Costco stands by its diversity policies while other US companies reduce focus on DEI initiatives

NEW YORK — Costco is objecting to a shareholder suggestion that calls for an assessment of potential business risks linked to its diversity, equity, and inclusion practices. The proposal was on the agenda for voting at the company’s yearly gathering on Thursday.

The National Center for Public Policy Research, a conservative organization in Washington, put forth the proposal, claiming that Costco’s DEI efforts could expose the company to legal, reputational, and financial hazards, which could ultimately impact its shareholders.

Drawing parallels, the think tank also proposed a similar evaluation to Apple. It pointed out that following a U.S. Supreme Court ruling in July 2023 prohibiting affirmative action in college admissions, a number of American companies have modified or pulled back on their diversity strategies.

Costco officials could not be reached for comment on the DEI proposal.

But Costco’s board of directors voted unanimously to ask shareholders to reject the motion. The board said it believes “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 details how having diverse employees and suppliers has, in their view, fostered “creativity and innovation in the merchandise and services that we offer” and led to greater customer satisfaction among Costco members.

Neil Saunders, managing director of consulting firm GlobalData’s retail division, said 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 diversity, equity and inclusion programs contrasts with the positions taken in recent months by other big consumer brands, including Walmart, McDonald’s and John Deere.

Last week, more than 30 Walmart shareholders, including Amalgamated Bank and Oxfam America, asked the CEO of the nation’s largest retailer to explain the business impact of curbing the company’s DEI policies, a move they called “disheartening.”

Prominent technology companies, including Amazon and Meta – the parent company of Facebook and Instagram – also have rolled back DEI initiatives, which are expected 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 similar arguments about corporations, targeting 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. Conservatives have long condemned them, arguing they violate the U.S. Constitution by considering factors such as race, gender and sexual orientation.

As for Costco, the National Center for Public Policy Research alleged that at least 200,000 of the company’s 300,000 employees worldwide “are potentially victims of this type of illegal discrimination because they are white, Asian, male or straight.” If only a fraction of those employees were to sue Costco, the legal costs could be significant, the center said.

Costco has a chief diversity officer, but the company’s executive ranks do not reflect the diversity of its customers. Nearly 81% of the executives Costco had in place last year were white, and 72% of them were men, according to data published on its website. Saunders said members of Costco’s management team typically stay a long time given the company’s solid and stable financial performance.

In other ways, Costco has been a bit of a maverick in the corporate world. It doesn’t have an official corporate public relations team, and it hasn’t focused on building up online business as much as rivals Walmart and Target.

The National Center for Public Policy Research intends to present a proposal at Apple’s Feb. 25 shareholder meeting that goes beyond what the think tank wants from Costco. The center’s resolution asks the tech company to abolish its inclusion and equity department, policies and goals, describing them as “consistent with, if not more radical than, most corporate DEI programs.

Apple’s board wants shareholders to vote down the proposal, saying the company strives “to create a culture of belonging where everyone can do their best work.”

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