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Costco Doubled Down On DEI, Then 19 Attorneys General Warned Them To Stop [1]
['Doug Melville']
Date: 2025-01-29
As executive orders continue to dominate the federal government’s position on DEI (diversity, equity and inclusion), one pressing issue has been how DEI activities would proceed and progress across the private sector.
Will there be no correlation between public and private sector activities? Some public influence on the public sector? Or will hard-line directives from the top dictate what private-sector companies can or can’t do in the DEI space?
While much of this remains unknown, we’re beginning to see some signs and signals of how DEI may continue outside the walls of government agencies and within the walls of corporate America.
Over the last month, Costco has emerged from the war on DEI as somewhat of a hero. They chose early and definitively to keep their DEI efforts alive. Fans of their actions rejoiced. And yesterday, 19 states AGs collectively sent them a letter warning them to stop their efforts.
Costco has yet to publicly respond, but I’ve been wondering: Is this the new road of DEI in America? Will our legal system wield its power to identify and publicly chastise companies who are trying to be more inclusive?
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Costco Became An Unlikely Hero In Their DEI Journey
Since the U.S. presidential election on November 4, 2024, multinational companies have continued to eliminate, downsize, rename, recalibrate, retool, realign, reposition, rethink or reimagine their DEI efforts.
With much of the pressure coming from outside influences, directed at corporations’ shareholders and boards to make a change to DEI, the responses have been consistent: fold to the pressure.
Costco took what seems to have become a contrarian stance.
In their 2024 Annual Report proxy statement, the topic of DEI within the company was mentioned in “PROPOSAL 4: SHAREHOLDER PROPOSAL REQUESTING REPORT ON THE RISKS OF MAINTAINING DEI EFFORTS.” The proposal read in part:
“With 310,000 employees, Costco likely has at least 200,000 employees who are potentially victims of ... illegal discrimination because they are white, Asian, male or straight … even if only a fraction of those employees were to file suit, and only some of those prove successful, the cost to Costco could be tens of billions of dollars.”
The board’s response was as follows:
“Our Board has considered this proposal and believes that our commitment to an enterprise rooted in respect and inclusion is appropriate and necessary. The report requested by this proposal would not provide meaningful additional information to our shareholders, and the Board thus unanimously recommends a vote AGAINST this proposal.”
On January 23, 2025, Costco shareholders voted down the proposal, with more than 98% of shares voting against the proposal. Prior to the shareholder meeting, Costco’s board of directors had voted unanimously to request that investors reject the motion.
Since that vote, it has become clear that Costco will resist the anti-DEI rhetoric, pushback and bullying. In response, viral videos began popping up, showing customers celebrating the wholesaler.
Case closed, right?
A shopper moves past a display of items in a Costco warehouse Saturday, May 18, 2024, in Sheridan, ... [+] Colo. (AP Photo/David Zalubowski) Copyright 2024 The Associated Press. All rights reserved.
Then 19 Attorneys Generals Wrote A Letter
Following the increased publicity of Costco’s position, 19 attorneys general—led by Brenna Bird, Iowa’s attorney general, and Kris Kobach, Kansas’ attorney general—penned a letter to the retailer’s president and CEO, Ron Vachris, urging him to end the “unlawful discrimination imposed by the company through diversity, equity and inclusion (DEI) policies.”
Close-up of Costco Wholesale logo on a white paper, Lafayette, California, May 18, 2024. (Photo by ... [+] Smith Collection/Gado/Getty Images) Gado via Getty Images
You can read the full letter here.
Here are some pertinent excerpts:
“Inexplicably, Costco has doubled down on DEI. Last month, Costco’s board of directors unanimously recommended that shareholders vote against a proposal requiring Costco to study and report on financial risks associated with its DEI policies. While defending the company’s DEI policies to a customer, you reportedly proclaimed that you are ‘not prepared to change.’
“Costco’s position runs contrary to the Supreme Court’s recent decisions and raises concerns about Costco’s compliance with state and federal laws.
“And beyond eliminating legal exposure, repealing its DEI policies would provide Costco with time to deal with other important issues, such as questions regarding the alleged connection between Costco products and slave labor in China.”
“Costco should ‘do the right thing’ by following the law and repealing its DEI policies. Within 30 days, please either notify us that Costco has repealed its DEI policies or explain why Costco has failed to do so. We look forward to your response.”
How Far Is Too Far?
Looking at the situation from both sides, I ask, How far is too far? As a company in the private sector, should the board of directors—especially at the behest of shareholders—not have the right to employ and maintain a DEI department? DEI may not be an endeavor that everyone likes, but the reality is that the majority of programs are indeed legal and operate with the parameters of good business.
In President Trump’s January 21, 2025, executive order titled “Ending Discrimination and Restoring Merit-Based Opportunity,” he addressed DEI initiatives in the private sector, describing them as “dangerous, demeaning, and immoral,” which “violate the text and spirit of our longstanding Federal civil-rights laws” and further said that DEI programs “undermine our national unity, as they deny, discredit, and undermine the traditional American values of hard work, excellence, and individual achievement in favor of an unlawful, corrosive and pernicious identity-based spoils system.”
The challenge with interpreting and implementing the executive order is this: at no point does the document describe or identify the types of DEI initiatives that violate existing federal civil rights laws.
It should surprise no one that corporate DEI programs—which have been around for decades and aren’t some new invention—are reviewed, planned and designed to align with the company’s general council and corporate values. But it’s important to know that active DEI programs are also aligned with the law. Businesses both big and small must defend themselves against legal claims, being diligent and consistent with their efforts to mitigate risk in this area. It would be naive to think that a company would set up DEI departments that are “dangerous, demeaning and immoral,” and “violate the text and spirit of our longstanding Federal civil-rights laws.”
Nevertheless, while those speaking out against DEI are seemingly getting louder and louder, there is a committed group of businesses and leaders who refuse to deny the ways diversity has helped grow their companies.
But the politics of DEI should not overshadow its power and potential. By 2045, America will be majority people of color, and finding ways to be inclusive of these voices allows companies to overcome the historic blind spots with these consumers, when it comes to messaging, marketing and elevating their importance to business, the economy and society at large.
How big is this blind spot? Over $6 trillion domestically, and $16 trillion globally.
Tapping into these consumer markets is not only smart but also necessary for robust corporate bottom lines. An added bonus is that the collective intelligence, insights and skillsets of diverse populations provide opportunities for employers to strengthen their workforce headcounts.
And by watching companies like Costco tackle these issues in the boardroom, we should continue to stay woke to see why DEI is worth defending.
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[1] Url:
https://www.forbes.com/sites/dougmelville/2025/01/29/costco-double-downed-on-dei-then-19-attorneys-general-warned-them-to-stop/
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