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Costco's board of directors is fighting a proposal to eliminate its diversity, equity, and inclusion (DEI) program, per Fox Business.
During an annual meeting of Costco shareholders scheduled for next month, investors are set to vote on a proposal by the National Center for Public Policy Research, which is challenging the legality of the wholesale retailer's DEI program.
The proposal comes after the Supreme Court ruled against considering race in college admissions, citing that it violated the equal protection clause of the 14th Amendment. Several lawsuits have been filed against Fortune 100 companies, alleging that the Supreme Court ruling made corporate DEI programs illegal.
In the wake of the ruling, companies like Alphabet, Meta, Microsoft, Zoom, and John Deere have rolled back DEI commitments or laid off employees from DEI departments, the proposal cites.
"And yet Costco still has such a program, though it was apprehensive enough to recognize this as it recently and quietly rebranded its DEI program to ‘People and Communities,’" the National Center for Public Policy Research wrote in its shareholder proposal. "But sticking a new label on discriminatory practices does not protect Costco and its shareholders from these risks."
The National Center for Public Policy Research argues that Costco's rebranded program still openly expresses a "commitment to equity," the company still employs a "Chief Diversity Officer," still has a supplier diversity program that chooses suppliers based on race and sex, still factors in race and sex in hiring and promotion, and "and still contributes shareholder money to organizations that advance the discriminatory agenda of DEI."
The foundation says Costco's DEI efforts could cost the company billions of dollars through legal challenges.
"With 310,000 employees, Costco likely has at least 200,000 employees who are potentially victims of this type of illegal discrimination because they are white, Asian, male or straight," their proposal argues. "Accordingly, even if only a fraction of those employees were to file suit, and only some of those prove successful, the cost to Costco could be tens of billions of dollars."
Costco's board of directors defended its DEI practices, saying they are "legally appropriate, and nothing in the proposal demonstrates otherwise." The board also argued that the National Center for Public Policy Research's "broader agenda is not reducing risk for the Company but abolition of diversity initiatives."
"We welcome members from all walks of life and backgrounds. As our membership diversifies, we believe that serving it with a diverse group of employees enhances satisfaction," Costco's board wrote. "Having diversity in our supplier base, including appropriate attention to small businesses, is beneficial for many of the same reasons diversity benefits our Company. We believe that it fosters creativity and innovation in the merchandise and services that we offer our members."
The board of directors penned a message directly to investors ahead of the January meeting.
"Our success at Costco Wholesale has been built on service to our critical stakeholders: employees, members, and suppliers. Our efforts around diversity, equity, and inclusion follow our code of ethics: For our employees, these efforts are built around inclusion – having all of our employees feel valued and respected," the message reads. "Our efforts at diversity, equity, and inclusion remind and reinforce with everyone at our Company the importance of creating opportunities for all. We believe that these efforts enhance our capacity to attract and retain employees who will help our business succeed. This capacity is critical because we owe our success to our now over 300,000 employees around the globe."
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