Costco is facing a shareholder proposal that seeks to evaluate the financial risks associated with its diversity, equity, and inclusion (DEI) initiatives. The proposal comes as a wave of companies, emboldened by a Supreme Court ruling against affirmative action, scale back their DEI programs. Costco's board of directors, however, is urging shareholders to reject the proposal, arguing that their commitment to DEI is essential to their business success.
Costco is resisting a shareholder proposal that calls on the wholesale club to assess any business risks associated with its diversity, equity, and inclusion ( DEI ) practices. The proposal was slated for a vote during the company's annual meeting on Thursday, but arrives as numerous other U.S. companies have scaled back their DEI initiatives.
The National Center for Public Policy Research, a conservative think tank based in Washington, submitted the proposal, arguing that Costco's DEI efforts carry 'litigation, reputational and financial risks to the company, and therefore financial risks to shareholders.' The think tank has advanced a similar proposal to Apple and, like some American companies that have already reduced or withdrawn from their diversity policies, cited a U.S. Supreme Court decision in July 2023 that prohibited affirmative action in college admissions. However, Costco's board of directors unanimously voted to recommend that shareholders reject the motion. The board stated its belief that '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 outlines how diverse employees and suppliers have, in their view, fostered 'creativity and innovation in the merchandise and services that we offer' and resulted in greater customer satisfaction among Costco members. While Costco officials could not be reached for comment on the DEI proposal, Neil Saunders, managing director of consulting firm GlobalData's retail division, told the Associated Press that 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 DEI programs stands in contrast to the positions taken in recent months by other major consumer brands, such as Walmart, McDonald's and John Deere. Last week, more than 30 Walmart shareholders, including Amalgamated Bank and Oxfam America, urged the CEO of the nation's largest retailer to explain the business impact of curtailing the company's DEI policies, a move they deemed 'disheartening.' Prominent technology companies, including Amazon and Meta — the parent company of Facebook and Instagram — have also scaled back DEI initiatives, which are anticipated 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 comparable arguments about corporations. They have targeted 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. On Tuesday, his administration directed that all federal DEI staff be placed on paid leave and eventually be laid off. Trump has labeled the programs 'discrimination' and insisted on restoring strictly 'merit-based' hiring
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