Costco is holding the line on DEI

At a time when many large U.S. companies are scaling back their diversity, equity and inclusion (DEI) efforts, Costco is standing firm in its commitment to these initiatives.

CEO Ron Vachris has even taken the step of responding directly to customers, particularly those concerned about race and gender-based hiring practices. In one email exchange, Vachris emphasized that the company does not use quotas but instead focuses on offering equal opportunities and fair pay to all employees, as reported by the Wall Street Journal (NWS+0.56%).

“If these policies you see as offensive, I must tell you I am not prepared to change,” Vachris wrote.

A shareholder vote on Jan. 23 could have significant implications for both Costco (COST+0.92%) and other businesses watching the conflict unfold. If the proposal passes, Costco will be required to reassess its DEI programs. However, if the recommendation from Costco’s Board of Directors to reject the proposal prevails, Costco will continue with its current diversity framework, setting a potential example for other companies facing similar scrutiny.

While many companies – such as Walmart, Google, Meta, Microsoft, and McDonald’s – have scaled back or reassessed their DEI goals, Costco’s position stands out. The company is currently at odds with the National Center for Public Policy Research, a conservative think tank pushing shareholders to reject Costco’s DEI programs.

The group argues that Costco’s diversity practices are discriminatory and could expose the company to legal and financial risks, citing recent high-profile legal challenges, particularly following the Supreme Court’s ruling on race-based admissions in higher education.

The think tank claims Costco’s rebranded “People and Communities” initiative is essentially the same DEI framework that involves hiring, promoting, and selecting employees and suppliers based on race and sex.

Despite these criticisms, the board has firmly backed its current DEI strategy. In response to the proposal, the board unanimously urged shareholders to reject it, stressing that the company’s diversity initiatives align with its core values of respect and inclusion. They argue that these efforts are good for the business and have been integral in helping Costco grow to more than 300,000 employees globally.

Costco said maintaining a diverse workforce boosts employee satisfaction and fuels creativity, driving the “treasure hunt” experience that customers crave. Furthermore, it says diversity helps attract suppliers, particularly small businesses, reinforcing Costco’s status as one of the top retailers in the U.S. – an advantage that’s crucial as its e-commerce growth lags behind rivals like Walmart and Target.