In the race for the best employees, American companies have always played for victory. Apple is paying millions to poach top executives, and Nvidia is sparing no expense to hire top AI researchers. Why? Because hiring the best and brightest in terms of skills and abilities is the secret to American innovation.

Unfortunately, some companies have rejected hiring people based on their skills and abilities and are now hiring based on race and gender.

My investment firm Azoria has identified three dozen S&P 500 companies with explicit racial and gender hiring goals.

Early next year, we will launch an ETF fund that invests in every S&P 500 company except those with these hiring goals.

The premise is simple: Companies that hire based on qualifications and skills will outperform those that hire based on race and gender.

Best Buy is one of the three dozen companies we won’t buy. It’s a $20 billion company that has a written policy that “one in three new corporate positions” should be “filled by BIPOC.”

Companies like Best Buy call these hiring goals “inclusive,” but the truth is that they hurt everyone, especially the people they claim to be helping.

When Best Buy says, “One in three is new. . . “Although the positions” are given to BIPOC Americans, they imply that Americans of color cannot advance into these roles without special treatment.

We do not support this way of thinking. It diminishes the qualifications of minority applicants and spreads the divisive lie that their success is only possible through lower standards and not on their own merits.

Supreme Court Justice Clarence Thomas — a brilliant black legal scholar — has spoken about the cloud that affirmative action casts over his achievements, unfairly branding him a token and suggesting that he could not succeed without special treatment.

We saw a similar phenomenon in 2022 when President Biden announced he would nominate a Black woman to the Supreme Court – no matter what.

He then announced Ketanji Brown Jackson, an extremely talented legal scholar, even though many conservatives, including myself, disagree with her legal opinions.

By portraying her nomination as fulfilling a racial and gender hiring goal, Biden unfairly saddled her with the label of being a “diverse employee.” She doesn’t deserve that.

My own mother struggled with this. She is a legal immigrant from South America who graduated from community college. She was always uncomfortable applying to companies with affirmative action programs because she wanted to be hired based on merit—not a diversity checkbox.

My father also felt uncomfortable applying to identity-obsessed companies, but for a different reason: He is white and feared that his race would be used against him.

No matter which side of this race and gender game you fall on, this inverted caste system creates fear and insecurity, and that is unacceptable.

Every American deserves dignity in employment – ​​neither reduced to an arbitrary diversity checkbox nor excluded for failing to meet one.

These policies don’t just hurt employees. Shareholders are also paying the price for these racial and gender hiring targets in the form of lower stock returns.

Why? Because extraordinary companies are led by extraordinary people. Qualified employees develop world-class products and services and generate cash flow that is reinvested to drive growth.

These hiring goals forced companies to prioritize identity politics over hiring the best and brightest Americans from all walks of life, hurting their ability to innovate and provide profitable products and services to customers.

The negative impact of these hiring practices is clear.

Last year, a portfolio of three dozen S&P 500 companies with racial and gender hiring targets returned just 12%, compared to 30% for the S&P 500. According to our own internal analysis, this portfolio returned 17% over two years , compared to 60% for the S&P 500.

In both periods, 70% of these companies underperformed the basic S&P 500 index, meaning that the entire S&P 500 would have performed even higher had these companies not been included.

Companies like Blackrock and Vanguard have not adapted to this new reality. They continue to invest in all S&P 500 companies, including those that have racial and gender hiring policies that negatively impact stock returns.

Azoria recently closed a $25 million investment round from institutional investors from both sides to create an investment firm based on freethinking and meritocracy. Our upcoming Meritocracy ETF (ticker symbol “SPXM”) will be publicly available to investors who want to avoid S&P 500 companies that pursue racial and gender hiring targets.

By excluding the stocks of these anti-timeritocratic underperformers, Azoria aims to help investors outperform the basic S&P 500.

To be clear, we will not banish these anti-timeritocratic companies forever.

Those who see the light and abandon their hiring goals will be reinstated into the fund, allowing our investors to benefit from their renewed commitment to meritocracy. And those who continue to run their companies like high school Model UN tournaments will be left out.

America’s major corporations now face a choice: They can continue to pursue racial and gender hiring goals and pay the price financially, or restore meritocracy and do right by their shareholders and employees.

At Azoria we focus on performance. We believe in an America where talent, skill and hard work – not identity – determine success.

James Fishback is CEO and co-founder of Azoria