As DEI Dies, Companies Would Be Wise to Abandon It Sooner Rather Than Later

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Commentary

Last week, the world’s largest restaurant chain, McDonald’s, followed by Meta—the technology conglomerate that runs Facebook, Instagram, and WhatsApp—dumped DEI (diversity, equity and inclusion).

In doing so, they join Toyota, Tractor Supply, Lowe’s, Ford, Boeing, Harley-Davidson, John Deere, and Molson Coors in discontinuing or reducing DEI efforts.

Even Walmart, previously one of the greatest corporate contributors to such causes, chose to roll back its DEI initiatives two months ago. Gone is their required employee training on critical race theory and their $100 million investment to combat “systemic racism.”

Given the trend, Walmart’s closest competitor (in brick-and-mortar sales), Costco, stands out for its recent ideological stand in the opposite direction.

In December a group of shareholders, led by the National Center for Public Policy Research (NCPPR), questioned the company’s DEI programs, which include picking suppliers and hiring and promoting employees “based on their race and sex.”

Citing evidence that such initiatives have led to legal and reputational disasters for other organizations, NCPPR introduced a proposal requesting a research report to assess the risks associated with maintaining Costco’s DEI efforts.

In response, a few weeks ago, the Seattle-based retailer’s board of directors issued a public statement. They recommended shareholders vote against the proposal, saying a research report on the company’s DEI practices “would not provide meaningful information.”

To shore up their argument, the board repeatedly declared that support for DEI is an ethical duty. While they didn’t mention the ethical dilemma in play, those promoting DEI as a moral necessity are typically motivated by the belief that society is systemically bigoted against minorities.

On that front, the research contradicts their belief.

Numerous studies by government commissions and esteemed US scholars have proven factors other than systemic racism or sexism are the cause of different outcomes between groups. In Canada, Matthew Lau has produced excellent work showing the same.

Interestingly, in the board’s response, there was also another “declaration of faith.”

Without providing supporting evidence, they added that they “believed” DEI efforts “help our business succeed.”

The board of directors’ contradictory claims should have Costco shareholders scratching their heads.

If they truly believe that DEI brings success, but can’t offer anything to back that up, isn’t an in-house study the ideal solution? After all, its findings could give them vindication and even more insights into corporate flourishing.

Maybe they suspect that an in-house study—if conducted honestly—won’t provide what they’re looking for. If that’s their suspicion, they are right.

Of course, a diverse workforce, arising organically, can improve a business. Because competent employees are best for success, it stands to reason that a business hiring based on competencies alone, irrespective of immutable characteristics, will do better.

However, the research shows that forced diversity, the kind that comes from DEI policies favouring one sex or skin colour over another, does nothing positive.

Last year, I examined the existing studies on the effects of DEI initiatives and produced a scholarly report for the Aristotle Foundation.

Despite proponents of such measures saying they lessen bigotry and increase harmony, my report showed there is no evidence to support that claim. Conversely, I revealed that a substantial number of studies have concluded that DEI increases bigotry and foments division. Other recent work has added to that proof.

The claim that forced diversity efforts help Costco, or any business, succeed also finds no support in the research.

A 2020 article in the Harvard Business Review summarized the existing studies on the issue. It noted there is no causal relationship between gender diversity and improved financial outcomes. Moreover, “As for studies citing the positive impact of racial diversity on corporate financial performance, they do not stand up to scrutiny either. ... In fact, research shows that things often get worse, because increasing diversity can increase tensions and conflict.”

In large part, the myth that manufactured diversity will improve the bottom line for businesses became accepted fact thanks to a series of studies commissioned by the world’s largest business consulting firm, McKinsey and Company.

But last year the positive outcomes of McKinsey’s studies were subjected to rigorous peer-reviewed testing and could not be replicated. When the economists conducting the exercise requested the raw data McKinsey’s team had used, they were refused. In their published findings, they concluded that McKinsey’s studies should “not be relied on” to support the view that increased racial/ethnic diversity improves financial performance.

Given all this, when Costco’s shareholders vote on NCPPR’s DEI proposal on Jan. 23, I think they would be wise to pay heed to the actions of their more successful competitor and not the unsubstantiated words of their board of directors.

More broadly, I think it would be wise for stakeholders at every organization—from corporations to public institutions—to challenge their DEI-supporting leaders. Neither the trend nor the evidence is on their side.

David Millard Haskell (@dmillardhaskell) is a senior fellow at the Aristotle Foundation for Public Policy, and a professor and social scientist at Wilfrid Laurier University. He is the author of “What DEI research concludes about diversity training.”

Views expressed in this article are opinions of the author and do not necessarily reflect the views of The Epoch Times.