Trump called for the end of DEI programs.
President Donald Trump is calling for the elimination of federal Diversity, Equity and Inclusion, or DEI, programs.
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Costco shareholders rejected an investor proposal from a conservative think tank that urged management to scale back its diversification initiatives. Investigate business risks.
More than 98 percent of shares voted against the proposal, according to preliminary results announced by Costco Chairman Hamilton “Tony” James. He and other board members had asked shareholders to reject a proposal covering the company’s diversity, equity and inclusion policies ahead of Thursday’s annual meeting.
James said, “We owe our success to the more than 300,000 employees who serve our members every day. It is important that they are all included and appreciated and that they communicate these values to our customers. ” said James.
Ethan Peck of the National Center for Public Policy Research—the right-leaning shareholder advocacy group that proposed the proposal—argued in a prerecorded message that DEI is “illegal, unethical and detrimental to shareholder value.” is detrimental to” and risks litigation for the company.
“By not hiring and promoting completely regardless of race and gender—in other words, solely on merit—a company is not always hiring or promoting the best person for the job, And anything less than that is selling the company short, and therefore the shareholders, short,” the message said.
The vote comes days after President Trump used executive power to crack down on DEI.
Increasingly, companies are facing a DEI showdown at the shareholder ballot box.
Apple recently recommended that investors vote against a shareholder proposal to end the company’s DEI programs.
Right-leaning groups such as the National Center for Public Policy Research and the National Legal and Policy Center say they want shareholders to counter the liberal politics invading corporate boardrooms and advance an “awakened” ideological agenda. Brings suggestions that put the business at risk.
Seizing on a 2023 Supreme Court decision striking down affirmative action in college admissions to challenge corporate diversity policies, these groups are bringing more DEI proposals to investors.
Although smaller, the number of anti-DEI shareholder proposals has more than tripled since 2020, according to the Conference Board. Walmart and Starbucks are facing similar proposals this proxy season.
Peck, deputy director of the National Center for Public Policy Research’s Free Enterprise Project, said his group is planning 40 shareholder proposals this year, 12 of which focus on DEI.
“Our shareholder proposal efforts are very much in line with the general pushback against DEI, in that both the general pushback and our proposals are about exposing that DEI,” he told USA TODAY. How it’s destroying discrimination and value,” he told USA TODAY.
Right-leaning investors push shareholder proposals — even those likely to receive low single-digit support — to make a point and gain attention. Like Costco, corporate boards typically recommend shareholders vote against them. Initiatives typically receive less than 2% of shareholder support.
Trump’s DEI Executive Orders Increase Business Risks
Speaking to business leaders at the World Economic Forum in Davos on Thursday, Trump called the DEI programs “absolute nonsense.”
His latest executive order to end DEI in the federal government and affirmative action in federal contracting sent shockwaves through corporate America. Trump said his administration would investigate corporations that don’t fall into line. This warning may fuel greater shareholder activism over the potential legal and financial consequences of diversification initiatives.
JPMorgan Chase is one of the companies that could be a target.
When asked about a potential challenge to its DEI methods, CEO Jamie Dimon told CNBC’s Squawk Box: “bring them” Although he said he would listen to arguments about where JPMorgan Chase is going wrong “and make adjustments.”
Faced with a rapidly changing political environment and under fire from conservative foundations, think tanks and political activists, a growing list of large corporations have backed off on diversification efforts.
Some companies backed away from DEI commitments shortly before Trump took office. Among them was Facebook and Instagram owner Meta as CEO Mark Zuckerberg sought to align his social media company with the Trump administration.
Costco, Apple and others rejected anti-DEI shareholder proposals.
Those rollbacks have critics who say companies are making short-sighted decisions that could hurt their businesses.
Among them is the progressive shareholder advocacy group As You Bow, which issued a Report 2023 showing “statistically significant correlations” between diversified management and eight key financial metrics.
“These are businesses that have been around for more than four years. We expect them to be in front of us beyond that four-year window,” said Meredith Benton, principal founder of Whistlestop Capital, which owns As You Bow. on consults with DEI. “What we want to see is that they make decisions that are in their business interests in the long term.”
Some companies stand by their DEI programs. No one has defended these programs as vigorously as Costco.
Presented by the National Center for Public Policy Research. Shareholder proposalarguing that Costco’s DEI actions pose “litigation, reputational and financial risks to the company, and therefore financial risks to shareholders.”
Costco’s board of directors voted unanimously to recommend that shareholders reject the move, arguing that diverse employees and suppliers drive innovation in the goods it stocks and the services it offers. .
“Our commitment to an enterprise of respect and inclusion is appropriate and necessary,” the directors said. “The report requested by this proposal would not provide meaningful additional information.”
Costco CEO Ron Wichris also defended the practices to a concerned shareholder, saying his company does not use job quotas but focuses on giving all workers equal opportunity.
“If these are the policies you find offensive, I have to tell you that I am not prepared to change,” Vacheris wrote. exchange The Wall Street Journal noticed.
Stephen Padfield, director of the National Center for Public Policy Research’s Free Enterprise Project, said Costco’s “perverse” response to a “perfectly reasonable shareholder request” was out of line.
“Just relying on shareholders to trust the status quo at Costco is insufficient,” Padfield told USA TODAY. “This is a rapidly changing landscape in terms of law, regulation, and market sentiment, and shareholders have good reason to review practices, legal advice, and management information gathering and processing accordingly.”
