Board Upholds DEI Program Ahead of Shareholder Vote
Costco Wholesale is standing firm on its diversity, equity, and inclusion (DEI) program despite growing criticism and legal challenges from stakeholders. Ahead of its annual shareholders’ meeting on January 23, 2025, Costco’s board of directors urged investors to reject a proposal seeking to eliminate the DEI initiative. The proposal, brought forth by the National Center for Public Policy Research, questions the legality of Costco’s DEI practices in light of the U.S. Supreme Court’s ruling in Students for Fair Admissions v. Harvard, which deemed race-based college admissions unconstitutional.
In a statement to shareholders, Costco’s board highlighted the integral role of DEI in fostering an inclusive workplace and supporting the company’s global workforce of over 300,000 employees. “Our efforts around diversity, equity, and inclusion remind and reinforce with everyone at our company the importance of creating opportunities for all,” the board stated. It argued that these initiatives enhance employee retention and business success, aligning with the company’s ethical commitments to employees, members, and suppliers.
The proposal comes amidst broader scrutiny of corporate DEI programs, with multiple Fortune 100 companies scaling back their initiatives following legal and political pressures.
Criticism of DEI Practices and Legal Concerns
The National Center for Public Policy Research’s proposal contends that Costco’s DEI practices, even under their rebranded name “People and Communities,” remain legally and ethically questionable. The organization argued that the initiative prioritizes equity of outcomes over merit-based opportunities, citing concerns about racial and gender-based discrimination in hiring, promotions, and supplier selection processes.
The proposal also pointed to warnings from attorneys general in 13 states and ongoing lawsuits against DEI programs across major corporations, emphasizing potential legal risks for Costco. “With 310,000 employees, Costco likely has at least 200,000 employees who are potentially victims of this type of illegal discrimination because they are white, Asian, male, or straight,” the proposal claimed, warning that even partial litigation success could result in billions of dollars in damages.
Costco’s board dismissed these allegations, maintaining that its DEI practices are legally compliant and serve to benefit both employees and the company. The board also accused the National Center for Public Policy Research of pursuing a broader agenda aimed at dismantling diversity initiatives, labeling the proposal as shareholder activism rooted in policy bias.
Defending Inclusion and Innovation
Despite the mounting scrutiny, Costco remains steadfast in its defense of Costco’s DEI as a driver of creativity, innovation, and business success. “We welcome members from all walks of life and backgrounds,” the board noted. “Serving our diverse membership with a diverse group of employees enhances satisfaction and fosters creativity in the merchandise and services we offer.”
The board also emphasized the value of diversity in its supplier base, including support for small businesses, as a means to spur innovation and reflect its customer demographics. Dismissing calls for a reassessment of its DEI program, Costco reiterated that such efforts are aligned with its fiduciary responsibilities and contribute to its long-term growth strategy.
Meanwhile, critics argue that the program compromises meritocracy and exposes the company to legal and reputational risks. Ethan Peck, deputy director of the National Center for Public Policy Research’s Free Enterprise Project, described DEI as “the redistribution of opportunity on the basis of race and sex,” asserting that such practices are both immoral and illegal.
As shareholders prepare to vote, the outcome could signal broader implications for Costco’s DEI initiatives nationwide, especially as companies navigate the legal and cultural shifts reshaping workplace equity.
