Column: Business leaders bow to anti-DEI activists — except at Costco

It has long been clear that relying on corporate leaders to stand fast for social and economic progress is a mug’s game.

Big business talks the talk, of course. As I’ve written before, after the insurrection of Jan. 6, 2021, many corporate leaders pledged publicly to oppose the assaults from the political right wing on democracy.

Leading corporations said they would cease making campaign contributions to lawmakers who voted against certifying Joe Biden’s election or played a role in the insurrection in Washington.

Some made similar promises about state laws restricting abortion or voting rights, or talked openly about reducing their activities in states enacting such measures. They promoted their commitment to programs fostering diversity, equity and inclusion, known as DEI.

When push comes to shove, however, most of these companies folded like a poker player with a bad hand. That’s been especially evident on DEI, which became a target in the “anti-woke campaign” waged by right-wing culture warriors such as Florida GOP Gov. Ron DeSantis during the late presidential campaign.

Anti-DEI activism on the right gathered steam after the Supreme Court struck down college affirmative action admission policies in June 2023.

Throughout this year, big corporations have retreated from the DEI landscape. The largest to do so is Walmart. In November, the company said it wouldn’t renew the five-year, $100-million commitment it made in establishing its Center for Racial Equity in the wake of the George Floyd killing, would cease using the term DEI and would end other diversity initiatives.

“We’ve been on a journey and know we aren’t perfect, but every decision comes from a place of wanting to foster a sense of belonging, to open doors to opportunities for all our associates, customers and suppliers and to be a Walmart for everyone,” the company said.

Ford, Harley-Davidson, Lowe’s and other companies said they would no longer provide workplace data to the Human Rights Campaign, a gay rights group, in part because the campaign’s widely published index of corporate progress enabled anti-LGBTQ+ activists to mount a backlash against participating companies.

That brings us to Costco. Almost uniquely among major public companies, Costco’s board has explicitly rejected the anti-DEI backlash.

The response from Issaquah, Wash.-based Costco came in the Dec. 11 proxy statement for its annual shareholder meeting, scheduled for Jan. 23. The meeting agenda includes a shareholder resolution proposed by the right-wing National Center for Public Policy Research, insinuating that Costco’s DEI program “holds litigation, reputational and financial risks to the Company, and therefore financial risks to shareholders.”

The resolution calls on the board to report on “the risks of the Company maintaining its current DEI … roles, policies and goals.”

The Costco board unanimously advised shareholders to vote against the resolution. “Our commitment to an enterprise rooted in respect and inclusion is appropriate and necessary,” it said in its response. “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 board took direct aim at the center, the resolution proponent, which it accused of hiding its true goal. Although the center “professes concern about legal and financial risks to the Company and its shareholders associated with the diversity initiatives,” the board stated, “it is the proponent and others that are responsible for inflicting burdens on companies with their challenges to longstanding diversity programs. The proponent’s broader agenda is not reducing risk for the Company but abolition of diversity initiatives.”

That swipe seems to have hit home. “The recent wave of companies walking back their DEI in response to no greater threat than merely having the truth about their DEI programs exposed,” center staff member Stefan Padfield told me by email, “makes clear that any related burden[s] these companies are experiencing are of their own making as they seek to misuse shareholders’ money to advance neo-Marxist and neo-racist ‘equity’ agendas.”

Costco says it doesn’t have any comment about the shareholder resolution beyond the board statement.

Although the Costco board didn’t go into detail, the center has assembled quite a record as a culture warrior. It’s a “partner” of the Stop Corporate Tyranny coalition, which describes itself as “a one-stop shop for educational resources exposing the Left’s nearly completed takeover of corporate America.” It has opposed initiatives to combat global warming, asserting that global warming isn’t happening, and it promotes cryptocurrency.

Costco’s straightforward response to the center’s proposed resolution may not be that much of a surprise. The company is generally known as employee-friendly, with favorable ratings from workers posting on Glassdoor. Among its benefits, health coverage with low co-pays is available to workers employed for at least 23 hours a week for 180 days.

Its approach to union organizing activity may not be entirely welcoming, but seems to lack the truculence and hostility shown by retailers such as Starbucks and Amazon.

Of Costco’s roughly 219,000 employees, about 18,000 are represented by the Teamsters. Remarkably, when 238 Costco workers in Norfolk, Va., voted to affiliate with the Teamsters a year ago, Chief Executive Ron Vachris and his immediate predecessor, W. Craig Jelinek, issued a joint statement blaming themselves.

They said they were “not disappointed in our employees; we’re disappointed in ourselves as managers and leaders…. The fact that a majority of Norfolk employees felt that they wanted or needed a union constitutes a failure on our part,” they wrote in a memo dated Dec. 29 and sent to all U.S. employees. CNN obtained a copy of the memo.

That doesn’t mean that labor relations are free of conflict: Early in December, the Teamsters union filed unfair labor practice charges with the National Labor Relations Board against the company for what it called the company’s “calculated effort to undermine workers’ rights and disrupt the collective bargaining process.”

Asserting that the company’s worker-friendly reputation is undeserved, the Teamsters said Costco had “expelled union representatives from stores, harassed and intimidated workers for wearing Teamsters buttons and attire, sent employees home, and even changed locks on union bulletin boards” to prevent the union from disseminating information to workers. Costco said it has no comment on the charges.

A few words about shareholder resolutions are appropriate here. Following the Supreme Court’s decision on college affirmative action, the number of resolutions about DEI programs receiving a vote at corporate annual meetings rose appreciably, to 25 through May this year from 13 in 2023, according to the Conference Board.

To be fair, that’s still a small number among the roughly 3,000 public companies in the Russell 300 index. More notable, however, is that anti-DEI proposals remained deeply unpopular. Resolutions opposing workplace diversity programs garnered support from less than 2% of shareholders, on average; those favoring such programs received support from an average of 21% of shareholders, however. (Shareholder resolutions proposed by almost anyone other than corporate managements seldom get anywhere near majority support.)

The Conference Board, a nonprofit corporate research consultancy, has found that diversity programs aimed at managers and the rank and file enhance corporate fortunes. Companies with diverse management teams “demonstrate 19% higher revenues due to innovation,” the board says.

Those with “higher racial and ethnic diversity [are] 35% more likely to have financial returns above their industry medians.” Commitments to diversity appeal to job applicants and tend to improve productivity.

On the other side of the coin are what the center’s Padfield claimed is “the wave of customer backlash we’ve seen against DEI.” He added, “rather than doing the right thing and evaluating the relevant risks … Costco is apparently doubling down on divisive and value-destroying DEI.”

The center told me by email that “one day, Costco will no longer have a DEI program. We hope for the sake of shareholders that it’s sooner rather than later.” Shareholders, workers and customers may hope for their own sake that the opposite is true — and that other businesses follow Costco’s example.