Companies, Facing Risk of Civil Rights Violations, Downsize DEI Programs

President Lyndon B. Johnson shakes the hand of Dr. Martin Luther King Jr. at the signing of the Civil Rights Act while officials look on in Washington, on July 2, 1964. Hulton Archive/Getty Images

In the wake of the U.S. Supreme Court’s ruling against Harvard University that blocked its race-based admissions policies, and amid what appears to be a rising tide of antisemitism, some legal experts are predicting that the movement for racial categorization in America, known as diversity, equity and inclusion (DEI), may be receding. 

“The days of DEI are numbered,” Jack Brown, an attorney at Pacific Legal Foundation, told The Epoch Times. “Any kind of policy that scapegoats people on the basis of race, that divides people into racial groups and then discriminates against them—any of those policies’ days are numbered.”

Corporate DEI budgets are increasingly being seen as an unaffordable expense at a time of economic retrenchment, with companies such as Google and Meta recently announcing deep cuts to their diversity departments.

According to a CNBC report, based on data from the job site Indeed, DEI-related jobs postings fell by 23 percent for the year ended November 2023, after falling 44 percent at midyear 2023, compared to the year prior. In addition, a number of companies have laid off DEI staff and cut DEI budgets by up to 90 percent in 2023.

But it isn’t just the cost of salaries for DEI departments that is a deterrent, it is also the potential exposure to civil rights lawsuits. 

In June 2023, the Supreme Court ruled that race-based admissions policies at Harvard University and the University of North Carolina violated the Equal Protection Clause of the U.S. Constitution’s Fourteenth Amendment as well as U.S. civil rights laws. 

“Eliminating racial discrimination means eliminating all of it,” the justices wrote.

While the court ruling applied to publicly funded schools under Title VI of the 1964 Civil Rights Act, corporations are coming to the realization that race-based policies could also put them in legal jeopardy under Title VII of the act, which regards private employment. 

“We’re certainly seeing a trend in corporations being significantly less brazen in touting their obvious violations of civil rights laws and the Constitution as corporate virtue,” Scott Shepard, a fellow at the National Center for Public Policy Research, told The Epoch Times. “Many companies have rewritten much of their DEI materials, and some have dropped reference to ‘equity’ altogether, as it is by its own terms aggressively discriminatory in patently illegal ways.” 

Racial Agendas Prevalent in Corporate America

Despite federal and state laws prohibiting racial discrimination at private companies, race-based programs became prevalent in corporate America over the past decade, and DEI continues to have both its critics and its fans among corporate executives.

In a Jan. 4 exchange on X,  Elon Musk, who purchased the social media platform, stated that “discrimination on the basis of race, which DEI does, is literally the definition of racism.”

Responding to his note, tech entrepreneur Marc Cuban, who owns the Dallas Mavericks basketball team, defended DEI, calling it a “core principle of business,” and adding, “if you don’t think there is a need for DEI and it doesn’t create a competitive advantage for your company, just look at the @x posts/replies/quotes below ... These are the same people that work for you or are your co-workers.”

To which, Mr. Musk replied, “Cool, so when should we expect to see short white/Asian women on the Mavs?”

A Harvard Business Review 2022 survey found that approximately two-thirds of U.S. companies had a race or gender-based DEI program. Following the 2020 death of George Floyd, a black man, at the hands of police officers, companies, including Wells Fargo, United Airlines, JPMorgan Chase, Delta Airlines, Ralph Lauren, and Estee Lauder, announced race-based hiring and promotion policies.

In April, 2021, United Airlines announced that half of its new pilot trainees will be women or “people of color.”

According to the U.S. Chamber of Commerce, DEI programs are “vital indicators that both employees and potential candidates use to identify the most progressive, supportive, and innovative companies. 

“Developing a DEI strategy is a must for businesses across all industries to keep track of their efforts and uncover any blocks diverse employees might be facing,” the Chamber states.

In practice, DEI programs included things like race-based hiring quotas, race-based promotion policies, racial quotas for suppliers, and mandatory racial training for employees, often targeted at those who were “non-diverse,” which typically meant white or male. 

But the legal risk of DEI programs has recently caused some companies to reconsider. 

“A lot of the principles that the court discusses in the Harvard Case do implicate DEI programs—treating people differently on the basis of race being the most obvious one,” Mr. Brown said. “I think these DEI programs do pose a liability risk for any company that’s employing them, simply because they could contribute to a hostile work environment claim under the Civil Rights Act if you’re segregating your staff for these trainings on the basis of race and gender.”

Following the Supreme Court ruling in the Harvard case, attorneys general from 13 states notified America’s largest corporations that private companies were subject to the same legal standard as schools regarding racial discrimination.

In a July 13 letter to Fortune 100 companies, the attorneys general wrote that “the Supreme Court’s recent decision should place every employer and contractor on notice of the illegality of racial quotas and race-based preferences in employment and contracting practices.

“If your company previously resorted to racial preferences or naked quotas to offset its bigotry, that discriminatory path is now definitively closed,” the attorneys general wrote. “Your company must overcome its underlying bias and treat all employees, all applicants, and all contractors equally, without regard for race.”

Companies Retreating from Activism

Corporate DEI initiatives are component of the environmental, social, and governance (ESG) movement, which also became prevalent throughout corporate America over the past decade and which some believe is also in retreat at the moment. 

BlackRock CEO Larry Fink, one of the more outspoken advocates of ESG, or “sustainable” investing, stated in June 2023 that he would no longer use the term ESG.

“In my last CEO letter, the phrase ESG was not uttered once, because it’s been unfortunately politicized and weaponized,” Mr. Fink stated at the Aspen Ideas Festival. 

Throughout the past year, companies began exiting various United Nations net-zero clubs, including Vanguard leaving the Net Zero Asset Managers Alliance in December 2022 and half the members of the Net Zero Insurers Alliance abandoning that club in 2023. 

Many of the insurance companies cited the heightened risk of membership amid warning letters from numerous state attorneys general that they were contemplating antitrust actions regarding what they charged was illegal collusion against oil, gas and coal companies. 

The past year also brought challenges for companies that pursued social-justice causes. Corporations like Disney, Target, and Anheuser-Busch, the parent company of Bud Light, took major hits to their sales and stock prices when some of their more conservative customers were put off by the companies’ progressive political campaigns. 

But many analysts question whether recent corporate reversals on ESG and DEI programs signify a material change or simply a rebranding of the same agenda. And having proclaimed their support of race-based policies, many corporations may still find themselves exposed to civil rights lawsuits, even after they change their policies. 

“Changes in language don’t solve the company’s problems,” Mr. Shepard said. “Now that so many of them have so proudly proclaimed plans to discriminate by race, sex or orientation, legal suppositions may reasonably arise that if their behaviors, despite the changes in text, still get them to their illegal goals, quotas or exclusions, actionable discrimination is still occurring.”

To protect themselves, he recommends that companies conduct internal reviews to ensure they are not engaging in racial or gender discrimination. His organization has presented numerous shareholder proposals, few of which have been accepted by management to date, that would require companies to conduct such an internal audit. 

He also suggests that companies rethink their DEI departments, which he calls “triple cost centers.”

Besides generating no revenue for the company, “they push policies that result in making decisions on the bases of surface characteristics rather than merit - which simply cannot, despite a bevy of bogus studies, increase company success; and they generate potentially massive legal liability,” he said.