Apple's board of directors, like Costco's, is joining the National Center for Public Policy Research (NCPPR), which urges companies to issue reports on the risks of their diversity, equity, and inclusion (DEI) programs or eliminate them. ) advised investors to reject shareholder proposals. They are completely. Board members at other companies who want to continue their commitment to DEI programs may want to explore how these two companies address anti-DEI shareholder proposals and adapt some of their methods. I don't know.
Although shareholder voting on these proposals has not yet been completed, boards of companies that may be targeted by the NCPPR are eager to begin discussing and planning how to respond to anti-DEI shareholder proposals. You might think. Of course, ending such programs is also an option available to boards, as several other companies decided last year.
In Apple's case, NCPPR's shareholder proposal calls for the company to discontinue all DEI efforts. Conservative groups argue that the U.S. Supreme Court ruled last year that race-based discrimination in college admissions violates the Equal Protection Clause.th The proposed amendments could also apply to corporate DEI programs, which could be equated with unlawful discrimination.
In a statement of support for the shareholder proposal against Apple, the NCPPR stated that “DEI poses litigation, reputational, and financial risks to companies, and therefore financial risk to shareholders, and therefore additional risk to companies that do not comply with their fiduciary duties.” It is clear that it will bring about . “Shareholders are asking us to consider eliminating our inclusion and diversity programs, policies, departments, and goals.”
In its shareholder proposal to Costco, NCPPR stated that “the Board of Directors has omitted confidential and privileged information regarding the company's risk of maintaining its current DEI (including 'people and communities') roles, policies, and policies.” It is requested that an evaluation be carried out and a report made public. the goal. ”
In a statement of support for Costco's shareholder proposal, NCPPR said, “Costco, with its 310,000 employees, has no one who is the victim of this type of unlawful discrimination because they are white, Asian, male, or heterosexual. There are likely at least 200,000 employees who could be sued. Therefore, even if only a small percentage of employees sue, and only a small percentage of them win, the cost to Costco will be several. It could be ten billion dollars.”
In both cases, the NCPPR has classified DEI as “unlawful discrimination,” even though courts have not made such determinations, and conservative groups have used the threat of litigation as a primary reason for eliminating DEI programs. Listed as risks and reasons.
Here's how Apple and Costco's boards are dealing with these challenging shareholder proposals.
In a statement on its behalf, Apple argued in response to a shareholder proposal to discontinue all DEI programs:
1. This proposal is inappropriate because Apple already has a well-established compliance program and this proposal seeks to inappropriately limit Apple's ability to manage its normal business operations, people and teams, and business strategy. Not necessary. This proposal seeks to inappropriately micromanage our programs and policies by proposing specific measures of compliance.
2. Apple's Board of Directors and management continue to actively monitor the legal and regulatory risks and compliance of our global business. Determining appropriate measures to comply with applicable law, including related changes to Apple's programs, policies, departments, or objectives, is a fundamental aspect of Apple's business operations.
3. We aim to conduct business ethically and with integrity and in compliance with applicable laws and regulations, and our Business Conduct and Compliance Policy is the foundation of how we do business. And we strive to create a culture of belonging where everyone can do their best work.
In its proxy statement, Costco argued in response to a shareholder proposal seeking reporting on the risks associated with its DEI program:
1. At Costco Wholesale, our success is built on service to our key stakeholders, including our employees, members, and suppliers. Our commitment to diversity, equity, and inclusion is guided by our Code of Ethics. For employees, these initiatives are built around inclusivity, ensuring all employees feel valued and respected.. Our commitment to diversity, equity and inclusion reminds and strengthens everyone at our company of the importance of creating opportunities for everyone.
2. We believe (and our member feedback shows) that many of our members want to see themselves reflected in the people they interact with in the warehouse. Diversity in our supplier base, including appropriate consideration for small and medium-sized businesses, is beneficial to many members. It's the same reason why diversity benefits us. We believe it fosters creativity and innovation in the products and services we provide to our members.
3. As part of our compliance with the law, all decisions regarding recruitment, hiring, promotion, assignment, training, termination, and other terms and conditions of employment will be made without unlawful discrimination based on race, color, national origin, or ancestry. Masu. , gender, sexual orientation, gender identity or expression, religion, age, pregnancy, disability, work-related injury, covered military or veteran status, political ideology or expression, genetic information, marital status, or other protected status.
4. But we value diversity, equity and inclusion not just to improve our financial performance, but to improve our culture and the well-being of the people whose lives we impact. The Proponent has expressed concern about the legal and financial risks to the Company and its shareholders related to its diversity efforts. This statement of support shows that proponents and others are responsible for burdening companies with challenges to longstanding diversity programs. The proponents' broader agenda is not to reduce the company's risk, but to eliminate its diversity efforts.
Here are the key takeaways from the Apple and Costco board responses:
• Respond quickly and directly to shareholders and explain why your company should participate in a DEI program. Apple says the company strives to “create a culture of belonging where everyone can do their best work.” Costco says, “Our commitment to diversity, equity, and inclusion is consistent with our Code of Ethics.” These and other statements are included in the Company's proxy statement for reference by all investors, allowing them to draw their own conclusions.
• Emphasize that your company is aware of what it needs to do to follow the law and operate its DEI program legally and in accordance with current regulations. Be sure to point out that your company does not discriminate against anyone.
• If possible, declare and demonstrate the benefits DEI has contributed to your company, such as improved financial performance, recruitment, and culture.
Finally, Costco sought to prove that the NCPPR has an anti-DEI purpose and that it actually contributes to the legal risks it claims it wants to eliminate (as opposed to other companies). (I pointed out that he was threatening to sue.) Take more risks than some boards are willing to take.
