Costco shareholders have overwhelmingly voted against a proposal to assess the risks of its diversity, equity, and inclusion (DEI) initiatives. This proposal, presented by the National Center for Public Policy Research, stemmed from concerns tied to the Supreme Court’s decision in SFFA v. Harvard, which ruled that considering race in college admissions violates the 14th Amendment’s equal protection clause. Despite the corporate world increasingly re-evaluating DEI frameworks, Costco’s board firmly defended its programs, emphasizing their compliance with legal standards and their alignment with company values.
Why did the proposal fail to gain traction?
The proposal was rejected by 98% of shareholders, as preliminary results revealed. It called for a report detailing potential risks posed by maintaining DEI initiatives in light of legal challenges and warnings from attorneys general in 13 states. Critics of DEI argue that recent legal developments could make such programs vulnerable to lawsuits, particularly after the Supreme Court case. However, Costco’s board unanimously opposed the measure, asserting that its DEI policies are legally sound. They stated:
“Consistent with our commitment to ‘obey the law,’ we regularly evaluate our practices concerning compliance with law, including evolving Supreme Court decisions. We believe that our diversity, equity and inclusion efforts are legally appropriate, and nothing in the proposal demonstrates otherwise.”
What is the broader context for DEI in corporations?
The rejection of the proposal comes amid declining corporate enthusiasm for DEI initiatives. Over the past year, companies like Walmart, McDonald’s, Ford, and Amazon (NASDAQ:AMZN) have reportedly scaled back their DEI commitments. Shareholder resolutions opposing DEI and similar corporate social responsibility efforts have also struggled, receiving less than 2% support on average in 2024. This trend highlights the growing debate over the role of such programs in the private sector, with some viewing them as essential for fostering fairness and others questioning their legality and effectiveness.
In earlier cases, companies like Target faced criticism regarding their DEI programs, sparking debates about the balance between inclusivity and compliance with evolving legal standards. Similarly, Donald Trump’s executive order eliminating DEI programs from federal agencies further intensified scrutiny of such initiatives. Compared to Costco, which has doubled down on defending its policies, other corporations appear more cautious in maintaining similar frameworks.
Costco’s continued stance in favor of DEI contrasts sharply with the shift seen in other leading companies. This divergence raises questions about how businesses interpret legal risks and societal expectations surrounding inclusivity. For shareholders, the overwhelming vote against the proposal indicates confidence in the company’s current approach.
For stakeholders following corporate DEI trends, it’s essential to consider the broader implications of these debates. While some entities scale back, others, like Costco, stand firm, signaling varied strategies in addressing evolving regulatory landscapes and stakeholder priorities. This divide highlights the complexities organizations face when balancing legal compliance, ethical responsibility, and profitability.
