[Global Focus] Backlash Against Work Capitalism... US Companies Cutting Ties with DEI

Pursuing Racial and Gender Diversity, Equity, and Inclusion
Backlash Grows Over 'Affirmative Action' Unconstitutionality Ruling
Business Titans Bill Ackman, Musk Criticize DEI
Eight States Including Texas Move to Legislate Against DEI
Ideological Conflict Expected to Intensify in November US Election

For decades, the United States has pursued diversity in race and gender from college admissions to employment through the ‘DEI’ policy, which has recently faced a backlash. The term ‘diversity,’ once a staple in corporate annual reports, has disappeared, and the conservative camp has even launched an 'anti-work movement' suing companies that expanded DEI policies. There are also growing forecasts that the backlash against DEI will escalate into a political ideological conflict between conservatives and progressives in the upcoming November U.S. presidential election.

What is the 'Woke Capitalism' Facing Backlash?

Recently, the ‘Woke capitalism’ that has faced backlash in the U.S. refers to the management style of companies that actively voice opinions on social issues such as race and gender. DEI policies are a representative example of this woke capitalism. DEI stands for Diversity, Equity, and Inclusion, meaning that governments, universities, and companies should pursue racial and gender diversity in hiring and compensation.

[Image source=Pixabay]

Local media such as Time and CNN regard the inauguration of former President Trump in 2016 and the 2020 death of George Floyd as catalysts for DEI being actively reflected not only in government and universities but also in corporate management trends in the U.S. According to the job platform Indeed, job postings for diversity and inclusion experts in the U.S. increased by 35% between 2016 and 2017.

The rapid increase in companies declaring DEI-related visions also began at this time. The global coffee chain Starbucks announced a diversity vision to have 30% of its employees be Black, Indigenous, or people of color by 2025. Media and telecommunications company Comcast established a policy to provide subsidies only to small businesses with more than 51% ownership by Black, Indigenous, people of color, or women. The world’s largest e-commerce company Amazon even paid an additional $10,000 commission when contracting Black and Latinx delivery drivers.

The Dawn of Anti-Work: Unconstitutional Ruling on ‘Affirmative Action’ in College Admissions

Meanwhile, opposition to DEI, which had become a social norm in the U.S., grew stronger. In particular, the U.S. Supreme Court’s June ruling last year declaring ‘affirmative action’?which gives preferential treatment to minority races in college admissions and corporate hiring?unconstitutional became a major turning point. Specifying policies that favor minority races or certain genders in annual reports now increases the risk of reverse discrimination lawsuits.

The voices of business magnates criticizing DEI also gained momentum. Bill Ackman, chairman of Pershing Square Capital and a longtime Democratic supporter and ESG advocate, said in a February interview with The Washington Post (WP) that “the hypocrisy of the DEI movement has been exposed” and criticized that “the race toward ESG, especially DEI, is undermining the meritocratic values that drive the free market economy and is constraining us.” Tesla CEO Elon Musk also supported Ackman’s criticism, stating, “DEI is just another word for racism” and condemning DEI as “an immoral term that discriminates against people based on race, gender, and other factors.”

DEI Falls from Management Trend to Corporate Risk

Companies such as Starbucks, Comcast, and Amazon, which had pioneered DEI policies, have faced lawsuits one after another, becoming victims of the DEI backlash. Seeing this, other U.S. companies have quickly begun to cut ties with DEI. An analysis by The Wall Street Journal (WSJ) of dozens of companies’ 2023 annual reports (K-10) submitted to the U.S. Securities and Exchange Commission (SEC) revealed that many DEI-related phrases and goals were significantly revised or deleted in these reports.

The U.S. department store chain Kohl’s had declared a goal to “discover diverse leaders” over the past three years but recently removed the word ‘diverse’ from its annual report. Competitor Nordstrom also eliminated goals to generate $500 million in sales from brands owned, operated, and designed by Black and Latinx people and to assign 50% of managerial positions to these races. Salesforce had announced plans to hire 50% of its employees from marginalized groups and to have 40% of its workforce be women or non-binary, but this vision disappeared from last year’s annual report. Other companies such as Uber, Wells Fargo, and Citibank have revised or deleted goals to “eliminate racist practices.” Companies like Zoom, Snap, Meta Platforms, Tesla, and X have even laid off or disbanded DEI personnel and teams.

Tom Lin, a professor at Temple University’s Beasley School of Law, explained, “Companies are responding sensitively to the changing political environment regarding DEI,” adding, “They face lawsuits if they refuse to abolish DEI policies.” Jill Fish, a professor of management law at the University of Pennsylvania Law School, analyzed, “Some U.S. companies now judge that promoting their DEI credentials or taking public stances on social issues is a risk no longer worth bearing,” and “Describing oneself as an ‘anti-racist company’ can be a political act with only downsides.”

DEI Backlash Spreads to the Public Sector

The DEI backlash that struck the private sector is also spreading to the public sector. According to an NBC News analysis last month, more than 100 DEI regulatory bills have been introduced or passed by Republican lawmakers in over 30 U.S. states. Conservative-leaning states such as Texas, Utah, North Dakota, and North Carolina are leading the legislative efforts to expel DEI.

As a result, public institutions in Texas can no longer provide preferential hiring benefits that favor minorities or promote diversity. Texas State University closed its multicultural center on campus and stopped funding separate events for Black, Hispanic, or Asian students at graduation ceremonies. Utah has restricted the use of words like ‘diversity,’ ‘equity,’ and ‘inclusion’ in various public programs. It also forbids labeling merit-based evaluation methods as racial or gender discrimination.

Conservative vs. Progressive Ideological Conflict

The debate surrounding DEI is expected to escalate into a political ideological conflict between conservatives and progressives in the upcoming November U.S. presidential election. Former President Trump, aiming to return to the White House this year, claimed in an interview with Time magazine last month that “there is an unacceptable anti-white sentiment in the U.S. today” and argued that “unfair laws and education have caused reverse discrimination against whites.”

Local media such as The New York Times and CNN have focused on the ideological conflict caused by DEI in the U.S. The New York Times reported that “America Is Under Attack” by the DEI backlash, while CNN diagnosed that “DEI is dividing America.” Ryan Williams, director of the Claremont Institute, pointed out that “DEI divides American society into ‘oppressors’ and ‘the oppressed,’” warning that “such discourse will cause disputes and divisions in the U.S.”