Costco's board of directors has unanimously rejected a shareholder proposal to report on the risks associated with diversity, equity, and inclusion (DEI) programs. The shareholders argued that Costco's DEI efforts could lead to 'illegal discrimination' against white, Asian, male, or straight employees, potentially costing the company billions of dollars. Costco responded that its commitment to DEI is essential to its success and that a diverse workforce benefits both employees and customers.
The Costco Board pushed back against its anti-diversity, equity and inclusion shareholders, who had suggested the wholesale corporation re-evaluate its 'illegal discrimination' program.Newsweek reached out to Costco for comment.
Why It MattersDEI programs have become both a cornerstone of institutional policies and a flashpoint in legal debates. Landmark court cases, such as Students for Fair Admissions v. Harvard and Fisher v. University of Texas, have challenged affirmative action practices, questioning whether race-conscious admissions violate constitutional principles of equal protection. Similarly, workplace DEI initiatives have faced scrutiny under Title VII of the Civil Rights Act.What to KnowThe Costco board responded to a group of shareholders, unanimously recommending a vote against the proposal to 'report on the risks of maintaining DEI efforts.' The shareholders had suggested Costco employees would potentially become victim to 'illegal discrimination because they are white, Asian, male or straight,' which could create 'tens of billions of dollars' in legal costs to the company.'Our Board has considered this proposal and believes that our commitment to an enterprise rooted in respect and inclusion is appropriate and necessary,' the response reads. 'Our success at Costco Wholesale has been built on service to our critical stakeholders: employees, members and suppliers. Our efforts around diversity, equity and inclusion follow our code of ethics.'The Board noted that it works to have all of its over 300,000 employees 'feel valued and respected.' They continue that by having a diverse group of employees, Costco is able to have additional insight and creativity into merchandise offerings. Customers are also able to 'see themselves reflected in the people in our warehouses with whom they interact.''Having diversity in our supplier base, including attention to small businesses, is beneficial for many of the same reasons diversity benefits our Company,' the Board wrote. 'We believe that it fosters creativity and innovation in the merchandise and services that we offer our members.'How it StartedSome shareholders had put forward a proposal stemming from the Supreme Court ruling in SFFA v. Harvard, which the Court had said the college's use of race as a factor in admissions was in violation of the 14th Amendment.The proposal suggested that a Starbucks manager, who won a $25.6 million lawsuit after arguing that she was fired for being white, was thanks to the Supreme Court presiding. The proposal also went on to note DEI staff layoffs and related investments at companies like Meta, Microsoft and Zoom.'It's clear that DEI holds litigation, reputational and financial risks to the Company, and therefore financial risks to shareholders,' the proposal read. 'And yet Costco still has such a program, though it was apprehensive enough to recognize this as it recently and quietly rebranded its DEI program to 'People and Communities.''The Costco Board said they 'regularly evaluate' the practices the company holds in order to be in 'compliance with the law including evolving Supreme Court decisions.''We believe that our diversity, equity and inclusion efforts are legally appropriate, and nothing in the proposal demonstrates otherwise,' the Board wrote. 'Our focus on diversity, equity and inclusion is not, however, only for the sake of improved financial performance but to enhance our culture and the well-being of people whose lives we influence.'What People Are SayingPeople on X, formerly known as Twitter, are praising the Costco Board for its response, some even calling it 'socially responsible capitalism.'What Happens NextThe annual shareholders meeting will be held by live webcast on Thursday, January 23 at 5 p.m. EST. Part of the time will allow for a vote on the shareholder proposal 'if properly presented at the meeting.' Only shareholders prior to November 15 are allowed to vote at the meeting.
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