: ending representation goals that could be construed as quotas for hiring or sourcing, halting participation in rankings and surveys, and reassigning DEI-focused staff and resources.
More recently, BI reported that Amazon has changed the language on its website regarding DEI. A senior AWS executive told employees in her division that there would be “no changes” to key DEI-related benefits, including a transgender benefit offered by the company.
And earlier in December, Amazon’s VP of inclusive experiences, Candi Castleberry, said in a memo shared with BI that while the company was ending some “outdated” programs, it was part of an “evolution to ‘built in’ and ‘born inclusive,’ instead of ‘bolted on.'”
Of course, rebranding alone is not an option at federal agencies under Trump’s rules, which require a deeper review of a program’s history. Private companies aren’t subject to that same level of government scrutiny — for now, at least.
Last Wednesday, newly sworn-in US Attorney General Pam Bondi said the Justice Department intends to “investigate, eliminate, and penalize illegal DEI and DEIA preferences, mandates, policies, programs, and activities in the private sector.”
“They really need to balance those risks,” Solorzano said in reference to companies’ decision-making. “What’s more risky, the reputational harm of dealing with one of these investigations or having a mutiny of their employees?”
Business leaders make a case for diversity
JPMorgan, like Costco, has also taken a strong stand in defense of diversity, equity, and inclusion and is now the target of political and activist pressure.
At the World Economic Forum in Davos, Jamie Dimon shrugged off an investor group’s opposition to JPMorgan’s DEI policies. In 2020, the bank started tracking executives’ progress toward DEI goals, which affects their compensation, but it doesn’t disclose publicly what proportion of executive pay is linked to DEI work.
Solorzano said he believes there will likely be a “bifurcation” of companies over DEI. While many companies in recent years have adopted DEI programs, he said, “I also don’t know that for every organization it was really core to their strategy.”
“For places like Costco, it actually may be,” he added.
In Costco’s December statement to shareholders, the board said diversity “helps bring originality and creativity” to its offerings, leading to greater satisfaction for its increasingly diverse customer base.
A group of 19 Republican state attorneys general last month wrote a letter to Costco CEO Ron Vachris expressing “concerns” about the company’s compliance with changing state and federal laws. The AGs’ letter doesn’t identify any specific allegations of illegal practices.
Solozano said the scrutiny Costco is facing — and how Costco responds — is “definitely being watched by all other major consumer branded companies right now.”
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