NEW YORK — Costco is opposing a shareholder initiative that calls for an assessment of potential business risks linked to its diversity, equity, and inclusion (DEI) practices. The vote regarding this initiative was slated to take place during the company’s annual meeting on Thursday.
The proposal was put forth by the National Center for Public Policy Research, a conservative think tank based in Washington, which contends that Costco’s DEI efforts pose several risks, such as legal, reputational, and financial consequences for the company and, by extension, for its shareholders.
This conservative organization has previously made similar appeals to other companies, including Apple, and referenced a U.S. Supreme Court ruling from July 2023 that struck down affirmative action policies in higher education admissions. Some American companies have responded to the ruling by scaling back or withdrawing from their diversity initiatives altogether.
While Costco officials have not publicly commented on the DEI proposal, the company’s board of directors unanimously voted to recommend that shareholders reject the initiative. The board expressed its belief that its ongoing commitment to a corporate culture built on respect and inclusion is vital, stating that the analysis requested in the proposal would not yield any significant new insights.
In their communication to shareholders, the directors emphasized that a diverse workforce and supplier base have contributed to enhanced creativity and innovation, ultimately resulting in improved customer satisfaction levels among Costco’s members.
Neil Saunders, managing director of the retail division at GlobalData, expressed confidence that shareholders will reject the proposal, suggesting that there is a widespread trust in Costco’s management and a sentiment of “Why change a system that works so well?”
Costco’s public endorsement of DEI initiatives stands in stark contrast to positions taken by other major consumer brands such as Walmart, McDonald’s, and John Deere, which have recently adjusted their DEI strategies in light of growing conservative criticism.
In a related development, over 30 shareholders from Walmart, including entities like Amalgamated Bank and Oxfam America, recently urged the CEO of the nation’s largest retailer to clarify the potential business repercussions of easing DEI policies, labeling such moves as “disheartening.”
Prominent technology firms such as Amazon and Meta, which owns Facebook and Instagram, have also begun to retract their DEI strategies amid expected pushback from the Trump administration. Following the Supreme Court ruling on affirmative action, conservative organizations have initiated lawsuits arguing against corporate diversity programs, including employee resource groups and hiring practices that prioritize historically underrepresented groups.
In a recent executive order, Trump mandated the termination of DEI initiatives in federal agencies, arguing that these programs constitute a violation of the U.S. Constitution by evaluating applicants based on race, gender, and sexual orientation. His administration plans to utilize the Justice Department to scrutinize private corporations engaged in hiring and training practices deemed discriminatory towards non-minority groups, such as white males.
Specifically concerning Costco, the National Center for Public Policy Research claimed that approximately 200,000 of the company’s global workforce of 300,000 could be subject to illegal discrimination due to their race, gender, or sexual orientation. The think tank suggested that even a small number of lawsuits from affected employees could lead to substantial legal costs for the company.
Although Costco has appointed a chief diversity officer, its leadership remains predominantly white, with about 81% of executives from last year being white and 72% male, according to the company’s own data. Saunders pointed out that the longevity of Costco’s management team contributes to this lack of diversity, affirming their historical stability in financial performance.
Costco has differentiated itself in several corporate aspects, notably by not maintaining a formal public relations team and having a comparatively lower emphasis on online sales compared to rivals like Walmart and Target.
Additionally, the National Center for Public Policy Research plans to present a more demanding proposal at Apple’s upcoming shareholder meeting, aiming to dismantle its DEI department and policies, asserting that they align with the most extreme corporate DEI initiatives. Apple’s board is similarly recommending against the proposal, advocating for a culture that promotes belonging and optimal performance for all employees.
Jamie Dimon, CEO of JPMorgan, has publicly sided with advocates for enhanced diversity goals, emphasizing ongoing outreach to diverse communities and supporting the DEI efforts that many firms adopted following the 2020 death of George Floyd.
Trump’s recent measures may intensify legal challenges for companies that choose to stand firm against conservative opposition to DEI initiatives, as noted by David Glasgow, head of the Meltzer Center for Diversity, Inclusion, and Belonging at NYU School of Law. Nevertheless, he remarked that large companies likely have consulted legal counsel or conducted internal audits in light of the Supreme Court decision and suggested that those confident in the legality of their DEI programs should maintain their positions.
