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Board series: DEI Backlash – Tensions in the boardroom

MARCH 2025

Over the past several years, Diversity Equity and Inclusion (DEI) has been a board-level topic, as the corporate push required the Fortune 500 to re-evaluate its talent strategy, employee engagement, and procurement policies. With broad-based opposition to many DEI-related initiatives coming from the White House and litigation threats mounting, DEI is once again in the spotlight. There are no easy answers as corporate boards weigh litigation, reputational, and compliance risks, as well as backlash from employees, customers, and shareholders.

Key Takeaways:

  • With anti-DEI litigation measures intensifying and succeeding across the U.S. as well as new requirements that apply to all federal contractors, DEI policies are being called into question by large U.S. corporations
  • Myriad tensions are pulling board directors and sub-committees in different directions – be it company values, reputational damages, reducing litigation potential, employee backlash, political risk, customer responses, and more
  • In evaluating these factors, many large companies have been quick to adopt new framing around inclusion, and belonging and focused on language that references terms that are not status-protected (e.g., socioeconomic diversity)

What are key tensions in the boardroom?

Many boards have held special meetings on the topics and have moved to crisis management regarding the pressure from shareholders, regulators, customers, and employees. In these sessions, we see key themes emerge as companies evaluate their next moves:

  • Countering litigation and political risks. Starting with the U.S. Supreme Court’s June 2023 decision that found race-conscious admissions practices in higher education violated both the Constitution’s 14th Amendment Equal Protection Clause and Title VI of the Civil Rights Act of 1964, the ripple effects are now making waves for large businesses. In 2022, over 90% of S&P 500 companies included DEI language in their annual filings
  • Complying with new federal procurement requirements. President Trump’s executive order (signed 1/21/2025), “Ending Illegal Discrimination and Restoring Merit-Based Opportunity,” rescinded affirmative action and other anti-discrimination policies applying to federal contracts. Large businesses with contracts with the U.S. government will have to comply with these new supplier requirements and demonstrate they do not have conflicting internal policies on DEI
  • Anticipating reputational damage. Like with the backlash on Target’s announcement of its DEI rollbacks, many are now targeting the company by claiming it is “seesawing back and forth and saying one thing and doing another.” When a company quickly capitulates to backlash and takes an apologetic stance, it suggests what it initially did was incorrect
  • Harmonizing global DEI policies. For global companies, balancing compliance with local laws and maintaining a strong, unified commitment to DEI is challenging. What works in one region won’t work in another. From a turbulent environment in the U.S., to more progressive laws of Canada and the EU, to more restrictive policies in Russia and Saudi Arabia, the global DEI landscape is challenging
  • Redefining the “S” in ESG. With the DEI backlash in the U.S., the “S” or “social” dimension of ESG will be evolving in disclosure reporting and voluntary metrics companies have been reporting on. Instead of DEI, many are focusing on engagement, belonging, employee engagement, volunteering, supply chain transparency, worker safety, elevated labor standards, human rights
  • Evaluating the cost-effectiveness of DEI initiatives. This question raises a great deal of complexity and company-specific analysis. While some claim DEI initiatives are costly and ineffective, others argue that they are crucial for business success, leading to better decision-making, innovation, recruitment outcomes, and employee satisfaction. Large companies are spending billions annually on DEI initiatives, with estimates ranging from $8 to $15.4 billion.
  • Improving the efficacy of DEI programs. DEI programs have been studied, which have shown mixed results in changing biases or reducing prejudice. Popular strategies for communicating the value of DEI has been a challenge for organizations and many are calling for a DEI “reset” to be more outcome-oriented and comprehensive to address areas of pay equity, physical and psychological safety, wellness, and promotion rates rather than one-time trainings or social media campaigns
  • Maintaining employee engagement. While 91% of workers have experienced discrimination related to gender, race, disability, age, or body size, and 94% of workers care about a sense of belonging, only 52% of American workers support DEI and 21% say it is a bad thing. Fewer people are supporting it, more are against it on a YOY basis. However, how to engage employees meaningful giving the open questions on belonging and discrimination remain open
  • Managing change effectively. So far employee reactions are mixed, many employees feel that these changes undermine efforts to create a more inclusive and equitable workplace, leading to decreased morale and engagement.
  • Looking at the issues from the client’s lens. Companies like Goldman Sachs are pressing their executive teams to look at all issues, DEI, emissions reductions, and talent engagement from the lens of their clients globally

With this in mind, how are large companies responding?

