Costco rejects shareholder demands to withdraw from DEI employment

The Costco board pushed back against its Diversity, Equity and Inclusion (DEI) shareholders, who had suggested the wholesaler reconsider its “unlawful discrimination” program.

Newsweek contacted Costco for comment.

Why it matters

DEI programs have become both a cornerstone of institutional policies and a flashpoint in legal debates. landmark legal cases, such as Students for Fair Admissions v. Harvard and Fisher v. University of Texashave challenged the practice of affirmative action and questioned whether race-conscious admissions violate constitutional principles of equal protection. Similarly, workplace DEI initiatives have come under scrutiny under Title VII of the Civil Rights Act.

What to know

The Costco board responded to a group of shareholders and unanimously recommended voting against the proposal to “report on the risks of maintaining DEI efforts.” The shareholders had suggested that Costco employees would potentially be victims of “unlawful discrimination because they are white, Asian, male or straight,” which could create “tens of billions of dollars” in legal costs for the company.

“Our board has considered this proposal and believes that our commitment to a company rooted in respect and inclusion is appropriate and necessary,” reads the response. “Our success at Costco Wholesale is 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 make all of its more than 300,000 employees “feel valued and respected.” They continue that by having a diverse group of employees, Costco is able to gain additional insight and creativity in product 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 that diversity benefits our business,” the board wrote. “We believe it fosters creativity and innovation in the goods and services we offer our members.”

How it started

Some shareholders had put forward a proposal that stemmed from the Supreme Court’s judgment in SFFA vs. Harvardas the Court had said that the college’s use of race as a factor in admissions violated the 14^th Change.

The motion suggested that a Starbucks manager who won a $25.6 million lawsuit after claiming she was fired for being white was thanks to the president of the Supreme Court. The proposal also went on to note DEI staff layoffs and related investments at companies such as Meta, Microsoft and Zoom.

“It is clear that DEI has litigation, reputational and financial risks to the company and thus financial risks to shareholders,” the proposal read. “And yet Costco still has such a program, although it was dubious enough to recognize this when it recently and quietly renamed its DEI program ‘People and Communities.’

The Costco board said it “regularly evaluates” the company’s practices for “compliance with the law, including recent Supreme Court decisions.”

“We believe our diversity, equity and inclusion efforts are legally appropriate, and nothing in the proposal indicates otherwise,” the board wrote. “However, our focus on diversity, equity and inclusion is not just for the sake of improved financial performance, but to improve our culture and the well-being of people whose lives we impact.”

What people say

The folks at X, formerly known as Twitter, are praising the Costco Board for its response, some even calling it “socially responsible capitalism.”

What happens next

The annual shareholders’ meeting will be held via live webcast on Thursday 23 January at 5:00 PM EST. Part of the time will allow for a vote on the shareholder proposal “if properly presented at the meeting.” Only shareholders before 15 November have the right to vote at the general meeting.