Costco’s Board of Directors is urging shareholders to vote against a shareholder proposal by the National Center for Public Policy Research (NCPPR) that would require the company to “conduct an evaluation and publish a report, omitting proprietary and privileged information, on the risks of the Company maintaining its current DEI (including “People & Communities”) roles, policies and goals.”
This rebuttal sets Costco apart from other major companies that have eliminated DEI roles and initiatives as a result of pressure from anti-DEI activists. But beyond the accolades for bucking the trend, there are elements in the NCPPR proposal—and the response by Costco’s board—that can help leaders understand why all the posturing and lawsuits brought by anti-DEI activists are senseless, and actually causing companies and shareholders to lose money.
To support its shareholder proposal, NCPPR cites a 2023 lawsuit in which the plaintiff, a white woman, was awarded more than $28 million after arguing she was fired because of her race. Based on this event, and citing other large companies that have eliminated DEI initiatives, NCPPR suggests that “DEI holds litigation, reputational and financial risks to the Company, and therefore financial risks to shareholders.”
Pointing to a single lawsuit as a reason to eliminate DEI is disingenuous. To put this in perspective, it should be noted that in 2019—the same year that the above-mentioned lawsuit was filed—the EEOC received 23,976 Title VII complaints on race discrimination and 8,682 for race harassment discrimination, plus nearly 50,000 complaints related to other DEI issues such as sex, age and disability. This does not include lawsuits brought through private attorneys, which can lead to significantly larger monetary awards.
It should also be noted that, historically, white workers accounted for only about 10% of race-based claims filed with the EEOC, in spite of making up about two-thirds of the US workforce. It is only after conservative groups like NCPPR and other visible figures began anti-DEI activism that some white workers became emboldened to file more lawsuits alleging reverse discrimination.
The shareholder proposal also reveals some of the ways in which organizations like NCPPR use misleading and divisive language to fuel polarization. Consider the sentence from the proposal claiming that Costco “still contributes shareholder money to organizations that advance the discriminatory agenda of DEI.” Describing DEI as having a discriminatory agenda is absurd, because the entire point of DEI is to try to counter the decades of discrimination that have impacted members of underrepresented groups. This sort of gratuitous and misleading language is designed to misrepresent the entire field of DEI, creating further division and anger.
In fact, it is exactly this kind of misleading language that emboldens more white employees to complain internally about reverse discrimination, and to take legal action against their employers. And this is exactly what anti-DEI activists like NCPPR aim to do: foment anger and polarization among white people, which will cause more of them file lawsuits or to threaten boycotts of visible brands. In turn, this will exert financial pressure on the targeted organizations, who will find it difficult to rebuke these attacks.
These mindless attacks are not benefitting anyone, and in fact they are causing widespread damage. They hurt employees by creating an increasingly unpleasant work environment for everyone, and they hurt shareholders by generating unnecessary expenses. And the damage impacts all companies, not just those targeted directly by the attacks. Media coverage of these attacks fosters animosity between identity groups across all organizations, and the cost of increased litigation is not limited to the companies that get sued: during a recent conference to promote the international standard ISO 30415 for Diversity & Inclusion, James Felton Keith, CEO at InclusionScore, pointed out that “Insurance carriers pay each time we claim discrimination. Even if funds don’t exchange hands, insurers raise the costs on companies that do similar work.”
Hence, if anything, the increased reputational and financial risks are not due to DEI initiatives—which in principle are designed to decrease the risk of lawsuits by creating work environments where discrimination is less likely—but rather to the anti-DEI activities initiated by groups like NCPPR. These groups are purposefully spending millions to attack companies, fomenting polarization to support their views, with no regard for the personal wellbeing of millions of employees, or the financial wellbeing of corporations and their shareholders. As Costco’s Board of Directors suggest in their response to the proposal, “it is the proponents and others that are responsible for inflicting burdens on companies with their challenges to longstanding diversity programs.”
To contrast the negative impact of anti-DEI activism, Costco’s response also underscores the positive impact of DEI in creating shareholder value and enhancing the well-being of people whose lives they influence: employees, members, and suppliers. Costco’s response recognizes the material financial impact they have enjoyed by leveraging DEI to attract and retain talent, to enhance employee satisfaction, to foster creativity and innovation, and to satisfy more customers. In their own words, “service to our employees, members and suppliers has rewarded our shareholders.”
And these are not just unfounded claims based on ideology: with annual revenues of about $250 billion, over the past 10 years Costco’s stock has yielded an annualized return of 23.13%, more than double the annualized return of 11.51% for the S&P 500 benchmark. This demonstrates clearly that happier employees are not simply a “nice to have,” but a key to higher profits.
In contrast, NCPPR is a nonprofit with an annual budget of under $12 million that has vowed to “fight back against the Left’s woke and censoring mob in the corporate lane.” They have no interest in the wellbeing of the corporations they attack or of their shareholders—they simply want to advance an ideological agenda.
The current anti-DEI backlash is a manifestation of the pendulum swinging back after the strong rise in interest sparked by the 2020 murder of George Floyd and by other societal inequities laid bare during the COVID-19 pandemic. The recent rise in political conservatism has given additional momentum to anti-DEI activities, causing the pendulum to swing very rapidly in the opposite direction.
Costco’s rebuttal to the NCPPR’s shareholder proposal, and its unwavering commitment to DEI as an integral part of its financial and reputational success, should be taken as a sign that not all major corporations are going to bow to the pressure from ideologues like the NCPPR. Corporate executives would do well to follow Costco’s lead in how they manage their employees, and how they respond to anti-DEI attacks.