Costco Votes To Keep DEI. What Now?

Costco won’t be gutting its diversity initiatives in response to the latest shareholder pushback. At its annual meeting yesterday, more than 98% of shareholders voted against a recent proposal urging the company to axe its diversity initiatives. Sponsored by the National Center for Public Policy Research, the proposal asserted that “DEI holds litigation, reputational and financial risks to the Company, and therefore financial risks to shareholders,” and laid out an explanation of Costco’s shifting diversity initiatives, including the company renaming its DEI efforts to “People and Communities.” As of today, Costco’s defense of diversity seems to have dealt a serious blow to the growing skepticism and criticism of DEI within many American companies. Seems.

So what’s to be made of this? Several weeks ago, I wrote that “Costco may not be the kind of company that flips overnight on biased corporate policies,” which is undoubtedly the case. Is Costco’s resounding rejection of this proposal an indicator that anti-DEI shareholder groups simply are falling on uncaring ears?

In a recent Axios piece covering the vote, Trillium Asset Management chief advocacy officer Jonas Kron made the case. “It’s also a strong indication that all the media reports of the death of DEI and ESG are way overblown,” Kron said. “The investing community clearly understands the importance and value of these ESG and DEI approaches.” Let’s leave aside the whole “death of DEI” business, that’s been covered in depth before, how no serious corporate engagement figure thinks diversity programs are actually dead. However, what about Kron’s opinions on the “investing community?” This is clever wording, intentionally or otherwise, from Kron. Who exactly are the “investing community” that generated such a strong pushback to Costco’s DEI-skeptical shareholders?

To explain how shareholder proposals work, we’re going to have to get a bit technical. Perspective time: you’re a Costco shareholder and as such receive a proxy statement from the company ahead of its annual meeting, containing all the items to be voted on, including this anti-DEI proposal. But the reality? Most people don’t vote directly on shareholder proposals. That job gets outsourced to what’s called a “proxy adviser,” prominent examples of which include Institutional Shareholder Services (ISS) and Glass Lewis & Co. Such proxy advisory firms are the ones that make recommendations regarding the best way to vote on many shareholder proposals, including ones that pertain to ESG & DEI initiatives. Very few alternatives exist for ESG and DEI skeptical shareholders — the firm I work for, Bowyer Research, currently offers the only such set of ESG skeptical guidelines offered through ISS.

The point of this explanation? Most Costco shareholders didn’t directly vote their shares on the anti-DEI proposal on the company’s ballot yesterday. Proxy advisory services are notably unfriendly to proposals calling for corporate depoliticization — and their recommendations determine the votes of vast swaths of corporate shareholders. To be clear, many pro-ESG resolutions are also not looked fondly upon by proxy advisers.

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The pro-DEI crowd, as evidenced by perspectives like Kron’s, would like you to think that the Costco narrative is one of shareholders directly voting en masse to keep their diversity initiatives. But, as with many things, the reality is more complicated. Most of the “against” votes on this proposal were determined by the will of a proxy adviser. The bias of proxy advisers is another obstacle that ESG/DEI-skeptical corporate engagement groups have to overcome — and that work is ongoing. We’re in this for the long game, and setbacks are no longer a deterrent.

Costco clearly isn’t flipping overnight on DEI, but that doesn’t mean they’re immune from pressure — and it definitely doesn’t mean the pressure’s going anywhere.

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Isaac Willour is an award-winning journalist focusing on race, culture, and American conservatism, as well as a corporate relations analyst at Bowyer Research. His work has been featured at outlets including USA Today, The Wall Street Journal, The New York Times Opinion, C-SPAN, and The Daily Wire. He is a member of the Young Voices contributor program and can be found on X @IsaacWillour.

The views expressed in this piece are those of the author and do not necessarily represent those of The Daily Wire.