Each day there are new announcements being made about roll-backs, continuation of DEI programs, and other legal considerations. So far, we’ve been tracking the companies who have held the line on DEI:

  • Costco. The company defended its DEI practices and voted down an anti-DEI proposal, with more than 98% of shareholders supporting the vote in its annual meeting in January 2025. Since 19 Republican attorneys general have called on Costco to end its policies. The board stated that its DEI policies are legally appropriate and “remind and reinforce with everyone at our Company the importance of creating opportunities for all”
  • Delta Air Lines. Maintained its line on DEI efforts, “We are steadfast in our commitment because we think they are actually critical to our business”
  • Apple. Apple’s board of directors has recommended shareholders vote against a conservative think tank’s proposal to consider scrapping the company’s DEI initiatives. “At Apple, we believe that how we conduct ourselves is as critical to Apple’s success as making the best products in the world . . . “ At the end of February, its shareholders emphatically rejected the anti-DEI proposal – dismissed by 97% of shareholders. Apple’s management advised shareholders to vote against the anti-DEI proposal and claims it infringes on management’s ability to steer its own operations and strategies
  • Microsoft. Has not made any moves to repeal its DEI policies and has stated that its “workforce is strengthened by many perspectives, experiences, and backgrounds critical to our innovation”

A greater portion of large U.S. companies have decided to align with pressures from the White House and roll back efforts:

  • Google. Announced in February that it was rolling back its DEI efforts, which include eliminating diversity hiring goals, reviewing DEI Programs, and removing language in its 10-K report to the SEC that it stated its commitment to DEI. Furthermore, the company removed references to Black History Month, LGBTQ+ Pride, and Women’s History Month
  • Amazon. Decided to scale back its DEI programs and has cited in an internal memo to employees the “winding down of outdated programs and materials” with an effort to focus on those with “proven outcomes”
  • McDonald’s. Ended its diversity goals for employees and suppliers. Executives cited that the company had, “assessed the shifting legal landscape.” However, it will continue to report numbers pertaining to diversity in its ranks and discuss inclusion with suppliers in business reviews
  • Meta. Eliminated the team overseeing its diversity efforts and ended its representation goals for interviewing and hiring women and minorities and cited political reasons for doing so
  • Target. Ended its Racial Equity Action and Charge initiatives, stopped all external diversity-focused surveys, and changed its “Supplier Diversity” team to “Supplier Engagement.” Its three-year diversity, equity, and inclusion coals have also been terminated
  • Walmart. Plans to wind down its Center for Racial Equity, a nonprofit it founded in 2020 with a $100 million, 5-year commitment, ceased funding for Pride month, stopped using DEI in communications
  • Goldman Sachs. Said it would drop a requirement that a company it takes public in the U.S. or Western Europe must have at least two “diverse” members on its board of directors, one of whom needed to be a woman. Dropped a section about “diversity and inclusion” from its annual filing
  • CitiBank. Will rename its “Diversity, Equity and Inclusion and Talent Management” team to “Talent Management and Engagement” and it will end its diversity hiring goals
  • Bank of America. Will end “aspirational” targets for diversity hiring and replaced the word “diversity” with “talent” and “opportunity” in an annual report
  • Warner Bros. Said in a staff memo that it remains committed to building an “inclusive team” but would rename its DEI programs to “inclusion”
  • State Street. Dropped its expectation for boards in major indexes to be 30% female and S&P 500 companies to have at least one racial minority director, which follows suit with BlackRock and Vanguard
  • Victoria’s Secret. Is reframing its DEI team to “Inclusion and Belonging” and is re-evaluating a supplier diversity goal, halting a goal to promote a certain percentage of black workers
  • Deloitte. Instructed its staff working on contracts for the American government to remove pronouns from email signatures to “align with emerging government client practices and requirements”

Actions boards can take:

  • Consider options for continuing DEI initiatives under a different framing within operational strategy and with language that avoids identification of protected classes (e.g., using socioeconomic diversity instead)
  • Evaluate potential backlash from employees, customers and clients, vendors, shareholders, and potential reputational damages
  • Bring together cross-functional management to evaluate key tensions and trade-off decisions
  • Provide oversight to management team’s change management plans and employee communication strategy
  • Review the management team’s plans to create a more inclusive culture and how these plans integrate within broader enterprise operational plans
  • Consider opportunities to harmonize DEI policies across regions where appropriate given the new political and litigious context in the U.S.
  • Convene the board’s audit sub-committee to determine the impact of ESG disclosure reporting

Questions for the boardroom:

  • What has been working well within our existing DEI framework and portfolio? What is essential to the long-term success of our business? What has not yielded results we were aiming to achieve?
  • Where do we face litigation risk due to our current DEI strategy and portfolio?
  • How have our peers adjusted (or not) amid mounting political pressure? What can we learn from their efforts?
  • How can we best communicate our changes or position to shareholders?
  • How does anti-DEI backlash dovetail with anti-ESG backlash? Where may we face challenges at that intersection?
  • Where do we have to revisit our definitions of diversity and inclusion in light of current litigation and Supreme Court decisions?
  • How does the “S” in ESG evolve with the DEI backlash? What will it look like in the U.S. and globally?
  • How will ESG disclosure reporting evolve to address the new legal precedent in the U.S.?

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