Last year, the US Supreme Court ruled in SFFA v. Harvard that discriminating on the basis of race in college admissions violates the equal protection clause of the 14th Amendment.1 Prior legal advice regarding the legality of corporate Diversity, Equity and Inclusion (DEI) programs has been called into question post-SFFA.2 As such, Attorneys General of 13 States warned Fortune 100 companies that SFFA implicated corporate DEI programs.3
Since SFFA, a number of DEI-related lawsuits have been filed. A corporation was successfully sued for a single case of discrimination against a white employee resulting in an award of more than $25 million,4 and the risk of being sued for such discrimination appears to be rising.5 Additionally, many major companies have begun to roll back prior DEI commitments and lay off employees from DEI departments.6 Alphabet and Meta cut DEI staff and DEI-related investments,7 Microsoft laid off an entire a [sic] DEI team,8 as did Zoom,9 and John Deere publicly stated that it has halted many policies that were previously part of its DEI efforts10 after Tractor Supply explicitly stated that it has "eliminate[d] DEI roles and retire[d] our current DEI goals."11
It's clear that DEI holds litigation, reputational and financial risks to the Company, and therefore financial risks to shareholders.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."12 But sticking a new label on discriminatory practices does not protect Costco and its shareholders from these risks.
The renamed program still openly expresses a "commitment to equity"13 (which means equality of outcome, not opportunity), still employs a "Chief Diversity Officer,"14 still has a supplier diversity program that picks suppliers based on their race and sex,15 still appears to factor in race and sex in hiring and promotion, and still contributes shareholder money to organizations that advance the discriminatory agenda of DEI.16 All of these practices are staples of corporate DEI programs and are consistent with Costco's DEI program prior to its rebranding.
With 310,000 employees,17 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.18 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.