Costco’s board pushed back against its anti-diversity, equity and inclusion (DEI) shareholders who suggested the wholesale retailer reevaluate its “illegal discrimination” program.

Newsweek has reached out to Costco for comment.

Why it matters

DEI programs have become both a cornerstone of institutional policy and a flashpoint in legal debates. Important court cases, such as Students for Fair Admissions v. Harvard And Fisher v. University of Texashave challenged affirmative action practices and questioned whether race-conscious admissions violate constitutional principles of equal protection. Similarly, DEI initiatives in the workplace have come under scrutiny under Title VII of the Civil Rights Act.

What you should know

The Costco board responded to a group of shareholders and unanimously recommended voting against the proposal to “report on the risks of maintaining DEI efforts.” Shareholders had suggested that Costco employees may be victims of “illegal discrimination because they are white, Asian, male or heterosexual,” which could cost the company tens of billions of dollars in legal costs.

“Our board has reviewed this proposal and believes that our commitment to a company based on respect and inclusion is appropriate and necessary,” the response said. “Our success at Costco Wholesale is based on service to our key stakeholders: employees, members and suppliers. Our diversity, equity and inclusion efforts follow our Code of Ethics.”

The board noted that it is about making all of its 300,000-plus employees “feel valued and respected.” They go on to say that having a diverse group of employees allows Costco to gain additional insight and creativity into its product offerings. Customers can also see themselves reflected in the people they interact with in our warehouses.

“Diversity in our supplier base, including consideration of small businesses, is beneficial for many of the same reasons that diversity benefits our company,” the board wrote. “We believe it encourages creativity and innovation in the goods and services we offer our members.”

How it started

Some shareholders had put forward a proposal arising from the Supreme Court ruling SFFA vs. Harvardin which the court had found that the college’s use of race as a factor in admissions was a violation of Article 14^Th The change.

The proposal suggested that a Starbucks executive who won a $25.6 million lawsuit after arguing she was fired because of her whiteness had the Supreme Court to thank. The proposal also mentioned DEI employee layoffs and related investments at companies like Meta, Microsoft and Zoom.

“It is clear that DEI poses litigation, reputational and financial risks to the company and therefore financial risks to shareholders,” the proposal says. “And yet Costco still has such a program, even though the company was concerned enough to recognize it when it recently and quietly renamed its DEI program People and Communities.”

The Costco board said it “regularly evaluates” the company’s practices to be “consistent with the law, including evolving Supreme Court decisions.”

“We believe our diversity, equity and inclusion efforts are legally appropriate, and nothing in the proposal proves otherwise,” the board wrote. “However, our focus on diversity, equity and inclusion serves not only to improve our financial performance, but also to improve our culture and the well-being of the people whose lives we impact.”

What people say

People on X, formerly known as Twitter, are praising the Costco board for its response, with some even calling it “socially responsible capitalism.”

What happens next

The annual stockholders’ meeting will be held via live webcast on Thursday, January 23 at 5:00 p.m. EST. Part of the time will allow voting on the shareholder proposal “provided it is properly presented at the meeting.” Only shareholders prior to November 15th may vote at the meeting.