Costco shuts down shareholder demands to drop DEI hiring practices

On By Littum

The Costco board has rejected a request from shareholders to drop its diversity, equity and inclusion (DEI) policies. The shareholders urged the board to get rid of its “unlawful discrimination” program.

Costco’s board responded to a number of shareholders and recommended voting against a proposal to “report on the risks of maintain DEI efforts,” Newsweek reported.

The shareholders had put forward a proposal that employees in the company may be victims of “unlawful discrimination because they are white, Asian, male or straight.” They argued that could lead to tens of billions of dollars in legal costs to defend against lawsuits.

“Our board has considered this proposal and believes that our commitment to a company rooted in respect and inclusion is appropriate and necessary,” said a statement issued by the board. “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 added that it wants to secure everything more than 300,000 employees “feel valued and respected,” and that by having a diverse workforce, Costco can get more insight and creativity when it comes to what the company offers in stores.

The board went on to note that customers will be 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 said. “We believe it fosters creativity and innovation in the goods and services we offer our members.”

The shareholders argued that the Supreme Court’s judgment in the case Students for Fair Admissions v. Harvard found that Harvard’s use of race when choosing who to admit to the school violated the 14th Amendment.

The shareholder proposal also noted that a Starbucks manager had won a $25.6 million lawsuit after claiming she was fired because she was white.

Shoppers reach for items on display at a Costco warehouse on November 19, 2024 in Lone Tree, Colo. The board has rejected a proposal by some shareholders to eliminate DEI policies
Shoppers reach for items on display at a Costco warehouse on November 19, 2024 in Lone Tree, Colo. The board has rejected a proposal by some shareholders to eliminate DEI policies (AP)

“It is clear that DEI entails litigation, reputational and financial risks for the company and thus financial risks for the shareholders,” the proposal states. “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 board noted that it “regularly evaluates” the procedures the firm uses to comply with “the law, including recent Supreme Court decisions.”

“We believe our commitment to diversity, equity and inclusion is legally appropriateand nothing in the proposal indicates otherwise,” the board added. “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.”

The annual meeting of shareholders is set to be streamed live on January 23 at 5:00 PM ET A portion of the meeting will be set aside for a vote on the motion “if properly presented at the meeting.” Only those who have been shareholders since before November 15 will be allowed to vote.