Resolved clauseShareholders request that the Board of Directors of Merck and Co, Inc. prepare and publish, within 12 months and at reasonable cost (excluding proprietary information), a report assessing the risks associated with race, gender, or identity-based recruitment goals or preferences and practices, specifically addressing whether these DEI initiatives pose potential legal or reputational liabilities given (1) recent federal directives, (2) the exposure of current DEI-related practices to enforcement actions, and (3) existing federal civil rights law.
Whereas clause"Merck is a significant federal contractor, with more than $2.8 billion dollars in U.S. government contracts in recent years.1 As a federal contractor, Merck must comply with applicable civil rights laws and federal contracting requirements. Recently, the legal environment regarding diversity, equity, and inclusion (DEI) policies has significantly changed. In January 2025, Executive Orders 14173 and 14151 revoked longstanding affirmative action mandates, including EO 11246, and require federal contractors to certify that they do not operate illegal DEI programs. This includes representational or aspirational quotas that conflict with civil rights law as well as “equity-related” actions, initiatives, programs, grants, contracts or performance requirements for employees, contractors, or grantees.
Despite this, Merck has yet to provide clarity regarding such policies, including tying elements of its executive compensation2 to metrics that include the “engagement and inclusion of our employees,” without explaining whether such initiatives involve racial/gendered criteria. This clarity is particularly important given Merck’s previous diversity initiatives, including commitments3 to “actively cultivating a… diverse and inclusive workforce,” without explaining whether cultivation efforts involve quotas, an accelerator program aimed at “accelerat[ing] the career growth and increas[ing] representation of… employees” based on racial characteristics, “diverse coaching” programs for “underrepresented ethnic groups, and Merck’s current bronze-level corporate sponsorship4 of the Human Rights Campaign.
Federal regulators have warned that DEI initiatives relying on race- or gender-based classifications may expose companies to liability under Title VII and the False Claims Act. In July 2025, the Department of Justice (DOJ) launched a Civil Rights Fraud Initiative explicitly stating it will use the False Claims Act to investigate any recipients of federal funds who certify compliance with civil rights laws while maintaining illegal DEI programs. This is a direct risk area for Merck. The company’s federal contracts5 are valued at almost $3 billion, more than 17% of its roughly $17 billion annual profit.6 Merck being the subject of such an investigation because of DEI initiatives creates tremendous contingent liability regarding both federal contracts and the impact of such investigations on broader valuations. Shareholders are right to ask the company to address it.
Merck’s diversity policies, if still in effect, may expose the company to regulatory scrutiny and costs associated with federal investigations in absence of further clarity. A transparent, up-to-date, and forward-looking evaluation of these practices is integral to the Board’s fiduciary duty. Shareholders deserve assurance that Merck is not implementing any illegal DEI practices, protecting access to federal contracts and safeguarding its brand and financial performance.
1 https://www.congress.gov/crs-product/IF10600
2 https://www.merck.com/wp-content/uploads/sites/124/2025/04/2025-Merck-Proxy-Statement.pdf
3 https://www.merck.com/wp-content/uploads/sites/124/2024/08/Merck_ImpactReport_2023-2024.pdf
4 https://www.hrc.org/resources/corporations/merck
5 https://1792exchange.com/contractors/
6 https://www.forbes.com/lists/global2000/"