DEI Initiatives under Attack by Activists

Michael Delikat and J. T. Ho are partners, and Hong Tran is an Associate at Orrick, Herrington & Sutcliffe LLP.  This post is based on their Orrick memorandum. Related research from the Program on Corporate Governance includes Social Responsibility Resolutions by Scott Hirst.

As early as 2015, activist shareholders have put forth proposals asking companies to implement diversity, equity and inclusion (DEI) policies and to provide more disclosure of the same. For example, in pursuit of greater transparency on these issues, the first half of 2022 has already surpassed 2021 in terms of the number of shareholder proposals for race-related audits.

Yet this pursuit of moving the needle towards the goal of achieving more positive results in the workplace on DEI has recently been met with resistance. A new wave of shareholder demands and proposals, often funded by conservatively-backed organizations, have sought to move the needle in the other direction with proposals for impact audits and demands for DEI policy retractions, accompanied by threats of reverse discrimination litigation. While these DEI push-back attempts have not gained much traction, it remains an open question whether they will slow the implementation of further DEI initiatives.

To attack DEI initiatives, activist shareholders have employed a number of tactics. One advocacy approach involves shareholder proposals. In 2022 alone, the National Center for Public Policy Research (NCPPR), a communications and research foundation dedicated to advancing the “conservative movement,” has submitted proposals, which resulted in 12 companies including Walmart, Lowe’s, Meta, Twitter, AT&T, and Johnson & Johnson, Bank of America and Levi Strauss & Co. putting their anti-DEI proposals to a vote. Most of these proposals requested that the board commission an audit analyzing how the company’s DEI policy impacts civil rights and non-discrimination, and the impacts of those issues on the company’s business. NCPPR has also commenced an initiative it calls “Stop Bank of America’s Divisive ‘Woke at Work’ Agenda,” asking individuals to sign on to a petition to BofA stating “[i]t is time to put an end to Bank of America’s radical and divisive ‘racial justice’ initiatives.” As of September 19, 2022, the NCPPR claims that 3,269 individuals have signed the petition, which has been directed to Bank of America’s CEO, Brian Moynihan.

The NCPPR’s shareholder proposal to The Walt Disney Company focused on “Disney-sponsored and -promoted employee diversity training” while the proposal to CVS underscored the impact on “non-diverse employees.” To Citigroup, which had already announced a racial equity audit, the NCPPR proposed that the board commission an additional impact audit focusing on “non-diverse” employees instead. NCPPR also sent a proposal to Comcast, requesting that the company issue a public report detailing the potential risks associated with omitting “viewpoint” or “ideology” from its written Equal Employment Opportunity (EEO) policy. The boards of all the targeted companies recommended that shareholders vote against such proposals, which garnered less than 5% of all the votes in each case.

The second type of anti-DEI advocacy involves DEI policy retraction demands. The American Civil Rights Project (ACRP), a law firm that represents clients such as the NCPPR, has sent seven such retraction demand letters since 2021, threatening lawsuits as a consequence of non-retraction in each case. Below is a summary of the retraction letters.


Corporation Date Request
Dropbox May 24, 2022 Demanding retraction of hiring program policies:

