Costco stands its ground on DEI

At the company’s virtual annual meeting last week, shareholders overwhelmingly rejected a request from a conservative think tank that asked Costco to study the risks of maintaining DEI — diversity, equity and inclusion — as a corporate keystone, claiming financial and reputational harm could result if lawsuits alleging discrimination in hiring or promotion were waged and won. Costs could top “tens of billions of dollars,” according to the proposal. DEI has been in the headlines of late as newly inaugurated President Donald Trump banned it across federal agencies and suggested it should be purged from the private sector, too.

Some companies already have watered down or shelved their policies, such as retail giants Walmart and Target, and Facebook parent Meta Platforms. But not Costco, which plans a Capital Region store. The company’s “unmatched culture of excellence” depends on “hiring and promoting only the best-qualified individuals based on performance, ability, knowledge and hard work,” Hamilton “Tony” Jones, chairman of Costco’s board, stated at the annual meeting.

At the same time, a diverse workforce better reflects shoppers and gives the clubs better insight into membership tastes, according to the company. Jones said DEI at Costco dates back 20 years and has never included quotas or preferences. DEI took hold more broadly at U.

S. companies in the wake of Black Lives Matter protests in 2020, according to Reuters, which describes it as policies designed to boost the recruitment of workers often overlooked because of their gender or race. DEI can also be good for a company’s bottom line, consultant McKinsey and others have reported, drawing a correlation between diverse leadership teams and higher financial returns.

Groups such as the National Center for Public Policy Research, which offered the proposal shot down at the Costco meeting, flatly declare DEI illegal, pointing to a 2023 U.S. Supreme Court decision that found the use of race in college admissions to violate the U.

S. Constitution’s equal-protection clause. The center will offer a dozen proposals similar to Costco’s during public company annual meetings this year, USA Today reported.

One submitted for Apple’s meeting next month requests that DEI policies and programs be abolished, but Apple’s board recommends its rejection as inappropriate interference in ordinary business operations. Costco viewed the DEI proposal rejected at its annual meeting as disingenuous. “The proponent’s broader agenda is not reducing risk for the company but abolition of diversity initiatives,” states the board rationale for rejection, citing language the center has used elsewhere to describe efforts to fight “the evils of woke politicized capital and companies.

” “We believe that the proponent’s request for a study reflects a policy bias with which we disagree, and that further study and reporting would not be an efficient use of company resources.”.