Shareholder Votes Can Provide Strong Support For DEI

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With more companies like McDonald’s and Walmart ending DEI initiatives, corporate boards can count on continuing pressure from conservative groups to abandon diversity programs. Getting shareholders’ input on the issue offers corporate boards tremendous support.

Costco shareholders’ overwhelming rejection of an anti-DEI proposal submitted by the National Center for Public Policy Research which asked the retail giant to produce a report on the business risks of continuing its diversity, equity and inclusion programs may have provided corporate boards with a credible defense to continue fighting for such programs.

After stating its strong support for its DEI initiatives and the positive impacts they have had on the success of the business, the morale of employees and loyalty of customers, the Costco board urged shareholders to vote against the proposal, and according to a Reuters report, more than 98 percent rejected the measure. Reuters also reports that last year, the average anti-DEI resolution at U.S. corporations received less than 2 percent support.

Speaking to Reuters, Lindsey Stewart, director of stewardship research and policy for Morningstar Sustainalytics, said, “even if the political environment on inclusion in the workplace is changing, investors’ low propensity to support anti-DEI resolutions is thus far unchanged.”

However, things can change quickly. With more companies like McDonald’s and Walmart ending DEI initiatives, corporate boards can count on continuing pressure from conservative groups to abandon diversity programs. Getting shareholders’ input on the issue offers corporate boards tremendous support. However, some boards may have decided to end their DEI programs without checking with the majority of their shareholders first.

It appears that whenever shareholders are asked to vote in support of DEI programs, they generally approve. In most cases, complying with the wishes of shareholders results in a positive outcome. Therefore, for those companies that would like to continue their DEI initiatives, when challenged about the perceived risks posed by diversity initiatives, boards might want to:

Give shareholders the option of voting on whether to continue DEI programs. Giving shareholders the option of voting on the issue could take some of the politics out of the situation because the board can rightfully claim to be following the wishes of investors, which is in line with its fiduciary duty. Shareholders voting to have their company invest in diversity programs should be taken just as seriously as investors voting on other issues of importance to the organization. It should not be seen simply as “woke politics,” especially if real benefits to those programs can be measured and verified.

Report the productivity and positive developments the programs have achieved.  Companies that have had these programs in place for years, have never been sued and have seen positive financial growth should be able to make a case that the programs are contributing to that growth. Making the case that diversity programs are part of what makes the company successful is a great exercise for the board and will build trust with investors, stakeholders and the community that the programs are being implemented fairly and are not discriminatory.

Use discussions about voting to end DEI programs to strengthen them. The calls to end DEI programs are likely not going away, but hearing from others can help make the programs and initiatives better. Boards should not be opposed to making some changes to how diversity initiatives are implemented or described, especially if the changes are in the best interest of everyone. 


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