U.S. President Donald Trump signs executive orders in the White House, on Feb. 4. The pushback by shareholders sets up a potential showdown between Mr. Trump’s anti-DEI crusaders and a universe of corporate leaders whipsawed by social and political issues.Evan Vucci/The Associated Press
Gus Carlson is a U.S.-based columnist for The Globe and Mail.
Just when corporate leadership teams thought workplace diversity, equity and inclusion (DEI) programs were dying in the face of U.S. President Donald Trump’s anti-diversity push, shareholders at some of the biggest companies are saying, not so fast.
This month, shareholders of Berkshire Hathaway BRK-A-N BRK-B-N and Bristol Myers Squibb BMY-N joined their counterparts at other big brands such as Apple AAPL-Q and Coca-Cola KO-N in rejecting anti-DEI proposals from company management.
The voting wasn’t even close. In both instances, 98 per cent of shareholders said no.
The pushback by shareholders sets up a potential showdown between Mr. Trump’s anti-DEI crusaders and a universe of corporate leaders whipsawed by social and political issues.
The emerging resistance is remarkable for many reasons. It runs counter to recent moves by many companies to pare back DEI initiatives to align with Mr. Trump’s executive orders aimed at killing such programs in the public and private sectors.
DEI was under threat long before Donald Trump. But he didn’t kill it alone
It defies the typical behaviour of most shareholders, other than activists, who tend not to vote for proposals tied to social or political issues, leaving those decisions to executive leadership.
And the near-unanimity of the recent votes – support for such proposals has been in the 1 per cent to 2 per cent range – suggests that shareholders not only believe strongly that DEI is important, but they also don’t like the companies in which they invest to bow to threats.
To be sure, proponents of the anti-DEI movement have been intimidating to some, suggesting that DEI initiatives are discriminatory and put companies at risk of discrimination lawsuits. They point to the U.S. Supreme Court’s recent ruling striking down affirmative action in college admissions as a cautionary tale for companies.
But there may be a more practical and less emotional reason underlying the emerging shareholder resistance.
Smart shareholders tend to decouple their financial decisions from emotional attachment to issues.
If you’ve invested your money in a company, while you certainly expect it to operate ethically and lawfully, your main concern is its financial returns. And those returns are generated by performance.
To that point, there’s a wide body of research that suggests companies with a diverse work force and diverse leadership teams perform better than those that are less so.
McKinsey & Co., among the leaders in quantifying the effects of diversity on performance, suggests the business case for diversity is getting stronger. The consultancy says companies with ethnic and gender diversity on executive teams are 39-per-cent more likely to outperform peer companies than a decade ago.
Those companies benefit from a wide variety of pluses diversity brings – new and different ways of looking at things, solving problems and serving customers; the richness of a culture that doesn’t simply incorporate diversity but embeds it and reflects it in the products and services it sells.
If you’ve worked in a global company that does business across multiple cultures, languages and political frameworks, diversity is table stakes. If you don’t have leadership and a work force that understand and can deliver to a global customer base you won’t survive.
But creating a truly diverse culture is easier said than done. Many companies have had trouble building internal mechanisms that make diversity a performance-driver.
One of the most common shortfalls: Companies focus on the recruiting part of diversity but fail to create the internal structures necessary to train, develop and acclimatize these new hires.
The streets of Corporate America are littered with a talented, diverse range of candidates who were recruited to show a commitment to DEI, but failed because companies didn’t create what HR types call a culture of success to support them.
It remains to be seen what response the new shareholder resistance will elicit from the White House. Will the Trump administration try to enforce the mandates and punish companies that retreat or drag their feet? Will the pushback unleash a flurry of discrimination lawsuits from conservative groups against companies that back off their anti-diversity pledges to appease shareholders?
Whatever the outcome, the bottom line is this: DEI, done properly and fairly for everyone, is one of the few social issues that can legitimately demonstrate performance improvement.
Smart shareholders understand that, and when they vote to reject anti-DEI measures, they are voting not with their hearts but with their heads – or more precisely, their wallets.
For these shareholders, supporting DEI is not just about doing good; it’s about doing well, too.
But for DEI to have lasting effect, companies need to be smarter and avoid making programs that are simply window dressing.
They need to create the structures and mechanisms behind the recruiting process that enables talent to thrive no matter who they are or where they came from – and prove the business case for DEI that defies partisan policy.