Costco defends its diversity policies as other US companies scale theirs back

Costco is pushing back on a shareholder proposal that urges the wholesale club operator to conduct an evaluation of any business risks posed by its diversity, equity and inclusion practices.

Investors were expected to vote on the recommendation during the company’s annual meeting Thursday.

The National Center for Public Policy Research, a conservative think tank based in Washington, submitted the proposal, arguing that Costco’s DEI initiatives hold “litigation, reputational and financial risks to the company, and therefore financial risks to shareholders.”

The think tank has made a similar proposal to Apple, and like some American companies that already scaled back or retreated from their diversity policies, cited a U.S. Supreme Court decision in July 2023 that outlawed affirmative action in college admissions.

Costco officials could not be reached for comment on the DEI proposal.

But Costco’s board of directors voted unanimously to ask shareholders to reject the motion.

The board said it believes “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.”

The directors’ message to shareholders details how having diverse employees and suppliers has, in their view, fostered “creativity and innovation in the merchandise and services that we offer” and led to greater customer satisfaction among Costco members.

Neil Saunders, managing director of consulting firm GlobalData’s retail division, said Costco can be confident the proposal will be rejected.

“I think people generally have confidence in Costco’s management, and there’s an attitude of ‘Why rock the boat? It’s sailing very nicely,’” Saunders said.

Costco’s public stance in support of diversity, equity and inclusion programs contrasts with the positions taken in recent months by other big consumer brands, including Walmart,McDonald’s and John Deere.

Last week, more than 30 Walmart shareholders, including Amalgamated Bank and Oxfam America, asked the CEO of the nation’s largest retailer to explain the business impact of curbing the company’s DEI policies, a move they called “disheartening.”

Prominent technology companies, including Amazon and Meta — the parent company of Facebook and Instagram — also have rolled back DEI initiatives, which are expected to face opposition from the administration of President Donald Trump.

Emboldened by the Supreme Court’s decision on affirmative action at colleges and universities, conservative groups have filed lawsuits making similar arguments about corporations, targeting initiatives such as employee resource groups and hiring practices that prioritize historically marginalized groups.

On Monday, Trump signed an executive order aimed at terminating DEI programs within federal agencies. Conservatives have long condemned them, arguing they violate the U.S. Constitution by considering factors such as race, gender and sexual orientation.

The plan includes leveraging the Justice Department and other agencies to probe private companies pursuing training and hiring practices that conservative critics consider discriminatory against people who do not belong to minority groups, such as white men.

As for Costco, the National Center for Public Policy Research alleged that at least 200,000 of the company’s 300,000 employees worldwide “are potentially victims of this type of illegal discrimination because they are white, Asian, male or straight.”

If only a fraction of those employees were to sue Costco, the legal costs could be significant, the center said.

Costco has a chief diversity officer, but the company’s executive ranks do not reflect the diversity of its customers.

Nearly 81% of the executives Costco had in place last year were white, and 72% of them were men, according to data published on its website.

Saunders said members of Costco’s management team typically stay a long time given the company’s solid and stable financial performance.

In other ways, Costco has been a bit of a maverick in the corporate world.

It doesn’t have an official corporate public relations team, and it hasn’t focused on building up online business as much as rivals Walmart and Target.

The National Center for Public Policy Research intends to present a proposal at Apple’s Feb. 25 shareholder meeting that goes beyond what the think tank wants from Costco.

The center’s resolution asks the tech company to abolish its inclusion and equity department, policies and goals, describing them as “consistent with, if not more radical than, most corporate DEI programs.

Apple’s board wants shareholders to vote down the proposal, saying the company strives “to create a culture of belonging where everyone can do their best work.”

JPMorgan CEO Jamie Dimon this week joined the corporate leaders taking a stand in support of the expanded diversity goals some companies added after the 2020 police killing of George Floyd.

Dimon defended his bank’s DEI policies during an interview with CNBC.

“We are going to continue to reach out to the Black community, Hispanic community, the LGBT community, the veterans community,” he said, speaking Wednesday from the World Economic Forum meeting in Davos, Switzerland.

“And wherever I go, red states, blue states, green states, mayors, governors and they said they like what we do.”

Trump’s actions this week increase the potential legal risks for companies that resist the conservative backlash against DEI, according to David Glasgow, executive director of the Meltzer Center for Diversity, Inclusion and Belonging at NYU School of Law.

But most big companies will have consulted their lawyers or performed an internal self-audit after the Supreme Court’s affirmative action ruling, Glasgow said.

“So if you are an Apple or another company who’s done that, and you’re confident in the legality of your existing DEI program, … I think what you should do right now is stand firm,” he said.