S&P 500 Companies Downplay DEI in Corporate Filings

In the hot summer of 2020, major companies made the mistake of jumping on the BLM bandwagon by announcing their commitments to DEI, anti-racism and whatever buzzwords they deemed helpful to keep the angry mob off their backs. A number of major companies have been walking those commitments back in the past six months. We’ve all heard about John Deere and Target and Goldman Sachs and many more. Each of these changes represent an anecdote suggesting a broader turn. But how broad exactly?

Today the NY Times takes a stab at generating some data on this topic. Reporters looked at the financial filings of the S&P 500 to see how many have mentioned DEI over the past several years. Not surprisingly, they found a big spike in 2021 and a slow pullback starting this year.

By 2022, over 90 percent of the S&P 500 had language about D.E.I. in their annual filings. Uber, for example, “committed to becoming an anti-racist company.” Best Buy wrote in a quarterly regulatory filing that “in the wake of George Floyd’s death” the company would strive to “address racial inequities.”

By 2024, the social pressure had started to reverse — “critical race theory” was labeled by some senators as “activist indoctrination,” and many states took steps to restrict D.E.I. programs at universities. This backlash was accelerated by a Supreme Court decision in 2023 that struck down affirmative action in college admissions. While that decision was not directed at corporations, some law firms began to face lawsuits over fellowships that were open only to marginalized groups, and other employers started to pay more attention.

This year, the majority of S&P 500 companies still mention topics related to DEI but the tone has shifted. Certain buzzwords are being eliminated in favor of rebranding that sounds less extreme.

Seventy-eight percent of companies — 297 out of the 381 that have filed their reports so far this year — continue to discuss various diversity and related initiatives, according to the Times analysis, which examined a decade of financial filings known as 10-Ks that public companies submit each year to the Securities and Exchange Commission.

But many of them have softened or shifted previous language, by removing the word “equity,” for example, or emphasizing “belonging” rather than D.E.I.

So we went from 90% talking about DEI to 78% this year, but even those who haven’t dropped it are softening. What you can’t tell from this analysis is whether anything inside the company has actually changed or if the filings just reflect a new PR approach. Simply put: Are they they changing or just hiding the ball? One lawyer who advises companies on these issues suggested it was the latter.

“You don’t want to provide a road map for critics to look into what you’re up to,” said Jon Solorzano, a partner at the law firm Vinson & Elkins who counsels companies on governance issues, including D.E.I. “Talking about it externally is now viewed as a riskier proposition, while continuing to talk about it internally is maybe less risky.”

But a Harvard business school professor suggested that companies follow fads all the time and DEI is probably just another example. “It’s a self-fulfilling prophecy, because it doesn’t achieve their business goals so it goes out of fashion and they dump it,” Professor Ranjay Gulati said.

Companies certainly jumped on this because it’s a fad and many are now stepping back for the same reason. However, most fads don’t have an army of staffers, a mob of online activists threatening boycotts and a horde of lawyers looking to sue over discrimination to back them up. DEI has a lot of enforcers out there who will never give up because DEI is either their job or their identity.

And that’s why I’m pretty pessimistic about this. The backlash against DEI is real but the proponents are entrenched. The only way to get rid of corporate DEI at this point is to sue enough companies for illegal hiring and promotion practices that the rest get the message. We aren’t there yet but we’re at least headed in the right direction.