Martin Lipton is a founding partner of Wachtell, Lipton, Rosen & Katz, specializing in mergers and acquisitions and matters affecting corporate policy and strategy. This post is based on a Wachtell Lipton memorandum by Mr. Lipton, John F. Savarese, Adam J. Shapiro, Erica E. Bonnett, Noah B. Yavitz, and Carmen X. W. Lu. Related research from the Program on Corporate Governance includes The Illusory Promise of Stakeholder Governance (discussed on the Forum here) and Will Corporations Deliver Value to All Stakeholders? (discussed on the Forum here) both by Lucian A. Bebchuk and Roberto Tallarita; Stakeholder Capitalism in the Time of COVID (discussed on the Forum here) by Lucian Bebchuk, Kobi Kastiel, Roberto Tallarita; and Restoration: The Role Stakeholder Governance Must Play in Recreating a Fair and Sustainable American Economy—A Reply to Professor Rock (discussed on the Forum here) by Leo E. Strine, Jr.
It is no secret that American corporations face vigorous — and often conflicting — demands concerning diversity, equity and inclusion (DEI) initiatives. Over the past year, DEI initiatives and commitments have come under pressure in the face of macroeconomic headwinds, political scrutiny and legal challenges. That pressure has only grown following the Supreme Court’s recent decision against affirmative action in SFFA v. Harvard (as discussed in our prior memo), after which Attorneys General from both red and blue states sent conflicting letters to Fortune 100 companies on what the SFFA decision meant for corporate DEI initiatives.
Managing the tension between proponents and opponents of DEI programs and initiatives is particularly complex because of the range of stakeholders involved. Shareholders, employees, customers, suppliers, regulators, stock exchanges and state legislatures are among the groups that have sought to shape the DEI agenda. And DEI is no longer a domestic issue: The European Union’s Corporate Sustainability Reporting Directive, which is expected to affect over 3,000 U.S. companies, includes disclosure standards that require firms to assess and disclose workforce and supplier diversity, equity and inclusion policies, practices and metrics to ensure equal treatment and opportunities for all.