Costco shareholders overwhelmingly rejected a proposal from a conservative think tank urging the company to assess the business risks associated with its diversity initiatives.
According to preliminary results shared by Costco Chairman Hamilton “Tony” James, more than 98% of the shares voted against the proposal.
James, along with other board members, had recommended that shareholders vote against the proposal related to the company’s diversity, equity, and inclusion (DEI) policies ahead of Thursday’s annual meeting.
James emphasized the importance of inclusivity, stating, “We owe our success to the more than 300,000 employees who serve our members every day. It is important that they all feel included and appreciated and that they transmit these values to our customers.”
The proposal was submitted by Ethan Peck from the National Center for Public Policy Research, a right-leaning shareholder advocacy group. In a prerecorded message, Peck argued that DEI initiatives are “illegal, immoral and detrimental to shareholder value,” warning that they pose potential litigation risks for the company.
He claimed that not hiring or promoting based solely on merit—without considering race or sex—could result in the company failing to hire or promote the best candidates, ultimately harming its future success and, by extension, shareholders’ interests.
The vote occurred shortly after President Donald Trump used executive power to curb DEI initiatives in the federal government. It also highlights the growing trend of shareholder votes on DEI matters. Recently, Apple advised its investors to reject a shareholder proposal that sought to eliminate the company’s DEI programs.
Conservative groups, such as the National Center for Public Policy Research and the National Legal and Policy Center, argue that shareholder proposals like these aim to counter what they see as the growing influence of liberal politics in corporate boardrooms and the advancement of a “woke” agenda that they believe risks business viability.
These groups are leveraging the Supreme Court’s 2023 ruling that struck down affirmative action in college admissions to challenge corporate diversity policies, submitting more DEI-related proposals to investors.
The number of anti-DEI shareholder proposals has surged, having more than tripled since 2020, according to the Conference Board. This proxy season, Walmart and Starbucks are also facing similar proposals.
Peck, deputy director of the National Center for Public Policy Research’s Free Enterprise Project, shared that his organization plans to introduce 40 shareholder proposals this year, with 12 focused on DEI.
Peck explained that his group’s efforts align with a broader pushback against DEI, stressing that these proposals aim to expose how DEI policies are “discriminatory and value-destroying.”
While anti-DEI proposals generally receive low support—typically less than 2%—they are designed to draw attention to the issue, as corporate boards often recommend shareholders vote against them.
The controversy surrounding DEI policies is further fueled by Trump’s recent comments at the World Economic Forum in Davos, where he dismissed DEI programs as “absolute nonsense.”
His executive order aimed at ending DEI in the federal government and affirmative action in federal contracting has added to the pressure on corporate America, with Trump signaling that his administration would investigate companies that don’t align with these policies.
This rhetoric is expected to inspire further shareholder activism, with a particular focus on potential legal and financial risks associated with DEI initiatives.
JPMorgan Chase, which may be targeted by such challenges, has already responded. CEO Jamie Dimon, when asked about potential challenges to the bank’s DEI practices, responded, “Bring them on,” but indicated he would listen to arguments about where JPMorgan Chase might be going wrong and make adjustments as necessary.
In the face of this shifting political landscape and pressure from conservative think tanks and political groups, many major corporations have reconsidered their DEI efforts.
Some, like Meta (Facebook’s parent company), dialed back their diversity commitments shortly before Trump took office, with CEO Mark Zuckerberg adjusting the company’s policies to align more closely with the new administration’s stance.
However, critics of these rollbacks argue that companies are making short-sighted decisions that could undermine long-term business performance.
One such critic is As You Sow, a progressive shareholder advocacy group that released a 2023 report showing a “statistically significant correlation” between diverse management and strong financial performance in several key metrics.
Meredith Benton, the principal founder of Whistle Stop Capital, which consults with As You Sow, emphasized that companies should make decisions that ensure long-term business success, rather than succumbing to short-term political pressures.
While some companies have reduced their DEI efforts, others, like Costco, have remained steadfast in their support. The National Center for Public Policy Research’s proposal argued that Costco’s DEI programs carry “litigation, reputational, and financial risks to the company, and therefore to shareholders.”
However, Costco’s board of directors voted unanimously to recommend shareholders reject the proposal, asserting that a diverse workforce and supplier base are critical drivers of innovation in both the company’s products and services.
The board emphasized that the report requested by the proposal would not provide meaningful or useful information, reinforcing the company’s commitment to maintaining an inclusive and respectful business environment.