Costco doubles down on its faith-based commitment to DEI
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Last week, the world’s largest restaurant chain, McDonald’s, followed by Meta – the technology conglomerate that runs Facebook, Instagram, and WhatsApp – dumped DEI (diversity, equity and inclusion).
In doing so, they join Toyota, Tractor Supply, Lowe’s, Ford, Boeing, Harley-Davidson, John Deere, and Molson Coors in discontinuing or reducing DEI efforts.
Even Walmart, previously one of the greatest corporate contributors to such causes, chose to roll back its DEI initiatives two months ago. Gone is their required employee training on critical race theory and their $100 million investment to combat “systemic racism.”
Given the trend, Walmart’s closest competitor (in brick-and-mortar sales), Costco, stands out for its recent ideological stand in the opposite direction.
In December, a group of shareholders, led by the National Center for Public Policy Research (NCPPR), questioned the company’s DEI programs which include picking suppliers and hiring and promoting employees “based on their race and sex.”
 Walmart backs away from DEI while Costco stands firm despite growing doubts |
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Citing evidence that such initiatives have led to legal and reputational disasters for other organizations, NCPPR introduced a proposal requesting a research report to assess the risks associated with maintaining Costco’s DEI efforts.
In response, the Seattle-based retailer’s board of directors issued a public statement a few weeks ago. They recommended shareholders vote against the proposal saying a research report on the company’s DEI practices “would not provide meaningful information.”
To strengthen their argument, the board repeatedly declared that supporting DEI is an ethical duty. While they didn’t mention the ethical dilemma involved, those promoting DEI as a moral necessity are typically motivated by the belief that society is systemically bigoted against minorities.
On that front, the research contradicts their belief.
Numerous studies by government commissions and esteemed U.S. scholars have proven that factors other than systemic racism or sexism are the cause of different outcomes between groups. In Canada, Matthew Lau has produced excellent work showing this.
Interestingly, in the board’s response, there was also another “declaration of faith.”
Without providing supporting evidence, they added that they “believed” DEI efforts “help our business succeed.”
The board or directors’ contradictory claims should have Costco shareholders scratching their heads.
If they truly believe that DEI brings success, but can’t offer anything to back that up, isn’t an in-house study the ideal solution? After all, its findings could give them vindication and even more insights into corporate flourishing.
Maybe they suspect that an in-house study – if conducted honestly – won’t provide what they’re looking for. If that’s their suspicion, they are right.
Of course, a diverse workforce, arising organically, can improve a business. Because competent employees are the key to success, it stands to reason that a business hiring based on competencies alone, irrespective of immutable characteristics, will do better.
However, the research shows that forced diversity, the kind that comes from DEI policies favouring one sex or skin colour over another, does nothing positive.
Last year, I examined the existing studies on the effects of DEI initiatives and produced a scholarly report for the Aristotle Foundation.
Proponents of such measures claim they lessen bigotry and increase harmony, but my report shows no evidence to support that claim. Conversely, I revealed that a substantial number of studies have concluded that DEI increases bigotry and foments division. Other recent work has added to that proof.
The claim that forced diversity efforts help Costco, or any business, succeed also finds no support in the research.
A 2020 article in the Harvard Business Review summarized the existing studies on the issue. It noted no causal relationship between gender diversity and improved financial outcomes. Moreover, “as for studies citing the positive impact of racial diversity on corporate financial performance, they do not stand up to scrutiny either.” In fact, “research shows that things often get worse, because increasing diversity can increase tensions and conflict.”
The myth that manufactured diversity will improve businesses’ bottom lines became an accepted fact thanks to a series of studies commissioned by McKinsey & Company, the world’s largest business consulting firm.
However, last year, the positive outcomes of McKinsey’s studies were subjected to rigorous peer-reviewed testing and could not be replicated. The economists conducting the exercise who requested the raw data McKinsey’s team had used were refused. Their published findings concluded that McKinsey’s studies should “not be relied on” to support the view that increased racial/ethnic diversity improves financial performance.
In addition to being at odds with the best research evidence, in choosing to stick with their DEI commitments, Costco’s board of directors is also at odds, as we saw earlier, with a growing number of the world’s biggest corporations.
When Costco’s shareholders vote on NCPPR’s DEI proposal on the 23rd of this month, I think they would be wise to pay heed to the actions of their more successful competitor and not the unsubstantiated words of their board of directors.
David Millard Haskell is a senior fellow at the Aristotle Foundation for Public Policy and a professor and social scientist at Wilfrid Laurier University. He is the author of What DEI research concludes about diversity training.
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