Costco's most recent "Notice of Annual Meeting of Shareholders," which contains information about business matters that will be voted on at the January 23, 2025 meeting, included an anti-DEI shareholder proposal that was submitted by the National Center for Public Policy Research.
Value Edge Advisors describes the National Center for Public Policy Research as a "reprehensible radical right" organization that has a history of filing anti-DEI lawsuits against various companies, including Starbucks, Nasdaq, and more. Its funders include right-wing groups like the Coors foundation.
The proposal states that "a number of DEI-related lawsuits" have been filed against other companies, including one corporation that "was successfully sued for a single case of discrimination against a white employee resulting in an award of more than $25 million." The proposal also cites other companies that have "begun to roll back prior DEI commitments and lay off employees from DEI departments," including Alphabet, Meta, Microsoft, Zoom, and Tractor Supply. The proposal requests that the Board of Directors "conduct an evaluation and publish a report" on the "risks" of Costco maintaining its DEI efforts. The proposal also asserts that, "It's clear that DEI holds litigation, reputational and financial risks to the Company, and therefore financial risks to shareholders" and states that Costco has "at least 200,000 employees" who are "potential victims" of "illegal discrimination because they are white, Asian, male or straight."
The Costco Board of Directors responded with a very strong, unanimous recommendation to vote AGAINST the Proposal, stating:
Our Board has considered this proposal and believes that our commitment to an enterprise rooted in respect and inclusion is appropriate and necessary. The report requested by this proposal would not provide meaningful additional information to our shareholders, and the Board thus unanimously recommends a vote AGAINST this proposal.
CNN calls Costco's response a "stern rebuke to activist shareholders looking to end the warehouse retailer's diversity ambitions. CNN reports:
Costco said its DEI efforts help the company attract and retain a wide range of employees and improve merchandise and services in stores. Costco also said its members want to interact with a diverse employee base . . . The board went further in its recommendation to vote against the proposal, saying the think tank is masking its true anti-diversity agenda under the guise of reducing risk. Costco said the NCPPR is inflicting burdens on companies with challenges to DEI and the organization's broader agenda is to abolish diversity initiatives.
Great job, Costco, keep up the good fight! I'm gonna file this under yet another great reason to shop at Costco.
Here's the full text of the anti-DEI Proposal, available on Proxyvote:
PROPOSAL 4: SHAREHOLDER PROPOSAL REQUESTING REPORT ON THE RISKS OF MAINTAINING DEI EFFORTS
The following shareholder proposal has been submitted to the Company for action at the Annual Meeting by the National Center for Public Policy Research, 2005 Massachusetts Avenue NW, Washington DC 20036. The proposal will be voted on at the Annual Meeting only if properly presented by or on behalf of the proponent.
PROPONENT'S STATEMENT IN SUPPORT OF SHAREHOLDER PROPOSAL
Supporting Statement: Last year, the US Supreme Court ruled in SFFA v. Harvard that discriminating on the basis of race in college admissions violates the equal protection clause of the 14th Amendment. Prior legal advice regarding the legality of corporate Diversity, Equity and Inclusion (DEI) programs has been called into question post-SFFA. As such, Attorneys General of 13 States warned Fortune 100 companies that SFFA implicated corporate DEI programs.
Since SFFA, a number of DEI-related lawsuits have been filed. A corporation was successfully sued for a single case of discrimination against a white employee resulting in an award of more than $25 million, and the risk of being sued for such discrimination appears to be rising. Additionally, many major companies have begun to roll back prior DEI commitments and lay off employees from DEI departments. Alphabet and Meta cut DEI staff and DEI-related investments, Microsoft laid off an entire a [sic] DEI team, as did Zoom, and John Deere publicly stated that it has halted many policies that were previously part of its DEI efforts after Tractor Supply explicitly stated that it has "eliminate[d] DEI roles and retire[d] our current DEI goals."
It's clear that DEI holds litigation, reputational and financial risks to the Company, and therefore financial risks to shareholders.
And yet Costco still has such a program, though it was apprehensive enough to recognize this as it recently and quietly rebranded its DEI program to "People and Communities." But sticking a new label on discriminatory practices does not protect Costco and its shareholders from these risks.
The renamed program still openly expresses a "commitment to equity" (which means equality of outcome, not opportunity), still employs a "Chief Diversity Officer," still has a supplier diversity program that picks suppliers based on their race and sex, still appears to factor in race and sex in hiring and promotion, and still contributes shareholder money to organizations that advance the discriminatory agenda of DEI. All of these practices are staples of corporate DEI programs and are consistent with Costco's DEI program prior to its rebranding.
