Corporations that bow to DEI pressure may soon find out they cannot afford it.
Corporations that bow to DEI pressure may soon find out they cannot afford it.
I saac Newton’s Third Law of Motion states that for every action, there is an equal and opposite reaction. A corollary in American culture may be that for every reasonable action, there is a hyperbolic overreaction.
Such is the case when it comes to diversity, equity, and inclusion policies in corporate America. Filmmaker Robby Starbuck has used his social-media following to expose DEI initiatives at several major American corporations. Operating on the premise that sunlight is the best disinfectant, Starbuck has brought failed policies that are legally questionable and highly unpopular with consumers to the attention of the general public and the shareholders of these corporations.
As a result, some of the best-known brands in the country have hastily canceled their DEI programs and cut ties with the far-left Human Rights Campaign (HRC), which pressures companies to do things like cover sex hormones and puberty blockers for minors in their health-care plans. Owing to their fiduciary duty to shareholders, it’s an entirely reasonable action. Cue the overreaction from the U.S. Congress.
Unwilling to let the practical failure of a policy distract from political fervor, 49 members of Congress, spurred on by a similar letter from HRC, signed an open letter to Fortune 1000 businesses demanding that they double down on DEI. But these companies have recently received two more open letters encouraging them to hold the line in favor of healthy ROI reality over feeble DEI ideology.
To reassure corporate America that, regardless of the ever-shifting political winds, their businesses do best when they respect the First Amendment freedoms of every employee, customer, and shareholder, a group of investment and proxy advisers with more than $65 billion in managed assets signed their own open letter. These are investment professionals who want the companies their clients invest in to succeed, not politicians advancing a partisan agenda.
The second letter is signed by 17 state treasurers and other state financial officials. These officials are responsible for state investment vehicles that hold billions of dollars in ownership positions in these companies. They represent state pensioners and beneficiaries of other state investment vehicles that care about how the company performs. Unlike partisan gamesmanship where the only risk is political capital, and the rules do not matter, the state financial officers and investors who signed these letters have real skin in the game. Livelihoods are at risk, and the results matter.
New academic studies are showing that DEI policies do not improve performance. Recent decisions from the U.S. Supreme Court and subsequent legal efforts described by the Wall Street Journal as a full-scale “legal assault” show that DEI policies present serious legal risks. Recent surveys and the noteworthy debacle at the University of Michigan, where students and faculty are more dissatisfied than ever after a decade of DEI policies, underscore the increasing unpopularity of such programs.
Add to this the cautionary tale of iconic American brands such as Anheuser-Busch, Target, and Disney losing billions in value for wading into a controversial social-policy arena, combined with the watchful eyes of shareholders and customers, and the result should be a renewed commitment from America’s corporate leadership to the depoliticization of business.
Successfully building, operating, and growing a business that provides excellent products and services to the public, upward economic mobility to employees, and financial stability to investors are moral goods in and of themselves. And to the extent that companies do engage on political issues, they should not be at the forefront of divisive political issues but should be supporting fundamental freedoms such as free speech and religious freedom that benefit every American.
There is no reason to seek the approval of partisan interest groups, politicians, or biased media personalities, none of whom will be around to sift through the wreckage of a corporation that took their advice on being “good corporate citizens.”
President Calvin Coolidge once said that “the chief business of the American people is business. They are profoundly concerned with producing, buying, selling, investing, and prospering in the world.” In today’s turbulent economy, Americans are profoundly concerned with which companies can provide the best value for their hard-earned dollar. Americans want quality goods at reasonable prices when they purchase products. Americans want productive workers and healthy bottom lines in the companies where they invest their money. The overwhelming majority of Americans could not care less about the skin color or sexuality of the people who made and sold them the product, a distraction at best and a virtue-signaling luxury that most cannot afford. Corporations that bow to DEI pressure may soon find out they cannot afford it, either.