Costco's Counterstatement Unveils the Mindless Financial Burden of Opposing Diversity, Equity, and Inclusion Initiatives
Costco's Board of Directors is encouraging shareholders to reject a shareholder proposal from the National Center for Public Policy Research (NCPPR) that demands the company to analyze and disclose, excluding confidential information, potential risks associated with maintaining its current DEI (People & Communities) roles, policies, and goals.
This stance by Costco differentiates it from other prominent firms that have eliminated DEI roles and initiatives due to pressure from anti-DEI advocates. Beyond the commendation for bucking this trend, there are aspects in the NCPPR proposal and Costco's board's reaction that can help leaders grasp why the grandstanding and lawsuits from anti-DEI activists are pointless and even leading to financial losses for businesses and shareholders.
To bolster its shareholder proposal, the NCPPR refers to a 2023 lawsuit where a white woman was awarded over $28 million after claiming she was terminated due to her race. Using this lawsuit, along with cases of large corporations scrapping DEI initiatives, the NCPPR maintains that DEI presents legal, reputational, and financial risks to the company, consequently posing a threat to shareholders' investments.
Referencing a single lawsuit to justify eliminating DEI is misleading. To provide some context, keep in mind that in 2019, the same year as the said lawsuit, the EEOC received 23,976 complaints related to race discrimination and 8,682 complaints regarding race harassment discrimination, as well as nearly 50,000 complaints concerning other DEI-related issues such as sex, age, and disability. This does not account for lawsuits initiated through private lawyers, often leading to substantial financial settlements.
It's also important to note that historically, white workers accounted for only approximately 10% of race-based complaints lodged with the EEOC, despite comprising about two-thirds of the US workforce. However, it was after conservative groups like NCPPR and prominent anti-DEI figures started their crusades that some white workers gained the courage to file more reverse discrimination lawsuits.
The shareholder proposal also unveils some of the ways organizations like NCPPR employ misleading and divisive language to fuel polarization. In the proposal, there's a sentence stating that Costco still funds organizations with discriminatory DEI agendas using shareholder funds. Describing DEI as having a discriminatory agenda is preposterous, as DEI's primary objective is to combat decades of discrimination affecting underrepresented groups. This sort of misleading language is designed to alter the entire perception of the DEI field, fueling further division and hostility.
In fact, it is exactly this kind of misleading language that empowers more white employees to complain internally about reverse discrimination and to file lawsuits against their employers. This is exactly what anti-DEI activists like the NCPPR aim to achieve: stoke anger and polarization among white people, leading to more lawsuits and boycott threats against prominent brands. In turn, this puts financial strain on the targeted organizations, who may find it challenging to respond to these attacks.
These baseless attacks don't benefit anyone and are, in fact, causing widespread damage. They harm employees by creating a more unfavorable work environment for everyone, and they harm shareholders by incurring unnecessary expenses. The damage extends to all companies, not just those directly under attack. Media coverage of these attacks fosters antagonism between identity groups across all organizations, and the cost of increased litigation isn't limited to the companies that get sued; during a conference promoting the international standard ISO 30415 for Diversity & Inclusion, James Felton Keith, CEO at InclusionScore, mentioned that "Insurance carriers raise the costs on companies that adopt similar practices."
Consequently, if anything, the increased reputational and financial risks are not because of DEI initiatives, but rather the anti-DEI activities encouraged by groups like NCPPR. These organizations are willingly spending millions to target companies, promoting discord to uphold their beliefs, with no regard for the well-being of millions of employees or the financial well-being of corporations and their shareholders. As Costco's Board of Directors suggests in its response to the proposal, "it is the proponents and others responsible for imposing burdens on companies with their challenges to established diversity programs."
On the other hand, Costco's response emphasizes the positive impact of DEI on increasing shareholder value and improving the lives of the people it influences: employees, members, and suppliers. Costco acknowledges the substantial financial impact it has experienced by leveraging DEI to attract and retain talent, enhance employee satisfaction, stimulate creativity and innovation, and satisfy more customers. In their own words, "our commitment to our employees, members, and suppliers has rewarded our shareholders."
And these aren't just unsubstantiated claims based on ideology; with annual revenues of around $250 billion, over the last 10 years, Costco's stock has provided an annualized return of 23.13%, significantly higher than the 11.51% annualized return of the S&P 500 benchmark. This evidently shows that happy employees are not merely a "nice to have," but rather a "key to higher profits."
On the other hand, NCPPR is a non-profit organization with an annual budget under $12 million that has promised to confront the "woke and censorship-promoting mob on the Left" in the corporate world. They have no concern for the welfare of the corporations they criticize or their shareholders; their main goal is to push their ideological agenda forward.
The current backlash against DEI is a result of the pendulum swinging back after the significant surge of interest in DEI topics, sparked by George Floyd's murder in 2020 and various societal inequalities exposed during the COVID-19 pandemic. The rise in political conservatism has provided extra momentum to anti-DEI activities, causing the pendulum to swing quickly in the opposite direction.
Costco's response to NCPPR's shareholder proposal, and its steadfast commitment to DEI as a crucial element of its financial and reputational growth, serves as a reminder that not all major corporations will cave under the pressure from ideological groups like NCPPR. Corporate leaders would be wise to follow Costco's example in managing their employees and responding to anti-DEI criticisms.
- Despite NCPPR's assertions, Costco's Board of Directors points out that NCPPR is a non-profit organization with a modest annual budget, raising questions about their true motivations and concern for the company's welfare and shareholder interests.
- The backlash against DEI initiatives, as seen in NCPPR's shareholder proposal, can lead to a costly legal and reputational backlash for companies, as evident by the increase in lawsuits and financial settlements related to DEI-related issues reported by the EEOC.
- In contrast to the financial gains and improved work environment seen at companies like Costco, which prioritize DEI initiatives, anti-DEI activists like NCPPR are leading a charge that may bring about financial losses for businesses and shareholders, as well as a less favorable work environment for employees.
