Costco faces down anti-DEI group as Trump stokes backlash

Stands behind policy as companies such as Meta and Walmart beat hasty retreat

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Bloomberg News

Jeff Green and Saijel Kishan

Published Jan 24, 2025  •  4 minute read

A worker in a check-out line at a Costco store in New Jersey. Costco's executive team defended its DEI policy against a proxy challenge. Photo by Stephanie Keith /Bloomberg

As many American companies beat a hasty retreat from the diversity, equity and inclusion programs they once embraced, bulk retailer Costco Wholesale Corp. has become one of DEI’s few remaining public proponents.

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The retailer, which is led by an overwhelmingly White, male executive team, fought off a proxy proposal Thursday from a conservative group asking Costco to detail the risks of its DEI efforts.

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At a time when Donald Trump’s new administration is trying to root out DEI from the federal government and corporate America, Costco recommended that shareholders reject the measure at its annual meeting on Thursday. The company defended its DEI programs as legal, saying that “our commitment to an enterprise rooted in respect and inclusion is appropriate and necessary.” More than 98 per cent of shareholders voted against the action.

Costco chief executive officer Ron Vachris said after the vote that the overwhelming results showed that the company is making the right decision on DEI.

‘Absolute nonsense’

Costco shareholders made their decision as companies from Meta Platforms Inc. to Walmart Inc. cut back on their DEI efforts after conservative activists mounted legal challenges against such programs in the wake of the Supreme Court’s decision to ban affirmative action in college admissions. Anti-DEI activists have also directly targeted consumer businesses.

Trump, an avowed DEI critic, took direct aim at diversity in his first flurry of executive orders after taking office Monday, including asking his agency heads to identify large companies or institutions to investigate for DEI programs that might “constitute illegal discrimination or preferences.”

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He reiterated his stance during an address to world leaders gathered in Davos Thursday, describing DEI policies as “absolute nonsense.” He added: “America will once again become a merit-based country.”

Costco “could have chosen to roll back as other companies did when approached by those groups. But they didn’t,” said Nadira Narine, senior director of strategic initiatives at the Interfaith Center on Corporate Responsibility, a group that often supports pro-DEI proposals at company annual meetings. “This is a strong business case that they intended to make.”

Costco, which started as a single store in 1976 and now operates more than 890 locations, is known for its loyal members and evolving offering of jumbo-sized products.

Costco’s executive ranks were 81 per cent White and 65 per cent White and male in 2023, and it had only one Black executive, according to the most recent data the company made publicly available. From 2020 to 2023, the share of Black employees slipped to about nine per cent as Hispanic workers rose to 32 per cent of the workforce. That’s even after the representation of White men declined, mirroring broader trends among S&P 100 companies. (Costco had no comment on its workforce demographics.)

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In its defence of its policies, Costco had said that diversity among its employees and suppliers helps support its increasingly diverse customer base, enabling members to have a shopping experience akin to a “treasure hunt.” Members also prefer to see people like them working at Costco outlets, the firm said.

Costco’s focus on membership plans has also historically insulated the company from macroeconomic conditions, because its customers pay a membership fee and tend to be more affluent. The stock is up more than 30 per cent in the past 12 months, higher than competitors Target Corp. and Kroger Co. but lower than Walmart Inc.

Shareholder vote

The new anti-DEI proposal was backed by a group called the National Center for Public Policy Research (NCPPR) and submitted as part of Costco’s annual meeting. NCPPR asked Costco to measure whether there is a business risk to having a DEI program now that such programs are confronting legal and social media challenges from conservatives.

NCPPR is taking similar proposals to other big companies including Apple Inc., Levi Strauss & Co., Goldman Sachs Group Inc., Berkshire Hathaway Inc., JPMorgan Chase & Co., and Bristol-Myers Squibb Co., Peck said. Chief executives of the two Wall Street banks said they’re going to continue to focus on programs to promote DEI in their workforces and customer bases.

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In its response, Costco said that NCPPR was one of the very groups creating the anti-DEI sentiment. Moreover, the “proponent’s broader agenda is not reducing risk for the company but abolition of diversity initiatives,” Costco added.

Companies often advise investors to vote against shareholder actions and they usually fail. Proposals from NCPPR rarely receive more than one per cent or two per cent of shareholder support, according to data compiled by Bloomberg.

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Ethan Peck, deputy director for NCPPR’s Free Enterprise Project, said that Costco’s public stance was unusual. Companies opposing NCPPR’s proposals don’t typically go so far as to directly question the group’s motives, he said in an interview before the meeting.

—With assistance from Jaewon Kang.

Bloomberg.com

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