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Dave Marcotte<\/p>\n
Senior Vice President, Kantar Retail<\/p>\n<\/div>\n<\/div>\n\n<\/div>\n
It came last month, within Costco\u2019s 2024 proxy statement, in response to the National Center for Public Policy Research, a conservative think tank and Costco shareholder. The group had submitted a proposal to be considered for the company\u2019s annual meeting, requesting \u201cthat the Board conduct an evaluation and publish a report, omitting proprietary and privileged information, on the risks of the Company maintaining its current DEI (including \u2018People & Communities\u2019) roles, policies and goals.\u201d<\/p>\n
NCPPR<\/span> cited recent lawsuits challenging DEI at companies; the U.S. Supreme Court\u2019s rollback of affirmative action in college admissions; and the fact that several companies have retreated from their DEI efforts. \u201cIt’s clear that DEI holds litigation, reputational and financial risks to the Company, and therefore financial risks to shareholders,\u201d the organization stated.<\/p>\nBut Costco\u2019s board of directors unanimously recommended a vote against this. The board expressed confidence in the company\u2019s adherence to the law and thereby rejected any worry about litigation, and defended its diversity policies as good for its relationships with customers, suppliers and employees. The latter in turn has rewarded its shareholders, Costco also said.<\/p>\n
Moreover, the board didn\u2019t end with a defensive posture. It went on to argue that NCPPR is concerned less about Costco\u2019s business or shareholders and more about its own political agenda, namely, the \u201cabolition of diversity initiatives.\u201d Costco also corrected the record on some NCPPR claims, calling them \u201cmisleading, at best.\u201d<\/p>\n
\u201cIt is the proponent and others that are responsible for inflicting burdens on companies with their challenges to longstanding diversity programs,\u201d the board wrote.\u00a0<\/p>\n
While vigorous and direct, Costco\u2019s response was also careful and specific, according to Alison Taylor, professor at New York University\u2019s Stern School of Business and author of \u201cHigher Ground: How Business Can Do the Right Thing in a Turbulent World.\u201d Some DEI critics have seized on inconclusive research regarding whether strong DEI efforts accrue to the bottom line, but Costco avoided making profitability claims and stuck to other valid business reasons, she said by phone.<\/p>\n
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\u201cIt is the proponent and others that are responsible for inflicting burdens on companies with their challenges to longstanding diversity programs.”<\/p>\n
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Costco Board of Directors<\/p>\n
2024 Proxy Statement<\/p>\n<\/div>\n<\/div>\n\n<\/div>\n
\u201cThere are very mixed studies on the business case for diversity, but they’re not getting into those business case arguments particularly,\u201d she said. \u201cThey made the case around their culture and their values and what their customers want, and that I think was very defensible.\u201d<\/p>\n\nCostco\u2019s move comes as many companies are hearing from both their legal and marketing departments that defending DEI policies could be costly, according to Taylor. But ditching DEI may not be as wise a response as it seems, and the future is uncertain. For example, if the incoming Trump administration further emboldens anti-DEI proponents, that could provoke a backlash, especially as Gen Z increasingly enters the workforce, she said.<\/p>\n
\u201cI think there’s this kind of misunderstanding, that in some way kowtowing to Starbuck and these people reduces your risk,\u201d she said, referencing Robby Starbuck, a conservative provocateur who has taken credit for many recent DEI rollbacks. \u201cThat is not certain \u2014 there\u2019s no neat way to get rid of your risk here.\u201d<\/p>\n
How might this play out in 2025?<\/p>\n
In a way, this \u201cclear brand statement from Costco\u201d is par for the course for the retailer, according to Marcotte. The company has a long track record of sticking to what it sees as keys to its success, including among the best pay and other working conditions in the industry, despite grumbling from shareholders, he said.<\/p>\n
\u201cDEI in this context is the same, in that they see it as part of a successful model and, in character, react bluntly to being told what to do,\u201d he said, adding that the company\u2019s protection of its DEI policy is unlikely to dent its strong membership retention or domestic and international growth.\u00a0<\/p>\n
It may impress other companies, if only to influence them \u201cto simply ignore the anti-DEI as one more political movement,\u201d he said.<\/p>\n
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\u201cThere\u2019s been so much reporting about this, everyone\u2019s just kind of toeing the line, and there\u2019s nothing to be done. So I think this does kind of freshen up the debate.”<\/p>\n
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Alison Taylor<\/p>\n
Author, \u201cHigher Ground: How Business Can Do the Right Thing in a Turbulent World.\u201d<\/p>\n<\/div>\n<\/div>\n\n<\/div>\n
Beyond that, Costco has provided a road map for navigating the DEI controversy that doesn\u2019t only lead to capitulation, according to Taylor.<\/p>\n\n\u201cIt kind of resets the conversation in some way. There’s been so much reporting about this, everyone’s just kind of toeing the line, and there’s nothing to be done. So I think this does kind of freshen up the debate,\u201d she said. \u201cOther companies may follow through because Costco gives them a bit of top cover. Whoever goes first takes the flak, right? So I think it kind of gives a license and opens up a space to say that there’s a different way to handle this.\u201d<\/p>\n<\/p><\/div>\n
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