Labor & Employment Law Daily Wrap Up, INDUSTRY NEWS, TRENDS—Costco feels the heat after shareholders vote in favor of its DEI policies, (Jan 29, 2025)

By Suzanne Cosgrove

Nineteen AGs send Costco’s CEO a letter urging him to stop DEI’s “unlawful discrimination.”

In a heated letter sent to Costco’s president and CEO, Ron Vachris, Attorneys General of 19 states urged the company to end what they described as discrimination imposed by the company through its diversity, equity, and inclusion (DEI) policies.

The AGs’ protest comes on the heels of a Costco shareholder vote that rejected an anti-DEI proposal forwarded by a conservative think tank, the National Center for Public Policy Research, that requested a report on the risks of maintaining the company’s DEI efforts.

As noted in Costco’s Form 8k released this week, shareholders overwhelmingly rejected the anti-DEI proposal, called Proposal 4, logging 281,267,612 votes against it and 4,857,195 in its favor. Three other less controversial proposals, including for new directors nominated by the board, were approved.

SFFA v. Harvard. In a proxy memorandum sent to Costco shareholders before the vote, the think tank suggested, among other things, that the U.S. Supreme Court’s pivotal ruling in Students for Fair Admissions (SFFA) v. Harvard created a template that corporations should follow, and that “discriminating on the basis of race in college admissions violates the equal protection clause of the 14th Amendment.”

However, as previously reported, Costco’s board of directors did not fall in line with the Center and unanimously recommended that shareholders vote against the proposal question, stating that the board’s “commitment to an enterprise rooted in respect and inclusion is appropriate and necessary.”

Picking up the thread. In their letter to Costco management, the Attorneys General, led by Ken Paxton of Texas and joined by AGs from 18 other red-leaning states, also cited SFFA v. Harvard. The Supreme Court “has repeatedly warned against using race-based preferences and classifications,” they wrote. “Race-neutral practices, on the other hand, honor the founding ideals of this country.”

Further, the state Attorneys General pointed out that following the Supreme Court’s SFFA decision, they warned corporate America “to stop unlawful DEI policies,” a notice heeded by a number of major companies that have recently backed away from prior DEI initiatives, including Target, Amazon and Meta. “Inexplicably, Costco has doubled down on DEI,” the AGs added.

Executive Order sets the tone. The AGs noted their case against DEI was echoed in President Trump’s executive order, issued on Jan. 21, that put forth a mandate to restore “merit-based opportunity.”

Costco should “do the right thing” by following the law and repealing its DEI policies,” the AGs concluded. They asked Costco to reply within 30 days.

Companies: Costco Wholesale Corp.

News: IndustryNewsTrends Discrimination WhiteHouseNews