Corporate Strategies Evolve Amid DEI Policy Shifts

In the wake of events like the protests that erupted in 2020 following the death of George Floyd, major corporations responded en masse by touting their commitments to diversity, equity and inclusion programs – commonly referred to as DEI. Just a few years later, however, President Donald Trump’s fervent opposition has apparently succeeded in causing corporate America to re-evaluate such policies.

Trump didn’t waste any time formally condemning DEI upon taking office for a second time in January. On January 20, the White House issued an executive order entitled “Ending Radical and Wasteful Government DEI Programs and Preferencing” that outlined the new administration’s plans to dismantle “illegal and immoral” DEI initiatives in the government. A day later, another EO appeared in the Federal Register claiming that “critical and influential institutions of American society, including the federal government, major corporations, financial institutions, the medical industry, large commercial airlines, law enforcement agencies, and institutions of higher education” were engaging in violations of civil rights by implementing DEI programs. The Department of Justice followed suit with a memo on February 5 vowing to get rid of DEI “preferences, mandates, policies, programs, and activities in the private sector and in educational institutions that receive federal funds.”

A federal judge’s ruling in February put a hold on enforcing significant portions of Trump’s EOs. Nevertheless, influential institutions in investing and corporate governance appear to be falling in line behind the administration’s anti-DEI orientation. They include proxy advisory firm Institutional Shareholder Services, which released a statement on February 11 announcing it would “indefinitely halt consideration of certain diversity factors in making vote recommendations with respect to directors at U.S. companies.” In other words, factors such as gender, race and ethnicity would no longer impact the recommendations of ISS when it comes to votes on members of boards of directors.

Meanwhile, the largest asset management firm in the world, BlackRock, revised its proxy voting guidelines to language calling for companies to aim for at least 30% of their board members to be diverse. One of BlackRock’s chief competitors, Vanguard, apparently removed similar language from its 2025 guidelines, too. Not to mention, the Nasdaq exchange last year conceded the invalidation of its board diversity rule.

Against that backdrop, many companies are watering down their statements about DEI while acknowledging that the issue has morphed into a risk to their businesses. For example, in a recent public filing with the Securities and Exchange Commission, Amer Sports Inc. asserted that Trump’s EOs had fomented a backlash against DEI programs, meaning the company could end up “facing additional compliance obligations, becoming the subject of investigations and enforcement actions, or sustaining reputational harm.” Expedia Group essentially admitted in its annual 10-K filing that DEI had turned into a no-win situation for the company: Either disappoint the activists clamoring for DEI and environmental, social and governance programs or risk the wrath of the federal government.

“These evolving stakeholder expectations and our efforts and ability to respond to and manage these issues, provide updates on them, and establish and meet appropriate goals, commitments, and targets present numerous operational, regulatory, reputational, financial, legal, and other risks and impacts, any of which may be outside of our control or could have a material adverse impact on our business, including on our reputation and stock price,” Expedia noted.

Will additional companies follow the leads of Amer Sports and Expedia? What portion will stand firm in their DEI policies, prepared to stand in the line of fire and face-off against the federal government? Stay tuned.