President Donald Trump has dropped a bombshell on corporate Diversity Equity and Inclusion (DEI) programs.
On day one, he delivered the two DEI-related executive orders that most political observers expected. The opening salvo made clear that the incoming president planned to eliminate all funding and participation in DEI throughout the federal government, establishing a robust meritocracy to replace the legally suspect regime of race and gender-based personnel considerations.
But day two was when President Trump landed what could be the knockout blow to DEI. In “Ending Illegal Discrimination and Restoring Merit-Based Opportunity,” President Trump overturned several previous executive orders – including one highly weaponized holdover from the Johnson administration – and extended the battle lines to federal contractors, federally funded educational institutions, and the private sector itself.
For years, the federal government has misused its power over federal contractors – which account for $759 billion of the federal budget – by pressuring them to comply with DEI-related mandates (based on race, sex, and other characteristics) as the price of doing business with the government.
Now, that equation is flipped 180 degrees. The new executive order requires each agency to include a term in every contract that acknowledges that noncompliance with Federal anti-discrimination laws will affect the government’s payment decisions and to certify that they do not have DEI programs that violate the law. There is little doubt that the Trump administration will take an aggressive stance on what violates these orders.
Indeed, the executive order also tasks agency heads and the U.S. Attorney General with identifying ripe targets for investigation among American corporations and institutions that double down on unlawful DEI practices.
Of course, many publicly traded companies didn’t wait for Inauguration Day to draw back from DEI. Thanks most recently to public pressure from Robby Starbuck, major brands including Meta, Walmart, McDonald’s, Stanley Black & Decker, and Boeing have already distanced themselves from DEI.
And for good reason. At its core, DEI is discrimination repackaged. It’s an ideology that treats some people worse than others based on skin color, biological sex, and religion. If that sounds illegal, it’s because it is. In a 2023 ruling that set the stage for the legal and cultural demise of DEI, the U.S. Supreme Court held that race-conscious admissions programs at Harvard and University of North Carolina violated the Equal Protection Clause of the 14th Amendment or Title VI.
Following that landmark decision, the once-entrenched regime of DEI has faced a steep decline in the courtroom. Most recently a ruling in December from the U.S. Court of Appeals for the Fifth Circuit struck down a 2020 Nasdaq rule imposing diversity quotas on all Nasdaq-listed company boards. In the courtroom of public opinion, the business case for DEI has also come unraveled, as studies have not only called into serious question the assertion that DEI leads to business success, but have also demonstrated that DEI divides workplaces rather than unites them.
Yet, not every company has been as astute legal and cultural observers as Walmart and its fellow travelers. Despite the preferences of its suburban family customers who prioritize affordable groceries over c-suite virtue signaling, Costco, under the leadership of Jeff Raikes, former CEO of the Bill and Melinda Gates Foundation, has reaffirmed its commitment to DEI policies.
Even at Walmart, it’s clear the issue is far from settled. A week before President Trump took his first shot at the DEI regime, 13 Democrat attorneys general and far-left shareholder activists like “As You Sow” and “Amalgamated Bank” sent public letters pressuring Walmart to reconsider its decision to cut ties with DEI. Predictably, the letters also invited Walmart to jump even more deeply into politically troubled waters by weighing in on such issues as immigration as a “driver of social and corporate change.”
Of course, nothing could be further from the truth. Walmart thrives by offering excellence in goods and services and treating every customer and employee equally, regardless of their religion, politics, or personal characteristics protected under law. The Superstore’s misguided experiment with DEI over the past four years has been a costly detour from its primary mission, and company leaders are more than justified in correcting course and focusing on what they do best.
It’s clear that DEI is in freefall. Companies have nothing to gain, and suddenly much to lose by clinging to a failed and morally bankrupt ideology. President Trump’s bold actions have put companies like Costco on notice. Now it’s up to the leaders of these companies to act in the best interests of their shareholders, customers, and hard-working employees.