  • Prioritizing Black, Indigenous, People of Color (BIPOC) and Underrepresented Minority (URM) candidates.
  • Adopting exclusively sex and race-based metrics to gauge its achievement of such diversity representation
  • Setting “annual aspirations to increase or maintain representation for women and [URMs] at the mid-career level and above” and defining URMs as “Black/African American, Hispanic/ Latinx, Native American, or Pacific Islander”
  • Setting in 2019 the goal of “increase[ing] representation of URMs and women amongst mid-level and above managers and individual contributors”
  • Achieving diversity goals in 2020 and expanding the “aspirations to include senior-level individual contributors”
  • Disappointed to fail to meet its 2021 aspiration “to maintain or exceed representation for women and URMs at these levels” but committed to improving representation “even further”
  • Measuring diversity in its Diversity, Equity, and Inclusion (DEI) philosophy exclusively through race and sex gauged metrics
  • Retaining two programs dedicated to “retaining women and URM talents” that “help high-performing mid-level women and URMs grow their professional networks, increase visibility with senior leaders, and prepare for their next career move” by providing “career workshops, internal and external mentorships, peer group forums, and tailored assignments”
  • Partly due to these programs, promoting women at a higher rate than men for the fifth consecutive year in 2020. Program participants are “2x as likely to be nominated for promotions over those from the same demographic outside of the program”
  • Adopting long-standing “Diversity Commitments” with the pledge to “[h]ire a diverse team” and “[d]evelop and advance equitably” with a focus on “increasing representation” of women and URMs, for which it “held managers accountable”
  • Recruiting, nominating, and electing a Board director based at least in part on her race and/or sex
  • “Continu[ing] to focus on our diversity commitments” in 2022
JP Morgan Chase & Co. May 16, 2022
  • Demanding retraction of hiring, supplier, lending program policies:
  • “Advancing Black Pathways” and “The Advancing Black Pathways Fellowship Program” (6-week, paid undergrad internship)
  • “Advancing Hispanics and Latinos” and “The Advancing Hispanics & Latinos Fellowship Program” (6-week, paid undergrad internship)
  • Focusing on “Black, Hispanic[,] and Latino households, customers, clients[,] and/or communities”; “hired more than 20 diverse senior business consultants to provide free one-on-one coaching for business owners”; “[p]rovide an additional $2 billion in small business lending to Black, Hispanic[,] and Latino communities”
  • JPMorgan Chase Global Supplier Diversity Network: “supplier must be certified by one of the JPMorgan Chase recognized certification agencies” as “having met the definition of being at least 51% owned, controlled[,] and operated by one or more members of a diverse group: minority, women, Veteran, Service-disabled Veteran, Disabled[,] and LGBT”
  • Retaining diverse outside counsel, investigating law firms’ progress in advancing racially and ethnically diverse employees, considering that in selecting outside counsel, meeting with law firm partners to discuss diverse staffing, considering law firms with racially and ethnically diverse ownership
  • Chase’s Gold Supplier Program: “a community encompassing suppliers large and small, public and private, diverse-owned businesses, and product categories of all types”
  • “[C]omitting $30 billion by the end of 2050 to advance economic growth and opportunity for Black, Hispanic[,] and Latino communities”
  • Committing to “Originate” “40K” “additional home purchase loans for Black, Hispanic[,] and Latino households”; “Help Black, Hispanic[,] and Latino households achieve lower mortgage payments though” “20K” “refinance loans”; “Provide” “15K” “additional loans to small businesses in majority Black, Hispanic[,] and Latino communities”
  • “supplier grant program [to raise and fund] qualified Black, Hispanic[,] and Latino-owned businesses to be used for compliance measures”
Starbucks March 25, 2022 Demanding retraction of policies:

  • Adopting goals of “achieving Black, Indigenous, and People of Color (BIPOC) representation of at least 30% at all corporate levels and at least 40% at all retail and manufacturing roles by 2025
  • Committed to completing the “roll out of an analytics tool that will provide leaders with visibility to current diverse representation relative to Starbucks representation goals”
  • Incorporating “measurements focused on building inclusive and diverse teams” into executive compensation starting FY21
  • Joined “the Board Diversity Action Alliance (BDAA) to act alongside peer companies as we are committed to representation of racially and ethnically diverse directors on corporate boards of directors.” The BDAA commits to increasing the number of Black directors
  • Starbucks Supplier Diversity and Inclusion program
  • Committed to allocating 15 percent of advertising budget with “minority-owned and targeted media companies”
  • “Leadership Accelerator Program” that “will focus on empowering [employee] capacity for self-promotion, advocacy and career navigation” to facilitate entry into “the leadership pipeline”, but will be made available initially only to BIPOC employees at the individual contributor level.
  • Only July 22, 2022, Starbucks, Inc. responded to the ACRP that its directors had “determined that it is not in the best interest of Starbucks to accept the Demand and retract the Policies.”
  • On August 30, 2022, the ACRP, representing the NCPPR as a shareholder of Starbucks, sued Starbucks’ officers and directors in the Spokane County Superior Court in Washington, seeking an injunction against the implementation of the policies and a finding that the directors and officers breached their fiduciary duties, among others.
McDonald’s Corporation March 25, 2022 Demanding retraction of policies:

