Former President Ronald Reagan once said, “The trouble with our liberal friends is not that they’re ignorant; it’s just that they know so much that isn’t so.”
Forty-nine Democratic members of Congress recently proved Reagan’s point in an open letter pressuring Fortune 1000 companies to recommit to Diversity, Equity, and Inclusion (DEI) policies. Contrary to mounting evidence, they claimed these policies and programs “give everyone a fair chance at achieving the American dream.”
But while the representatives waxed poetic about DEI’s virtues, the results simply don’t live up to the hype—a fact acknowledged even by self-ascribed DEI experts. It’s no secret that DEI programs are divisive and unpopular both among customers and, as ADF’s Freedom at Work survey found, with employees. DEI’s focus on group identities and discriminatory hiring practices also poses legal risks that could prove costly. That’s why 17 state financial officers as well as investors with over $65 billion in assets sent their own letters to major businesses with a different message: bid DEI ‘adieu.’
DEI’s poor performance review
Congressional pressure for businesses to stick with DEI comes as prominent companies like Lowe’s, Home Depot, Ford, and Toyota have publicly distanced themselves from these types of policies.
As the letters sent by investors and state financial officers affirm, companies have many good reasons for parting ways with DEI.
First off, it is simply incorrect to say that DEI is good for business. While congressional Democrats relied on assertions from McKinsey & Company to tout DEI’s financial dividends, the letters from state financial officers and investors point to two recent studies that undermine the business case for DEI.
An article published in Econ Journal Watch found that, using McKinsey’s own data, the consulting firm’s studies “should not be relied on to support the view that US publicly traded firms can expect to deliver improved financial performance if they increase the racial/ethnic diversity of their executives.” And a separate study from the Harvard Law School Forum on Corporate Governance confirmed that there’s little data to support the claim that companies that prioritize DEI in board selection outperform other companies.
DEI’s workplace practices also come with significant legal risks.
The investors and state financial officers cite the recent U.S. Supreme Court decision in Students for Fair Admissions, Inc. v. Harvard, in which the Court affirmed that it’s unlawful for colleges to consider race as a factor in admissions decisions. As EEOC Commissioner Andrea Lucas has pointed out, the Court’s reasoning likely applies to many companies’ DEI programs, especially race-based diversity quotas, under Title VII and other applicable antidiscrimination laws.
DEI doesn’t unite – it divides
And courts are not the only ones concerned about DEI practices—employees are also voicing their concerns. The Freedom at Work Survey conducted by Ipsos and released by ADF’s Viewpoint Diversity Score found that a plurality (40 percent) of employees say DEI divides, rather than unites, colleagues. A similar number say they are less likely to trust others or feel included at work if they are told in a company-sponsored training that they are complicit in racism or oppression based on their skin color, religion, or sex, a hallmark of many DEI programs.
As the investors’ letter says, “It is neither inclusive nor American to punish employees for their race, sex, or for exercising their First Amendment freedoms.” It’s no wonder that many companies are now facing lawsuits and threats by state attorneys general and aggrieved employees over race-based hiring.
No qualified candidate should be turned away because of the color of their skin. That goes against the equality of opportunity and merit-based upward mobility that are part and parcel of the American dream. It should not come as a surprise that when social media influencer Robby Starbuck pulled back the curtain on companies’ DEI policies, they faced widespread public backlash and quickly scrambled to undo their DEI practices.
America’s businesses should not be pressured by congressional Democrats to stay the course despite poor returns, legal risks, and negative feedback from employees, shareholders, and customers. The top-down imposition of political fads instead of popular demand and firm performance should concern anyone who cares about the free market at the heart of the American dream. That’s why investors and state financial officers, who oversee billions of dollars of state funds and their citizens’ pensions, had a clear message for companies: listen to your shareholders, employees, and customers—not politicians, who have no stake in your business’ performance.
Americans across the board are better served when companies let go of failed and unpopular DEI policies.
For those who want to assist their companies in correcting course, ADF’s Viewpoint Diversity Score is here to help. We provide businesses with sound research, as well as a one-stop shop for policies and practices that promote a business culture that respects everyone’s freedoms. For more information about how to avoid DEI’s traps and embrace sound business principles, visit www.viewpointdiversityscore.org.
