A graduate student of mine opted to do their thesis research on the evolution of corporate communications about their DEI (Diversity, Equity, and Inclusion) policies in the legally mandated 10-K filings. The student, and others, have observed that communication about DEI by large publicly traded corporations has waned in the recent years, since surging after the killing of George Floyd and the outcry against racism. However, there are some highly successful, profitable corporations, such as Apple, Costco, Disney, and Microsoft, that have reaffirmed their commitment to DEI policies.
This made me ask whether this is signaling the end of corporate DEI programs, and why some companies are reaffirming their commitment to them. I have not done any research on this, but here is my educated speculation, based on much previous research and having interviewed many CEOs about their business decision making.
Most corporate leaders recognize that for their companies to perform their function in society successfully – production and trade of goods and services people need and want and creating value for the company’s shareholders – they must hire and reward employees for their productive ability and performance, not for their racial, gender, sexual orientation, religious, social class, or other identities, as the Diversity, Equity, and Inclusion policies would mandate.
Hiring and rewarding employees based on their productive ability and performance is consistent with the principle of justice, or the trader principle identified by Ayn Rand, that counsels trading partners (such as companies and their employees, customers, and suppliers) to trade value for value, by mutual consent to mutual benefit. If a company wants to be successful – to maximize profits in the long-term – in relatively free markets (where companies are competing for investors, employees and customers), it needs apply this principle.
The DEI policies are at odds with such a concept of justice. Instead of evaluating and rewarding individual merit and performance, DEI policies are based on identity politics and designed to promote equity – equal outcomes – for various identity groups, to compensate for past discrimination.
The business justification for DEI policies has been that they would improve innovation, productivity and profitability of companies, because diverse employees with different identities who are treated equitably (regardless of performance) and feel accepted and included would contribute to these performance metrics. According to this logic, DEI policies based on identity politics would be a win for the equity of identity groups as well as for company profitability.
Some studies have shown a positive association between diverse work force and company profitability, and shareholders of many major corporations keep voting in favor of retaining DEI policies. But an association does not mean a causal relationship between DEI policies and profitability.
Since race, gender, sexual orientation, and other such identities are irrelevant to an individual’s productive ability and performance, members of any identity group have variable levels of productivity (as do members of the total population). The most profitable companies are likely to employ the most productive employees regardless of their identity groups.
Companies that base their employment decisions on identities, whether discriminating against or favoring some over others, are likely be less profitable than those that hire and compensate based on productive ability and performance.
Leaders who run their companies to produce and trade material values and to create wealth for the company shareholders know better than to make employment decisions based on identity politics. Where shareholder voting has allowed, corporate leaders have quietly shifted their human resource management communication and focus from DEI to emphasize a culture that recognizes individual employees and rewards them for their contributions – according to the trader principle.
Some other financially successful companies (such as Apple, Costco, Disney, and Microsoft) where the shareholders have voted to retain DEI policies have reaffirmed their commitment to them. My high-confidence assessment is, however, that these companies don’t prioritize identity politics in their employment decisions but apply the trader principle and seek and retain the most productive employees, without favoring or discriminating against anyone based on their identity.
Why be confident in this assessment? Because companies cannot achieve and sustain profitability unless they act according to the trader principle, recognizing the contributions of individual employees and compensating them accordingly.
My conclusion: the DEI terminology may not have disappeared entirely from business but the ideology (if it ever amounted to more than virtue signaling in corporate communications) has been extinguished. The trader principle rules again, as it should. (Unfortunately, the DEI is still live and well at many universities and government organizations. But let’s be optimistic and trust that eventually, with a better political climate, it can disappear from there also).