  • Producing senior leadership by 2025, at least 35% of which must be of “historically underrepresented groups” and 45% women
  • Shifting nearly 10% of supply contracts from others to “diverse-owned suppliers” by 2025
  • Increasing spend with “Black-owned media and production properties” by more than 100% by 2024; increasing investments with “Hispanic, Asian Pacific American, Women and Lesbian, Gay, Bisexual, Transgender, and Queer (LGBTQ)-owned properties” as part of net increase in “national investments in diverse-owned media companies” by more than 100% by 2024
  • Pressuring suppliers to “increase[e] representation and underrepresented talent in leadership and in staffing McDonald’s business overall and increase[e] their use of diverse suppliers
  • Launching “a franchise recruitment initiative to help increase the number of franchisees from historically underrepresented groups in McDonald’s US”
  • Pledging to “measure and improve diversity in our organization” as measured by board representation and employee category representation
Novartis March 25, 2022 Demanding retraction of policies regarding outside counsel:

  • Requiring outside counsel firms to “make specific diverse staffing commitments for each engagement (and in any event commit that not less than 30% of billable associate time and 20% of partner time will be provided by females, racially/ethnically diverse professionals, or members of the LGBTQ+ community, with an expectation that such commitments will move to parity over the next several years”
  • Stating that “[i]f a firm does not meet its agreed-upon diverse staffing commitment for a particular matter, Novartis will withhold 15% of the total amount billed over the life of that specific matter”
  • Stating that 22 firms agreed to comply and have been included in Novartis’s “Preferred Firm Panel of Global and U.S. law firms”
Lowe’s August 12, 2021 Demanding retraction of Making It…with Lowe’s promotion policies, a program to find and elevate diverse small-business owners:

  • Identifying “up to 375 diverse small-business owners who may be invited to sell their products on” for Phase 1; identifying “up to 75 diverse small-business owners to be invited to participate in Phase 2”; stating diverse qualification as “having at least 51% owned, operated and controlled by one or more of the following diversity classifications: Minority, Women, Veteran, Disability or LGBTQ”
Lowe’s November 23, 2021 Demanding retraction of Making It…with Lowe’s, a program to find and elevate diverse small-business owners and threatening lawsuits:

  • The ACRP states that “it appears that Lowe’s has not altered the discriminatory, illegal details of MIWL, and instead announced subsequently how it continues to advance its discriminatory promotion”

On July 26, 2022, Lowe’s launched “Into the Blue: Lowe’s Product Pitch Event,” which appears to be similar to “Making It…with Lowe’s” but no longer contains diverse ownership requirements. The ACRP interpreted this as a response to the pressure its letters have placed on Lowe’s in the past two years.

Coca-Cola June 11, 2021 Demanding retraction of policies regarding outside counsel, announced by former GC Bradley Gayton in a letter to all outside counsel on January 28, 2021:

  • The ACRP built on an open letter to Coca Cola by C. Boyden Gray, former White House counsel and ambassador to EU on April 27, 2021
  • Gayton’s policies would require outside counsel to report, on a quarterly basis, race, ethnicity, sex, gender, and disability status of all members of “teams working on [Coca Cola” matters”

Gayton’s policies would make a firm’s compliance to the policies a condition for payment to the firm in the future for identical legal work, willingness to continue to use the firm, willingness to include the firm on preferred vendor list

Coca Cola was the only company that appeared to have negotiated with the ACRP in response to their demands. For context, in January 2021, Coca Cola’s General Counsel Bradley Gayton announced that Coca Cola would implement several policies regarding outside counsel that would achieve the goal of more Black attorneys working on and having lead attorney and relationship roles on legal matters for Coca Cola. These policies included requiring that more than 30% of billable hours on new matters come from diverse attorneys and of that amount, half needed to go to Black attorneys, a 30% reduction in fees charged to Coca Cola for firms that firms that failed to meet this commitment, and if firms did not meet the goals over time they would not get new matters.. In June 2021, the ACRP demanded that Coca Cola retract such policies under threat of taking legal action. Coca Cola reached an agreement with the ACRP on December 17, 2021 to produce certain requested materials. Shortly thereafter Coca Cola announced that the Gayton’s proposed company policies “have not been and are not a policy” of Coca Cola.