With 310,000 employees, Costco likely has at least 200,000 employees who are potentially victims of this type of illegal discrimination because they are white, Asian, male or straight. Accordingly, even if only a fraction of those employees were to file suit, and only some of those prove successful, the cost to Costco could be tens of billions of dollars.
Resolved: Shareholders request that the Board conduct an evaluation and publish a report, omitting proprietary and privileged information, on the risks of the Company maintaining its current DEI ((including "People & Communities") roles, policies and goals.
And here's the full text of the Costco Board of Directors' response, also available on Proxyvote.
BOARD OF DIRECTORS' RESPONSE
The Board of Directors unanimously recommends a vote AGAINST this proposal.
Our Board has considered this proposal and believes that our commitment to an enterprise rooted in respect and inclusion is appropriate and necessary. The report requested by this proposal would not provide meaningful additional information to our shareholders, and the Board thus unanimously recommends a vote AGAINST this proposal.
Our success at Costco Wholesale has been built on service to our critical stakeholders: employees, members, and suppliers. Our efforts around diversity, equity and inclusion follow our code of ethics:
For our employees, these efforts are built around inclusion – having all of our employees feel valued and respected. Our efforts at diversity, equity and inclusion remind and reinforce with everyone at our Company the importance of creating opportunities for all. We believe that these efforts enhance our capacity to attract and retain employees who will help our business succeed. This capacity is critical because we owe our success to our now over 300,000 employees around the globe.
We welcome members from all walks of life and backgrounds. As our membership diversifies, we believe that serving it with a diverse group of employees enhances satisfaction. Among other things, a diverse group of employees helps bring originality and creativity to our merchandise offerings, promoting the "treasure hunt" that our customers value. That group also helps to provide insights into the tastes and preferences of our members. And we believe (and member feedback shows) that many of our members like to see themselves reflected in the people in our warehouses with whom they interact.
Having diversity in our supplier base, including appropriate attention to small businesses, is beneficial for many of the same reasons diversity benefits our Company. We believe that it fosters creativity and innovation in the merchandise and services that we offer our members
Consistent with our commitment to "obey the law," we regularly evaluate our practices concerning compliance with law, including evolving Supreme Court decisions. We believe that our diversity, equity and inclusion efforts are legally appropriate, and nothing in the proposal demonstrates otherwise. As part of our obeying the law, all decisions regarding recruiting, hiring, promotion, assignment, training, termination, and other terms and conditions of employment will be made without unlawful discrimination on the basis of race, color, national origin, ancestry, sex, 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.
Combined with our obedience to the law, service to our employees, members and suppliers has rewarded our shareholders. This is our code of ethics. Our focus on diversity, equity and inclusion is not, however, only for the sake of improved financial performance but to enhance our culture and the well-being of people whose lives we influence.
The proponent professes concern about legal and financial risks to the Company and its shareholders associated with the diversity initiatives. The supporting statement demonstrates that it is the proponent and others that are responsible for inflicting burdens on companies with their challenges to longstanding diversity programs. The proponent's broader agenda is not reducing risk for the Company but abolition of diversity initiatives. A 2023 federal district court decision, in a case brought by the proponent, noted that the proponent had "published a document called 'Balancing the Boardroom 2022,' which describes its shareholder activism as 'fighting back' against 'the evils of woke politicized capital and companies.' [The proponent went] on to describe 'CEOs and other corporate executives who are most woke and most hard-left political in their management of their corporations' as 'inimical to the Republic and its blessings of liberty' and 'committed to critical race theory and the socialist foundations of woke' or 'shameless monsters who are willing to sacrifice our future for their comforts.'" National Center for Public Policy Research v. Schultz, E.D. WA. (Sept. 11, 2023). And the proponent's efforts to demonstrate retrenchment on the part of companies are misleading, at best. For example, the assertion that "Microsoft laid off an entire a [sic] DEI team" is simply wrong. It was later reported that Microsoft stated that the two positions eliminated were redundant roles on its events team and that Microsoft's diversity and inclusion commitments remain unchanged, according to Jeff Jones, a Microsoft spokesperson: "Our focus on diversity and inclusion is unwavering and we are holding firm on our expectations, prioritizing accountability, and continuing to focus on this work." Colvin, Caroline. Amid DEI cuts, Microsoft works to distinguish itself from those responding to 'woke' backlash. HR Dive, July 24, 2024.
We believe that the proponent's request for a study reflects a policy bias with which we disagree and that further study and reporting would not be an efficient use of Company resources.
The Board of Directors recommends a vote AGAINST Proposal 4.
Previously:
• Meet 'Dash,' the old-fashioned Costco shopping cart that somehow survived the purges
• Costco co-founder to new CEO: 'If you raise the effing hot dog, I will kill you.'