Reports of the Death of Corporate DEI Have Been Greatly Exaggerated

A look at the data reveals a more nuanced story

In the wake of the controversy over the Congressional testimony of the presidents of Harvard, Penn, and MIT about campus anti-semitism, opponents of diversity, equity, and inclusion (DEI) initiatives are saying it’s time to kill off corporate DEI efforts. Much of the recent heat has come from high-profile billionaires like Bill Ackman and Elon Musk, but the conversation isn’t over.

The DEI backlash has been gaining steam among Republican politicians for a while. Florida Governor Ron DeSantis passed a law in May 2023 banning DEI in Florida’s public colleges and universities. Two months later, after the Supreme Court dismantled affirmative action in university admissions, thirteen Republican attorneys general wrote an open letter to the CEOs of Fortune 100 companies warning them “to refrain from discriminating on the basis of race, whether under the label of ‘diversity, equity, and inclusion’ or otherwise.”

These politicians and their allies are doing their best to make “DEI” a toxic term, not unlike their efforts to turn “CRT” and “woke” into 21st-century dog whistles. One challenge posed by the acronym itself is that “DEI” has become a catchall, even though organizations of all shapes and sizes have widely varying names for and approaches to diversity work. [1]

Beyond this air war being waged by politicians and billionaires, there’s no question that corporate DEI faces difficulties. Concerns about litigation and lawsuits are real. At the ground level, a little-noticed Edelman survey from last spring revealed three key challenges, two of which point to a generation gap between Boomer and Gen X executives and the rank-and-file young Millennial and Gen Z employees that they manage. [2]

First, executives have an inflated sense of how they’re doing on race and diversity. Three out of five (60%) executives feel like their organizations are making meaningful progress addressing racism and racial inequality in the workplace, while fewer than one in five non-managerial associates (18%) share this assessment. Over half of executives (56%) trust their CEO to tell the truth about racism and DEI matters in their organizations, while associates are more than twice as likely to trust racially diverse coworkers (39%) over the CEO (15%).

Second, most executives feel like they are walking on eggshells. Three-fifths (61%) are uncomfortable talking about race and racial issues and worried that they will accidentally say something racist, while associates (43%) are less likely to share this concern. Part of this spread probably results from demographics: today’s executives are whiter than the young professionals they manage.

Finally, many heads of DEI face internal credibility gaps. Only one-fifth of executives (20%) trust their DEI heads to tell the truth about racism and DEI matters in their organizations. This raises an obvious question: why don’t the vast majority of executives trust the DEI leaders in their own organizations? This gap is not limited to executives: fewer than one in three associates (28%) or mid-level (31%) employees express trust in DEI heads. There is clearly important work to be done.

But even with these problems, reports of the death of DEI have been exaggerated for at least a few reasons.

First, diversity helps the bottom line. Teams with divergent thinkers get better outcomes than like-minded groups, and one of the best ways to build that kind of team is to bring together people with varied backgrounds and life experiences. In 2023, McKinsey found that companies in the top quartile for gender diversity are 39% more likely to financially outperform those in the bottom quartile. The same (39%) holds true for companies in the top quartile for ethnic diversity versus those in the bottom quartile. [3]

Second, DEI is necessary as a talent strategy. Gen Z is the most diverse generation America has ever had. Companies that want to attract and retain the best people will have to offer equal pay for equal work and provide work environments free of discrimination and harassment. The Edelman survey found strong support among employees from all racial backgrounds for employers ensuring diversity across all functions and levels (73%), ensuring Board and C-Suite diversity (67%), ensuring pay equity between racial and ethnic groups (80%), and removing biases in hiring practices that disadvantage certain candidates (77%). [4]

Third, DEI is already deeply embedded and supported. A November 2023 survey by Littler of 300+ US C-suite executives found that 57% say their organization’s commitment to DEI has increased since 2022. [5] Employee resource groups (ERGs) and affinity groups, which have been established in corporations like Microsoft and Xerox for decades, are now typically funded and managed through the DEI function. Edelman found that two-thirds of employees (68%) expect their employers to maintain ERGs or affinity groups. [6]

DEI is also baked into corporate accountability measures. As of 2021, more than three-quarters of Fortune 100 corporations publish their EEO-1 filings, which are mandatory annual reports on workforce diversity that must be submitted to the U.S. Equal Employment Opportunity Commission. [7] It’s hard to imagine corporations going backwards on this.

So what’s next? Today’s backlash has not yet reached its peak. It will no doubt provide an excuse for some firms to cut budgets and programming. All eyes will be on the courts. And as with “greenhushing” [8]—a recent phenomenon in which corporations maintain efforts toward net-zero carbon goals while deliberately opting not to publicize them—companies and their executives may say less publicly about diversity while doing what they deem necessary to build the best possible team. As a brand, DEI may get a makeover and a new name.

But the current moment also represents an opportunity for dialogue within corporations about how to operate in a society that’s highly diverse and getting more so every day. If handled effectively, these conversations should result in strong, credible DEI initiatives that support employees and ultimately lead to stronger performance.

Notes:

1. I have used “DEI” generically throughout while acknowledging these limitations.

2. Edelman, 2023 Edelman Trust Barometer Special Report: Business and Racial Justice, pp. 9, 14, 18. https://www.edelman.com/trust/2023/trust-barometer/special-report-business-racial-justice

3. McKinsey, Diversity Matters Even More: The Case for Holistic Impact (December 5, 2023), p. 11, https://www.mckinsey.com/featured-insights/diversity-and-inclusion/diversity-matters-even-more-the-case-for-holistic-impact?

4.  Edelman, pp. 21-22.

5. Littler, Inclusion, Equity, and Diversity: C-Suite Report (January 2024), p. 3, https://www.littler.com/files/2024_littler_csuite_survey_report.pdf

6. Edelman, p. 23.

7. Dieter Holter, “Companies Make EEOC Diversity Disclosures Public Amid Investor Pressure,” Wall Street Journal, September 1, 2021, https://www.wsj.com/articles/companies-make-eeoc-diversity-disclosures-public-amid-investor-pressure-11630490400

8. Nadia Kähkönen, Elliott Bourgeault, and Isabel Hagbrink, Net Zero and Beyond: A Deep-Dive on Climate Leaders and What’s Driving Them (South Pole, October 18, 2022), p. 4, https://www.southpole.com/news/going-green-then-going-dark