Given the lack of public disclosure as to how companies have responded to these retraction demands, other than Coca Cola, it is not clear how many companies have actually engaged with the ACRP on its demands. Novartis’s spokeswoman, Julie Masow, said that the company stands by its program as part of the company’s efforts to “do [their] part to create a more diverse, equitable, inclusive and equal opportunity for all in the workplace.” Following the ACRP’s retraction demand letter in August 2021, Lowe’s maintained their policies, which led to the ACRP threatening legal action against the company again three months later.

On August 30, 2022, NCPPR made good on its threat to bring legal action against one of the companies that rejected its retraction demand when it sued Starbucks and its officers and directors in the Washington State courts seeking a declaratory judgment that the rejection of their retraction demand violated various federal and state statutes.

Yet another strategy in the anti-DEI activist shareholder’s toolbox is sending requests to the Equal Employment Opportunity Commission (EEOC) to open civil rights investigations into companies’ HR and promotion practices. The American First Legal (AFL), led by Stephen Miller, has sent letters requesting that the EEOC investigate Lyft, DICK’S Sporting Goods, Kontoor Brands, and Yum! Brands for their HR practices, including Lyft’s and DICK’S abortion-related travel reimbursement policy. Separately, the AFL also sent letters to the companies, including a letter to Yum! Brands’ CEO asking the company to immediately cease and desist from such discriminatory contracting and employment, to engage an outside firm to audit its hiring and contracting practices, and to make the audit report available to investors and shareholders. Lastly, the AFL has also written to the board of Disney to criticize its employment practices and what it perceives as “corporate waste” and unlawful discrimination against religious and conservative employees and has demanded a “culture audit” from the company.


Company Date Request
Lyft, Inc. July 27, 2022 Asked the EEOC to open a civil rights investigation of Lyft, Inc. for multiple violations of Title VII of the Civil Rights Act of 1964, as amended by the Pregnancy Discrimination Act of 1978 after Lyft announced a benefit of “reimbursement for travel costs if an employee must travel more than 100 miles” for an abortion. The AFL saw this as discrimination against pregnant women who do not get abortion because they do not get the same benefit. The AFL also claimed that Lyft’s DEI-oriented employment practices are unlawful.
DICK’S Sporting Goods, Inc. July 13, 2022 Asked the EEOC requesting the Commission to open a civil rights investigation of DICK’S Sporting Goods, Inc. for multiple violations of Title VII of the Civil Rights Act of 1964, as amended by the Pregnancy Discrimination Act of 1978 after DICK’S announced a special employment benefit of “up to $4,000” in travel reimbursement for an employee, spouse, or dependent, along with one support person, to obtain an abortion. The AFL saw this as discrimination against pregnant women who do not get abortion because they do not get the same benefit. The AFL also claimed that DICK’S DEI-oriented employment practices are unlawful.
Kontoor Brands, Inc. July 8, 2022 Asked the EEOC to open a civil rights investigation of Kontoor Brands, Inc., the parent company for iconic denim brands Wrangler and Lee, for hiring and promoting to impose racial quotas in its workforce such as:

“Increase U.S. Black, Indigenous, People of Color (BIPOC) representation from 38% to 50% by 2030.”

“Increase U.S. Black representation from 11% to 16% by 2030.”

“Increase U.S. BIPOC representation at Director level and above from 15% to 25% by 2030.”

Yum! Brands, Inc. June 27, 2022 Asked the EEOC to open a civil rights investigation of Yum! Brands, Inc. for engaging in unlawful, discriminatory hiring practices. The Company’s Form 10-K states that “In connection with our focus on equity, inclusion and belonging, our areas of focus include the following …. increasing representation of Black and Latinx [sic] U.S. associates among our executive and management ranks, franchisees, and suppliers over the next 10 years to match the combined demographics of those groups within the U.S.”

Most recently on July 20, 2022, the AFL went one step further and filed a class action lawsuit against Amazon in the United States District Court for the Eastern District of Texas for what it saw as “patently unlawful racial discrimination” in a number of Amazon’s DEI initiatives including a $10,000 grant to diverse delivery service entrepreneurs and the “Black Business Accelerator” program.

While anti-DEI shareholder proposals have been overwhelmingly defeated by shareholder votes and it is unlikely that many Boards of Directors will react favorably to retraction demands and other initiatives, DEI initiatives will likely continue to encounter outside pressure and potential legal rulings which may impact the speed with which the DEI needle moves forward.

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