Corporate board members who are interested in maintaining diversity equity and inclusion programs at their companies will want to pay attention to what the Costco board is doing in its fight against anti-DEI activists.
The National Center for Public Policy Research (NCPPR) has filed a proposal which asks Costco to end its DEI initiatives because they are discriminatory and open the company up to financial and legal risks. In a statement, the conservative think tank stated that, “DEI holds litigation, reputational and financial risks to the company, and therefore financial risks to shareholders.” The NCPPR asks shareholders to vote in support of its proposal during Costco’s annual meeting set for January 23.
Costco’s board is urging shareholders to vote against the NCPPR proposal and has publicly stated its commitment to its DEI programs. In a message to its investors, the board stated “Our efforts around diversity, equity and inclusion follow our code of ethics: For our employees, these efforts are built around inclusion—having all of our employees feel valued and respected. Our efforts at diversity, equity and inclusion remind and reinforce with everyone at our company the importance of creating opportunities for all. We believe that these efforts enhance our capacity to attract and retain employees who will help our business succeed.”
The January 23 vote will help determine whether Costco will join Walmart, Harley Davidson, Ford Motor Company, Tractor Supply, John Deere, Home Depot, Lowe’s, Microsoft and Southwest Airlines and several other major companies that have taken a stance against DEI initiatives, in part due to pressure from conservative groups. In 2024, some companies were threatened with legal actions and boycotts because of their support for DEI initiatives. There are reports that Costco might be facing a boycott soon.
No matter which side of the DEI debate directors are on, corporate boards will likely pay close attention to what happens with the vote on this anti-DEI proposal. Costco is one of the largest companies to be confronted with calls to dismantle its DEI programs, and its board has chosen to fight. Examining what Costco does may prove helpful as the debate over DEI continues. Corporate boards might want to:
Communicate the organization’s commitment to diversity to investors. In a message to investors, Costco’s board explained its reasoning for believing in and implementing diversity programs. The board also explained how diversity contributed to and enhanced the current business, which is very profitable and well admired across the globe. It made the point that employees were largely in favor of the programs and that the programs helped with recruiting the best and brightest from all backgrounds. Other boards might want to show that with diversity programs in place, their businesses haven’t suffered the negative impacts the anti-DEI activists suggest.
Connect DEI with corporate values. Soon after the NCPPR proposal was filed, Costco quickly reached out to investors in a message tying diversity to the company’s code of ethics. Establishing the organization as ethical will help dissuade the attempts to smear it as discriminatory. Also demonstrating that the company has a corporate culture that fosters tolerance and values differences might go a long way to fending off claims of discriminatory behavior.
Prepare a legal defense of your DEI programs. Ultimately, anti-DEI activists will likely file lawsuits if shareholders do not vote to abolish DEI programs. Boards will need to make sure that any programs they implement are not viewed as quotas and do not discriminate against people who are white, Asian male or straight. It might be wise to approach outside legal consultants because the language used to describe and defend any DEI program will be under the strictest scrutiny imaginable.
