THE ECONOMIST: Corporate America’s diversity wars are just getting started

“I am a woman of colour. I am a mom. I am a cis-gender millennial who has been diagnosed with generalised anxiety disorder. I am intersectional.” She was also a spook. Her mission: advertising a career at the CIA. The time? 2021. The place? President Joe Biden’s America.

The American workplace was remade after the death of George Floyd in May 2020.

A policeman was convicted of his murder. There were riots. In the heat, the principles of diversity, equity and inclusion (DEI) were extolled in government and across corporate America.

Unconscious-bias training and email-signature pronouns became features of office life. All manner of flags were hoisted. Active discrimination was encouraged through hiring practices that often penalised white men.

Political correctness went mad like never before.

That vast project is crumbling. President Donald Trump has promised a “revolution of common sense”. America’s federal bureaucracy is his main target, and those in DEI-related jobs are the bullseye.

Last year the State Department employed a staff of 13 in its “office of diversity and inclusion”; $US2.9 million ($4.7m) was earmarked for diversity training.

Now, under secretary of state Marco Rubio, staffers have reportedly been told to declare diversity initiatives to “DEIAtruth@opm.gov” (the “A” stands for accessibility). Finished, too, are plum contracts for consulting firms. Since 2020, for instance, Deloitte had won more than $US12m in DEI-related work from the Department of Health and Human Services.

In corporate America the backlash against DEI began well before Mr Trump arrived in Washington. After the Supreme Court ended affirmative action in university admissions in June 2023, a barrage of lawsuits were filed against companies.

“We sued international law firms over their internship programmes. We sued venture-capital firms. We sued the Smithsonian Museum. We sued Southwest Airlines. I can’t even remember all of them,” says Edward Blum, who brought the university-admissions case.

A second front was opening up online. “We’ve been fighting this fight for five years, and we’ve faced immense opposition,” says Christopher Rufo, an influential conservative activist who has written extensively against corporate DEI policies.

Mr Trump’s victory in November accelerated the reversal. Some of America’s biggest firms, including Amazon and Walmart, have since scrapped DEI initiatives.

The most severe whiplash is in tech. You can listen to it on Spotify. On one podcast Marc Andreessen, a venture capitalist, scolded BlackRock, the world’s biggest asset manager, for forcing “retarded” social policies on companies it invests in.

Mark Zuckerberg went on Joe Rogan’s show to decry the lack of “masculine energy” in the modern workplace. (Somebody ought to notify State Street, a fund manager whose gender-diversity-focused fund has Meta as its top holding.)

What remains of the DEI movement is being swiftly rebadged. In January McDonalds said it would abandon its workforce demographic goals. The fast-food chain’s “diversity team” has become its “inclusion team”. At Target, “supplier diversity” is out; “supplier engagement” is in.

The retailer says it wants to stay “in step with the evolving external landscape”.

Firms retaining DEI policies are likely to have change forced upon them. Anti-DEI executive orders appeared immediately after Mr Trump’s inauguration. One revoked civil-rights era rules that required extensive demographic-data collection by firms doing business with the government (that includes many big public companies).

The burden of the old rules should not be understated. “I have seen many companies decline government contracts just because of the costs of compliance,” says Bob Lian of Akin Gump, a law firm.

Deals with the state will now require companies to take a vow of abstinence from “programmes promoting DEI that violate any applicable Federal anti-discrimination laws”.

But DEI is a broad bag of concepts. Its ambiguity has so far been to the advantage of its supporters: one man’s discriminatory pursuit of diversity is another’s agenda for inclusion.

Mr Trump is fighting vague management speak with vaguer legalese. When bosses “don’t know what the government and the court’s view will be of which programmes are lawful” they will be much more careful, says Jason Schwartz of Gibson Dunn, another law firm.

It is having the intended effect. Bosses are seeking counsel on whether workplace “affinity groups”, for example, are legal. Is it worth a court case to find out?

“Some of the mechanisms in the executive order are clearly designed to generate private litigation,” says Ishan Bhabha of Jenner & Block, another law firm. America First Legal, one of the most litigious groups in recent years, was founded by Stephen Miller, now Mr Trump’s deputy chief of staff.

“The people leading the activist groups now have the machinery of the federal government behind them,” says Mr Schwartz.

Federal agencies have also been tasked with naming and shaming institutions they deem the worst DEI offenders, including public companies. In government, that is unprecedented. But in the online MAGA world, public shaming has proved to be a powerful tool.

“I expect the investigations to yield a treasure trove of excess, illegality and insanity, all driven by left wing ideologies,” says Mr Rufo.

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When DEI was ascendant, bosses thought of themselves as statesmen solving social problems more effectively than governments. Many now blame the hubris of that period on paying too much attention to the demands of young employees.

The reality is more complicated. Firms committed themselves to embracing their “stakeholders” when there was consensus among elites about the benefits of DEI. That consensus has shattered. With Mr Trump in the White House, the fallout is likely to get more painful still.

Costco offers a cautionary tale. Unlike Target, the retailer has not released a statement disavowing its commitment to DEI. It told shareholders to reject a resolution from a conservative group which would force a review of its DEI policies.

They did; such resolutions hardly ever get much support. The left wrongly interpreted this as a full-throated commitment to DEI: Al Sharpton, a black preacher, strolled its aisles in support.

The right—just as inaccurately—saw the move as a defiant challenge to Mr Trump’s war on DEI. Attorneys general from 19 red states wrote a letter chastising the firm. Promises of boycotts swirled online.

When selling a hotdog and soda for $1.50 can’t unite Americans, perhaps nothing can.