DEI blowback is roiling corporate America. After an initial wave of enthusiasm in 2020, big companies are “reevaluating” diversity, equity and inclusion initiatives and recasting their DEI and environmental social governance programs in reports to shareholders.
The pullback comes in the wake of intense scrutiny from investors, customers and conservative lawmakers. What they want, it seems, is for corporate elites to shut up about social justice and go back to focusing on profits.
But there’s a business case to be made for DEI, said a panel of experts at a webinar hosted by Berkeley Law, and it’s becoming an increasingly important factor for companies to remain competitive on the international stage.
“We know that our society is becoming increasingly diverse. So it’s critical to understand and deliver value to customers from all walks of life. It’s also important to recruiting the best talent and avoiding the risk of groupthink. Building a diverse workforce is how you get there. That’s how everyone has a fair shot and can thrive. And that’s all critical for business success,” said Mahlet Getachew, managing director of corporate racial equity at Oakland, California.-based research institute Policy Link.
Getachew said companies had good intentions back in 2020 when the killing of George Floyd sparked a nationwide racial reckoning. But that hasn’t always translated into actual goals.
“They were building the DEI plane while they were flying it and didn’t really embed the key infrastructure that they need to be successful for the long term,” she said. “And some of that, in addition to greater rigor around data practices, is having goals, long-term goals. And I don’t mean quotas, I mean goals around workplace sentiment, customer sentiment, the impact of your products and services, the reach of your products and services and how broadly the company is casting their talent net.”
Leo Strine, corporate attorney at Wachtell, Lipton, Rosen & Katz and a former chief justice of the Delaware Supreme Court, put it more bluntly. “A bunch of companies said things they didn’t really mean. And they took out group ads, and they did it because there was a certain wind blowing.”
He said companies should focus less on “branding” and more on treating their entire workforce well and welcoming a diversity of thought.
“There’s no focus on equity within the whole workforce. There is no focus on where you really recruit,” he said.
“It’s a hard question to ask, but what do we expect businesses to do? They ought to be open and seeking employment from everybody, regardless of background, using their talents to make money. They ought to be welcoming and open to all people. And that includes all people. That’s not a groupthink thing. So somebody who’s a conservative, a Christian, as long as they treat everybody with respect, gets the work.”
Mentorship opportunities also remain limited to favored employees at many organizations, said UC Davis law professor Afra Afsharipour.
“A lot of times, those mentoring, sponsorship and leadership development programs are done in these kinds of ad hoc ways that actually benefit people who are already already in privileged positions,” she said.
Companies should think about how they can implement retention and promotion policies more democratically, “rather than what we’ve seen, which is a senior manager takes their favorite kind of junior person under their wing, and then promotes them in ways that might perpetuate the kind of implicit biases that we already have.”
Corporations have been on high alert for potential legal or PR attacks since the U.S. Supreme Court’s 2023 ruling striking down affirmative action in higher education.
In the wake of that ruling, 13 Republican attorneys general sent letters to the Fortune 100 warning of the “serious legal consequences” of using race-based preferences in hiring and promotion.
This year, John Deere, Conoco and General Motors also have gotten pushback on their ESG and DEI commitments, and Tractor Supply Co. abruptly dropped its DEI program after a barrage of criticism from conservative commentators over its support of “woke causes.”
Business leaders who are unable to articulate how their social stances connect to business strategy will have a harder time navigating such situations, Getachew said.
“Business leaders have a lot on their plates, and they likely are not spending a lot of time really understanding the historical context, the current context and how this isn’t about equivocating between two sides, but really being able to bring folks together and embodying equal opportunities for everybody,” she said.
“Leaders need to spend more time to become more fluent in these issues so that they don’t get caught in the Tractor Supply situation.”