Costco shuts down shareholders demand to ditch DEI hiring practices

‘Our Board has considered this proposal and believes that our commitment to an enterprise rooted in respect and inclusion is appropriate and necessary,’ Costco stated

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 “illegal discrimination” program.

The Costco board replied to a number of shareholders, recommending a vote against a proposal to “report on the risks of maintaining DEI efforts,” Newsweek reported.

The shareholders had put forward a suggestion that employees of the company could be victims of "illegal discrimination because they are white, Asian, male or straight.” They argued that it could lead to tens of billions of dollars in legal expenses defending against lawsuits.

“Our Board has considered this proposal and believes that our commitment to an enterprise rooted in respect and inclusion is appropriate and necessary,” said a statement issued by the board.. “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.”

The board added that it wants to make sure all of its more than 300,000 employees "feel valued and respected,” and that by having a diverse workforce, Costco can have more insight and creativity when it comes to what the company offers at 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 diversity benefits our Company,” the board stated. “We believe that it fosters creativity and innovation in the merchandise and services that we offer our members.”

The shareholders argued that the Supreme Court ruling 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 lawsuit worth $25.6 million after claiming that she was fired because she was white.

Shoppers reach for items on display in a Costco warehouse Nov. 19, 2024, in Lone Tree, Colo. Its board has rejected a proposal from some shareholders to remove DEI policies (AP)

“It’s clear that DEI holds litigation, reputational and financial risks to the Company, and therefore financial risks to shareholders,” the proposal stated. “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 board noted that it “regularly evaluates” the procedures the firm uses to comply with “the law including evolving Supreme Court decisions."

“We believe that our diversity, equity and inclusion efforts are legally appropriate, and nothing in the proposal demonstrates otherwise,” the board added. “Our focus on diversity, equity and inclusion is not, however, only for the sake of improved financial performance but to enhance our culture and the well-being of people whose lives we influence.”

The annual shareholder meeting is set to be streamed live on January 23 at 5 p.m. E.T. Part of the meeting will be devoted to a vote on the proposal “if properly presented at the meeting.” Only those who have been shareholders since before November 15 will be allowed to vote.