Rethinking Commitments to DEI: Corporations Reconsider Race-Based Ideology
Introduction:
Ford and several other major corporations, such as Tractor Supply, John Deere, Harley-Davidson, and Lowe’s, have recently distanced themselves from the “diversity, equity, and inclusion” (DEI) movement. This shift can be attributed to public pressure, legal challenges, and shareholder concerns. Shareholders have notified 25 companies that their DEI programs may violate civil rights laws and breach fiduciary duty. The rapid succession of reversals suggests a growing trend of companies reevaluating their DEI programs, which were seen as social engineering rather than value-producing business practices.
Ford’s Reversal and Cascade Effect:
Ford CEO Jim Farley announced a fresh look at the company’s DEI program, acknowledging that employees and customers hold a wide range of beliefs. Other companies, including Tractor Supply, John Deere, Harley-Davidson, Polaris, Indian Motorcycle, Lowe’s, and Molson Coors, have also revised their DEI policies due to public pressure or legal challenges. This cascade effect indicates a shift in customer demand and shareholder expectations. Jerry Bowyer, president of Bowyer Research, explains that the world of DEI and stakeholder capitalism had surpassed what customers desired, and shareholders were not asking for it.
Pressure and Backtracking:
Pressure from activists, shareholders, customers, and state attorneys general has compelled companies to reconsider their DEI programs. Tractor Supply, for instance, responded to consumer backlash and decided to no longer participate in the Human Rights Campaign rating system. They redirected their focus to rural America priorities, such as ag education, animal welfare, and veteran causes. Law firms have also faced legal suits compelling them to allow people of all races to apply for fellowships previously reserved for people of color. Employers are at risk of being sued for their DEI practices, with Edward Blum, president of American Alliance for Equal Rights (AAER), stating that using race as a factor in employment decisions is unfair, polarizing, and illegal.
Supporters and Critics:
Organizations advocating for DEI policies criticize companies for backtracking. Human Rights Campaign Vice President Eric Bloem called Harley-Davidson’s decision to back away from the Corporate Equality Index impulsive, emphasizing that DEI initiatives benefit everyone in the workplace. Advocates argue that DEI programs improve employment decision-making processes and close the opportunity gap among workers. Ming-Qi Chu, deputy director of the ACLU’s Women’s Rights Project, emphasizes that DEI programs do not disadvantage any particular worker and have long been held lawful. Microsoft, among other companies, has reiterated its commitment to DEI programs despite the trend of reversals.
Legal Risks of Race and Gender-Based Policies:
Legal experts argue that companies adopting policies based on gender or race assume legal risks. Recent U.S. Supreme Court rulings have cast doubt on the legality of such policies. In the Students for Fair Admissions v. Harvard case, the court ruled that universities receiving government funding cannot discriminate in admissions. This ruling clarified that racial discrimination in university admissions is illegal and applies to employers under Title VII of the Civil Rights Act. Companies relying on previous court decisions to justify race and sex-based discrimination now face legal consequences.
The Need to Rethink DEI:
Jeremy Tedesco, senior vice president of Corporate Engagement for the Alliance Defending Freedom, suggests that companies should rethink their embrace of DEI. Recent academic work, such as studies by McKinsey, has suggested that diversity leads to better financial performance. However, a study published in the Econ Journal Watch questioned the methodology used in the McKinsey studies, concluding that the reports were erroneous. The study found no statistically significant relationship between racial diversity and financial performance among companies in the S&P 500 index. This calls into question the assumed benefits of DEI practices.
Government Implementation of DEI:
The Biden administration has actively implemented DEI programs for government employees, issuing executive orders to make the federal government a model for diversity, equity, inclusion, and accessibility. However, this effort has faced opposition. Republican Senator JD Vance introduced the Dismantle DEI Act, aiming to eliminate all DEI programs for federal employees. Vance argues that the DEI agenda breeds hatred and racial division.
Conclusion:
The recent trend of companies reconsidering their DEI programs reflects a shift in customer demand and shareholder expectations. While supporters argue that DEI programs benefit everyone in the workplace and are legally sound, critics highlight the legal risks and question the assumed benefits of such practices. Ultimately, companies must navigate these complexities and strike a balance between meeting legal obligations, shareholder expectations, and customer desires.
