Costco Defends DEI, While McDonald’s Becomes The Latest To Roll Back Programs

Costo is standing firm on its diversity, equity, and inclusion (DEI) commitments despite activist investors pushing for the company to make changes in line with those seen at Walmart, John Deere, and McDonald’s.

Activist investors target DEI efforts

Forbes reported that a proposal from a shareholder, put forward by a conservative think tank, challenged Costco to evaluate and openly share the harm linked with its DEI policies and goals. The proposal states that the firm DEI’s plans present financial, reputational, and litigation threats that could negatively affect shareholders.

In the past year, anti-DEI shareholder proposals have increased from 15 in 2023 to 30 in 2024. An analysis published in Harvard Law School Forum on Corporate Governance found that previously, these proposals received limited acknowledgment from the broader investor community.

But recently, anti-DEI activists have found favorable outcomes in getting large companies to reduce their diversity plans. Even though Costco’s board of directors has collectively ignored the demands, the shareholders will make the final call with a vote on the issue this month.

What is Costco’s stance on DEI?

The firm views its DEI efforts as fundamental to its business growth and operational success. Costco associates its DEI efforts with its infamous “treasure hunt” retail strategy, which provides bespoke, limited-time products at eye-catching prices.

Additionally, Forbes reported that Costco believes a “diverse group of employees helps bring originality and creativity to our merchandise offerings, promoting the ‘treasure hunt’ that our customers value.” This underlines how workforce diversity directly fuels the success of Costco’s business model.

Additionally, the company understands the significance of supplier diversity, a key target in activists’ demands. In its document to shareholders, Costco said a diverse supplier base “fosters creativity and innovation in the merchandise and services we offer our members.”

What have other companies said about DEI efforts?

Walmart recently discontinued multiple DEI initiatives in its workplaces. This plan to phase out DEI efforts was initially made public by anti-DEI conservative activist Robby Starbuck.

Walmart later confirmed the changes with Bloomberg and the Associated Press, which include closing the company’s racial equity center and phasing out the use of the words like ‘DEI’ and ‘Latinx.’

In July 2024, John Deere announced they would no longer support “social or cultural awareness” events. “The existence of diversity quotas and pronoun identification has never been and are not company policy,” The company said in a statement posted on X.

McDonald’s recently announced that it will also reduce its DEI initiatives. “We are retiring setting aspirational representation goals and instead keeping our focus on continuing to embed inclusion practices that grow our business into our everyday process and operations,” the company said.

Image: Grant Beirute