Companies Are Revising DEI Language And Metrics Linked To Executive Pay And More

A growing trend among America’s largest corporations reveals a shift in how diversity, equity, and inclusion (DEI) metrics influence executive compensation. 

According to a review of approximately 1,200 companies by Farient Advisors, the proportion of corporations using DEI metrics to set compensation has decreased from 33% to 28% in 2023. 

High-profile companies like Best Buy Co., Johnson & Johnson (J&J), and Lazard Inc. are among those that have de-emphasized or removed DEI from their executive pay criteria.

Conservative Pressure and Corporate Response

This shift is partly attributed to conservative activists targeting DEI-related executive compensation. These activists argue that tying compensation to DEI goals could encourage improper hiring practices. 

Notable billionaires like Elon Musk and Bill Ackman have amplified these concerns, especially following the Supreme Court’s decision to declare affirmative action in college enrollment illegal.

“Companies and boards are especially trying to be careful when they’re setting these goals,” said Brian Bueno, head of Farient’s environment, social, and governance practice, according to Bloomberg.

“It’s possible we could see movement away from diversity or towards broader measures of human capital or workforce-related measures.”

DEI Language And Metrics are Changing

Many companies have adjusted their DEI-related language and metrics, with Best Buy, for example, changing “inclusion and diversity” to “culture and belonging.”

J&J also removed references to DEI goals for female, Black, and Hispanic representation. Similarly, Chipotle Mexican Grill Inc. shifted its focus from increasing workforce diversity to reducing turnover among existing diverse workers.

Ally Financial Inc., Carnival Corp., and Lazard Inc. are also making notable changes. Carnival, for example, removed DEI from its “culture essentials” section in its latest proxy filing, though a spokesperson asserted that DEI remains integral to its overall strategy.

Long-Term Implications for Corporate DEI Initiatives

Despite these adjustments, advocates for diversity insist that DEI remains critical for long-term business success. 

Ivy Jack, co-founder of the Diverse Investing Collective, told Bloomberg, “Those who take their eye off the ball on diversity will miss out on business opportunities as their customers become increasingly diverse.”