Only a few years ago, in 2020, corporations were rushing to implement DEI (diversity, equity, and inclusion) programs for hiring, training, and promotions to show they were combating oppression and discrimination of minorities they were accused of. Many are now pulling back, most recently Walmart, the largest corporation to do so thus far. Walmart’s pullback from DEI programming includes abandoning mandatory employee diversity training and other measures. Among others that have withdrawn from their DEI commitments, starting last year, are Ford, John Deere, Lowe’s, and Molson Coors.
Why are these companies exiting their DEI programs now? For one, the cultural credibility of the narratives of systemic oppression and victimhood of minorities is declining. As National Post reports, a recent survey shows that 57% of Canadians now disagree that equity should be considered in hiring decisions while only 28% agree. The opposition to equity-based hiring is less strong in the U.S., where 46% oppose it and 36% support it. These numbers are up and down, respectively, from 2023. Customers’ and employees’ opposition to DEI and anti-DEI activists’ loud voices is giving corporations a pause.
Another reason for the waning corporate commitment to DEI is its negative impact on performance. Jamie Sarkonak reports that a Rutgers University meta-analysis found not the previously touted benefits, but negative performance implications. For example, DEI training induced unwarranted perceptions of racial injustice and provoked distrust. At best, DEI hiring does not improve companies’ financial performance, as recent research has shown.
Besides the above, there are more fundamental – moral – reasons as to why DEI programs are doomed to fail and should be abandoned.
First of all, DEI initiatives obstruct companies from performing their proper role: the production and trade of goods and services for profit – on which our survival and wellbeing depends. DEI programs divert companies’ resources from real value creation, wealth for shareholders and goods and services for customers. This undermines overall human flourishing, which is the fundamental reason why DEI programs are immoral.
Part of profits that otherwise would be used to reward employee productivity, to create innovative products and services and efficient processes – new treatments for diseases, or solutions to enterprise data management and analytics, for example – are channeled to pursuing DEI. Companies’ wealth creation suffers, as does everyone’s – customers, employees, suppliers, and shareholders – prosperity.
Corporate DEI programs are immoral also because they are unjust, both to the recipients of DEI benefits (equity- and diversity-based hiring, promotions, pay, etc.), and to their co-workers, as well as to the companies themselves (the shareholders). When companies adopt equity hiring and other DEI programs, their employees are not the best fit for any given job and therefore not as productive as those chosen based on their job-related qualifications alone. Equal pay for lesser performance is undeserved and therefore unjust. Besides being unfair to more productive workers, undeserved pay would also be damaging to the self-esteem of its recipients who cannot help but know they are being paid more than their work is worth.
DEI programs would also be unjust to non-DEI employees because they have to carry more of the work, presumably for the same pay. They likely would grow resentful, de-motivated, and less productive, or quit, thus hurting the company’s performance even further and triggering shareholders to move their investment elsewhere.
Finally, corporate DEI programs are immoral because their central tenet, equity, is impossible to achieve without force and cannot be sustained. In other words, pursuing it is an irrational waste of resources. Equity – equality of outcomes or results – can be achieved only temporarily by forcibly redistributing the products of everyone’s labor to all, equally. But this redistribution cannot be sustained because individuals have different abilities, skills, and motivation. Some will be more productive and prosper more. Experiments of forced equity in authoritarian regimes such as the former Soviet Union, Cuba, and Venezuela have all failed and led to low productivity, shortages, poverty, and worse. In the corporate context even in semi-free countries, equity-enforcing (or -seeking) companies will be outcompeted and go out of business, unless they give up their commitment to DEI.
Besides abandoning DEI programs, what should companies do then if they want to achieve long-term success?
They should hire, train, promote, and compensate employees based on the principle of trade for mutual benefit. By hiring the best possible employee available for any given job, companies would receive employees’ productive input in exchange for commensurate compensation and benefits. This would lead to value creation for customers in the form of products and services with the combination of quality and price they desire and are willing to pay for. Customer value creation ensures profitability, and therefore, wealth for the shareholders.
Most of the increased shareholder wealth is invested (as all will not or cannot be consumed), either back in the company or other businesses, which will create more innovative products, services, or processes, more job opportunities, and donations to charitable causes, in a virtuous circle that increases human flourishing. That would be the outcome of corporations performing their proper role (assuming at least semi-free markets) and of abandoning DEI.