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At Annual Meeting, Costco Refuses to Join Others Retreating From DEI

Washington, D.C. – Despite public outcry, Costco shareholders failed yesterday to approve a shareholder proposal (Proposal 4) presented from the National Center for Public Policy Research’s Free Enterprise Project (FEP) asking the company to assess the risks of its Diversity, Equity and Inclusion (DEI) efforts.

Even before President Trump’s executive order this week targeting DEI in federal agencies, Costco made headlines for publicly refusing a shareholder request to assess the risks created by its DEI agenda after the U.S. Supreme Court’s 2023 decision to strike down affirmative action in higher education.

In its supporting statement to Costco’s shareholders, FEP noted:

[T]he U.S. 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. Prior legal advice regarding the legality of corporate Diversity, Equity and Inclusion (DEI) programs has been called into question post-SFFA. As such, Attorneys General of 13 States warned Fortune 100 companies that SFFA implicated corporate DEI programs.

Since the SFFA decision, 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….

Clearly, companies with DEI policies risk litigation as well as reputational and financial harm, and therefore pass financial risks to shareholders. Yet Costco still maintains such a program, though it was apprehensive enough to recently rebrand it. While that program is now referred to as simply “People and Communities,” it continues to practice the staples of corporate DEI programs.

In addition, Costco’s board of directors recommended against voting for FEP’s proposal to assess the risks of DEI. At today’s annual shareholder meeting, FEP’s proposal unfortunately fell short of the approval threshold.

“While we are disappointed by the result, we are also not surprised, given the forces aligned against us,” said FEP Executive Director Stefan Padfield. “These forces include conflicted asset managers and proxy advisers that profit from ESG and DEI. Given that we have been referred to as the premier proponent of anti-ESG proposals, it is not surprising that the Big 5 have never supported a single one of our relevant proposals while supporting many pro-ESG proposals.”

“The influence of the Big 5 on other voters is difficult to overstate but likely material in light of the findings of fact in the recent American Airlines opinion, which highlighted the corrupting influence of ESG and in which BlackRock was specifically named over 270 times,” continued Padfield. “On top of that, as in this case, we routinely deal with unusually hostile management. While management typically opposes shareholder proposals, if you review how often the top pro-ESG filer gets negotiated withdrawals while we get attacked as improper proponents — because somehow our agenda is disqualifying but a pro-ESG agenda is not — you’ll be hard-pressed to deny a material (and arguably fiduciary-duty-breaching) bias.

“Fortunately, the truth about DEI is being exposed as never before, and it is only a matter of time until DEI’s inherent shareholder-value-destroying nature forces even managers like those at Costco to get back to neutral and focus on creating value by providing great products and services rather than engaging in neo-Marxist and neo-racist social engineering projects,” concluded Padfield.

FEP, the original and premier opponent of the woke takeover of American corporate life, aims to push corporations to respect their fiduciary obligations and to stay out of political and social engineering. More information about this proposal can be found in FEP’s mobile and web app, ProxyNavigator.

 

About
The National Center for Public Policy Research, founded in 1982, is a non-partisan, free-market, independent conservative think-tank. Ninety-four percent of its support comes from individuals, less than four percent from foundations and less than two percent from corporations. It receives over 350,000 individual contributions a year from over 60,000 active recent contributors. Contributions are tax-deductible and may be earmarked for the Free Enterprise Project. Sign up for email updates at https://nationalcenter.org/subscribe/.

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Author: The National Center