Editor’s Note: This is the second part of a two-article point-counterpoint series on recent retail decisions about DEI. We are presenting two different views to explore the many facets of this polarizing issue.
Most, if not virtually all, consumer-facing businesses, whether small, medium, large or overlarge, do business with diverse groups of customers. Diverse by virtue of race, color, religion, ethnicity, lifestyle, sexual orientation and political leanings. Most consumer-facing businesses also employ similarly diverse groups of associates and suppliers. Diversity is an American societal reality; thus, diversity brings with it an intimate link to issues of equity and inclusiveness.
My issue here is not to challenge the importance of DEI’s underlying principles, but to criticize how some consumer-facing organizations have tried to use DEI as a marketing message, and then, as some, have cowardly turned tail in the face of targeted right-wing threats.
If you have a problem with the concept and reality of diversity and its inherent connection to equity and inclusion, then you might want to stop reading this article.
Institutionalized DEI
I think that any broad-based enterprise led by accomplished, intelligent and thoughtful leaders must recognize and support DEI issues. Unfortunately, shining a bright light on these issues exposes companies to the biases, prejudices and in some cases, like it or not, downright racism, that is out there among us. The question then, is not whether an enterprise should support DEI principles but rather whether, or to what degree, it should outwardly communicate its intentions rather than just practice them.
George Floyd’s murder by a Minneapolis policeman accelerated an understandably nationwide outpouring of outrage and concern. The idea then of “DEI” as a necessary organizational imperative became widespread. DEI mandates were written, DEI committees within companies were formed, and in some cases, DEI executives were elevated to C-Suite status.
Unfortunately, some of these efforts can easily be described as more “knee-jerk” than substantive. In fact, at the Columbia Business School where I was teaching at that time a Vice Dean position for DEI was created. The position was occupied by a Vice Dean and senior faculty member, who prior to that appointment had curiously moved to create a faculty lounge that sought to exclude all non-tenured or tenure-track faculty. (Note, the majority of courses at Columbia’s Business School are taught by non-tenured faculty.) Faculty were compelled to attend DEI meetings and were asked to “write down” instances where they had observed Black staff being treated badly, a well-intended but completely foolish question as Columbia’s Business School employed almost no Black staff.
DEI In-Store
Target has repeatedly been guilty of publicly facing overreach over the years, first in the company’s support for transgender bathrooms, then more recently, its over-the-top assortment of LBGTQ merchandise in support of Pride Week. Target allegedly suffered substantial losses of volume in both cases due to customer backlash. In the face of customer pushback and widespread media coverage, Target hastily deemphasized the Pride Week assortments it had presented.
Walmart also carried LBGTQ merchandise in support of Pride Week but did so in a more reasonable and measured way. Walmart stayed out of the transgender bathroom issue (in my view correctly), leaving the issue to the government. But then Walmart hopped on the DEI bandwagon and when threatened, uncharacteristically did a 180-degree turn. The DEI efforts that Tractor Supply publicly mounted were also abruptly reversed when threatened. It’s not surprising when one considers Tractor Supply’s customer base as likely mostly conservative, rural and semi-rural. Pissing off a substantial number of your customers, like or not, is not a winning strategy. Who else has recently reversed course? The Ford Motor Company, whose long-standing best-selling vehicle is the F-150 pickup truck. It’s easy to assume what the cultural bias might be for many if not most, hardcore pickup truck owners.
DEI in the Cross Hairs
My issue here is not to challenge the importance of DEI’s underlying principles but to criticize how some consumer-facing organizations have tried to use DEI as a marketing message, and then others have cowardly turned tail in the face of targeted activist threats.
So, now the spotlight is on Costco. The third-largest U.S. retailer, Costco has always practiced good governance with regard to DEI issues since the company was founded. There was no breast-beating as others did when DEI became “a thing.” Their Board has rejected the recent demand that they “study” the impact of DEI practices on the company’s performance and wisely presented the matter to the company’s shareholders for a proxy vote later this month. I believe Costco’s management is correct in strongly opposing the adoption of this proposal. In my opinion, Costco has a broad customer base that is likely more educated, enlightened and progressive than typical customers at Walmart, Tractor Supply, Ford, Bud Light and even Target. I don’t believe Costco is facing any consequential risk by standing firm on its current DEI policies.
The issue is not about DEI per se but about the undertone of the NCPRR policy group’s proxy proposal “demand” for research, which I believe echoes an extreme view that is really about underlying racism, along the same biased notion that books should be banned from schools and libraries if they aren’t seen as appropriate by a vocal cadre of conservatives. That may sound harsh, but unfortunately, the entire public conversation about DEI is polarizing and has become politically weaponized.
Balancing Act
Costco’s shareholders should consider the ramifications of allowing any activist group with extreme views to attempt to dictate the company’s underlying culture, policies and even, possibly, the brands and assortments it carries. Costco is, in my opinion, not only one of the world’s largest and most successful retailers but is also a paragon of virtue with respect to strategy, execution, policy and corporate behavior. It’s no wonder that the company almost always outperforms its peers in volume growth, and profitability, year in and year out. Its relationship with its employees is also exemplary, driven by the company’s age-old support for its premium wages and benefits. A marker for this position is the company’s remarkably low associate turnover.
I applaud the company’s courageous position on this proxy issue and hope all its shareholders find a way to “do the right thing” for all constituents, not just the activist shareholder that has currently mounted what I would characterize as a “thinly veiled threat.” My concern is that when you give shareholder activists the right to demand so-called research into a company’s cultural policies, the next thing you know they will demand a role in other underlying foundational issues best left solely to customers, shareholders at large, and associates within.
Doing the Right Thing
When all is said and done, a company is completely responsible for its actions. If its actions are appropriate its performance should reflect them. If not, then it should face consequences that are directly linked to its business results. Management positions taken should be well thought out, with risk and opportunity considered in advance. Positions on DEI should be considered, installed and practiced, not proclaimed publicly as marketing messages as they have been recently. Then, those positions should only be reversed for good reason, not a threat.
