In June 2023, the U.S. Supreme Court — in a divided decision — struck down affirmative action in college admissions, stating that race could not be a factor in admission decisions and forcing institutions of higher learning to develop new ways to achieve diversity among their student base. While concern about the decision was focused on what it would mean for colleges and universities, opinions also were offered on what the Court's ruling would mean for the DEI initiatives of companies across the land.
An article in Harvard Business Review by Kenji Yoshino and David Glasgow, “What SCOTUS's Affirmative Action Decision Means for Corporate DEI,” struck an optimistic tone. “We believe the court has left plenty of room to continue advancing diversity and inclusion in the workplace,” Yoshino and Glasgow wrote.
Meanwhile, in an interview for Directors & Boards, I had a pleasant but somber conversation with Joyce Cacho, chair of the board of Sistema.bio and a premier go-to of mine on the topic of DEI. When asked if the Supreme Court's decision on affirmative action would affect corporate DEI initiatives, Cacho, too, expressed optimism, saying, “Companies that have gone through the process of aligning their mission, purpose, vision, company policy, strategy and operations have invested energy and time in asking the tough questions.” In other words, if you have done all of this work because you know DEI has benefits, why would you stop because of a court ruling, no matter how lofty the ruling body?
But she went on.
“Companies that have not done that alignment work can hold up the ruling as confirmation of their status quo — ‘You see, diversity really doesn't matter' — and then they can go back to their playbook as they had it” before the Supreme Court ruling.
So, two things:
- Joyce Cacho still has never steered me wrong.
2. Several companies out there might be in need of renewing their subscriptions to Harvard Business Review.
Indeed, the number of companies curtailing or roiling back their diversity initiatives is somewhat staggering. According to Bloomberg, in response to an anti-DEI campaign, Toyota announced in October that the company will no longer sponsor LGBTQ+ events and will narrow its community activities to align with STEM education and workforce readiness. In June 2024, Tractor Supply announced that it would eliminate its DEI goals and staff, stop providing data on human rights and no longer pursue its previously stated carbon emission goals. In the same month, CNN Business reported that John Deere had pledged to cease sponsorship of “social or cultural awareness” events and audit all training materials “to ensure the absence of socially motivated” messages. Lest you think I am picking on these companies, know that Advocate.com's list of companies that have curtailed or abandoned their DEI programs puts me in danger of writing a run-on sentence. It includes Molson Coors, Ford Motor Company, Lowe's, Harley-Davidson and Brown-Forman.
These corporate decisions to turn against DEI initiatives stand in stark contrast to the business case for DEI, which was presented by McKinsey & Company in its December 2023 report “Diversity Matters Even More: The Case for Holistic Impact.” The report found that companies in the top quartile for ethnic diversity in leadership outperform those in the bottom quartile by 39%. It also found that companies in the top quartile for both gender and ethnic diversity in executive teams are on average 9% more likely to outperform less diverse peers. As for board diversity, McKinsey's study found that companies in the top quartile for ethnically diverse boards are 13% more likely to outperform boards in the bottom quartile. The same report found that a diverse board and leadership team also had a positive effect on matters such as business ethics, corporate citizenship and philanthropy, and climate strategy.
With the business case for DEI in mind, perhaps it would be wise not only to point out companies that are pulling back on their DEI commitments, but also to highlight some companies that are strengthening their commitment in the face of opposition (and a Supreme Court-supplied exit ramp). A Business Insider report, “As Some Companies Scale Back on DEI, Others Double Down on Their Efforts,” for instance, tells the story of Ancestry.com, which responded to turnover rates among diverse talent by developing programming to celebrate cultural-heritage months and instituted a “Global Day of Understanding,” an event that encourages honest discussions about DEI matters.
Perhaps you have heard of the saying, “Stats don't lie. People do.” So if you doubt my veracity, that is fine, but a look at statistics generated by Spencer Stuart for its 2024 U.S. Spencer Stuart Board Index reveals what has happened to “underrepresented minority” directors since the gavel dropped on the Supreme Court's 2023 diversity decision.
In 2014, 12% of new S&P 500 directors were underrepresented minorities. That number rose to 23% in 2019. Four years later, the percentage had climbed to 36%. The percentage in 2024 — just one year after the Supreme Court's decision?
Twenty-six percent.
In a polarizing political and social climate, perhaps now is not the right time to pull back on corporate and board DEI initiatives. But then again, is there ever a right time?