The Controversy Surrounding DEI Programs in Manufacturing and Beyond

Company Actions

To be clear, widespread retreat from DEI programs by companies is not underway.  According to Littler’s January 2024 C-Suite Survey Report, only 6% of executives report pulling back DEI commitment to any degree over the past year.

 Still, activity has picked up. During the 2024 proxy season, 17 shareholder proposals addressing companies’ diversity and equity practices were filed compared to only five in 2023, according to a report by The Conference Board.

And when big manufacturers step back or away from diversity programs, it makes news. Here’s a little of what’s been reported:

• Along with distancing itself from social or cultural awareness events, Deere has committed to “auditing all company-mandated training materials and policies to ensure the absence of socially motivated messages, while being in compliance with federal, state, and local laws.”
• In a leaked internal memo from the past year, Ford revealed that it has “taken a fresh look at our policies and practices to ensure they support our values, drive business results, and take into account the current landscape.” It also said Ford “will not use quotas for minority dealerships or suppliers.”

In a statement to IW, the automaker said, “To be clear, there are no changes to our policies, or our commitment to foster a workplace anchored in respect and inclusion.” It also provided IW with a copy of the memo and a link to the 2024 Ford Integrated Report for more information on ERGs (page 107).

• Harley-Davidson announced that it would end participation with the Human Rights Campaign (HRC), an LGBTQ+ advocacy group (as has Ford). Harley-Davidson added it no longer has supplier diversity spend goals and has not operated a DEI function since April.

These three manufacturers said their decisions were made in response to employee and customer feedback and, in Deere’s case, “ongoing conversations.” Each company cited the desire to align internal policies with company values. Harley-Davidson and John Deere have yet to respond to multiple requests for comment.

What Pro and Anti DEI Proponents are Saying

Opponents of DEI programs say they are discriminatory and give an unfair advantage to those who are deemed to be oppressed. Billionaire hedge fund manager Bill Ackman said in a lengthy X post that DEI is “inherently inconsistent with basic American values. Our country since its founding has been about creating and building a democracy with equality of opportunity for all.”

Ackman goes on to write, “The country has seen burgeoning resentment and anger grow materially over the last few years, and the DEI movement is an important contributor to our growing divisiveness. Resentment is one of the most important drivers of racism. And it is the lack of equity, i.e, fairness, in how DEI operates, that contributes to this resentment.”

Conservative activist Robby Starbuck, one of the driving forces pushing companies to drop DEI, told CNN in a phone interview that corporate DEI programs are a “Trojan horse for pushing leftism,” and he said he wants companies to stay neutral on social issues.

Starbuck’s already large X following of over 700,000 followers has been amplified with multiple post replies from the platform owner and Tesla CEO Elon Musk.

Litigation is likely another concern impacting companies’ actions around DEI. In Littler’s C-Suite Survey Report, 59% of executives “say that backlash has increased since the Supreme Court’s decisions on affirmative action in June 2023.” Additionally, of the leaders whose company decreased DEI commitment, “50% attributed their decreased commitment to concerns about legal liability and litigation, including reverse discrimination lawsuits.”

On the flip side, proponents of DEI programs point to reams of data and research to support their stance. For example, according to the McKinsey report Diversity Matters Even More, “Companies with representation of women exceeding 30 percent (and thus in the top quartile) are significantly more likely to financially outperform those with 30 percent or fewer. Similarly, companies in our top quartile for ethnic diversity show an average 27 percent financial advantage over others.”

Similarly, Boston Consulting Group research says, “When employees believe that DEI programming is a priority in the workplace, the number of all employees who are happy increases by 31 percentage points and the number of both women and men who feel motivated increases by nearly 25 percentage points.”

Backlash Upon Backlash

While companies are scaling back DEI efforts in response to the backlash against DEI programs, proponents of DEI are fighting back.

Following John Deere’s announcement, National Black Farmers Association President John Boyd called for the resignation of CEO John May and a boycott of the company.

The HRC responded to Ford in a statement released by President Kelley Robinson. “The Human Rights Campaign could not be more disappointed to see Ford Motor Company shirking its responsibility to its employees, consumers, and shareholders,” said Robinson. “Ford Motor Company’s shortsighted decisions will have long-term consequences. Hastily abandoning efforts that ensure fair, safe, and inclusive work environments is bad for business and leaves Ford’s employees and millions of LGBTQ+-allied consumers behind.”

Manufacturers likely could have avoided such intense criticism had their DEI statements been more clear, says Sacha Thompson, founder and CEO at business consultancy The Equity Equation.

For example:

• “Ford remains deeply committed to fostering a safe and inclusive workplace and building a team that leverages diverse perspectives, backgrounds and thinking styles,” wrote Ford CEO Jim Farley in the internal memo.
• “We remain committed to listening to all members of our community,” Harley-Davidson wrote in a statement.

“It would have been much more impactful, and they probably would not have received the backlash that they did if they had a few more specifics in there,” Thompson says.

She and other DEI advocates say vague statements give the appearance that companies are trying to sit on the fence to avoid alienating any population.

Moreover, a better explanation on how the companies will foster diversity after the amendment of workplace DEI would help create a better understanding of where the company stands, says Buki Mosaku, founder of DiverseCity Think Tank, a consultancy of workplace bias and DEI experts.

“If they said, ‘In its current form, [DEI] is more divisive than inclusive, so we’ve decided to have a less divisive approach or view of equality,'” Mosaku says. “You’re looking to do something better as opposed to throwing the baby out with the bathwater.”

Negative Consequences: Attracting Talent and Customer Perception

Proponents foresee unintended consequences for companies that step away from DEI. Talent acquisition is one example.

“You have a younger generation that’s coming into the workforce, that is in the workforce, that has a very high expectation that organizations have some type of diversity, equity and inclusion efforts in place,” says Thompson. “If they don’t see it, if they don’t like it, they will leave. So, you’re looking at higher turnover rates, which cost the organization.”

“You want to go where you feel valued, and if you’ve made a conscious decision to say, ‘We’re not going to support LGBTQ+ rights,’ or ‘We don’t care where we fall on the index,’ you send a very large message not just to that population, but to those that may have LGBTQ+ people in their families or in their friend circle,” Thompson says.

Consumers

Mosaku says companies that drop DEI may unintentionally change public perception in a negative way. Data show the same. According to the 2024 Edelman Trust Barometer Special Report, 76% of U.S. respondents say organizations better connect with the public when they have diverse workforces.

Thompson says that like sustainability efforts, company commitment to diversity is becoming an important component for customers when choosing where to spend their money. Distancing themselves from DEI could make these companies attractive to some right now but hurt them in the long run.

“I happen to live not too far from a Harley-Davidson shop that’s in a predominantly black community. So, what I’m hearing is you’re not going to have programs or activities to encourage more diversity of your clientele when you have a location that’s in a very diverse area,” Thompson says. “It’s short-sighted because they’re missing out on opportunities that could impact the bottom line.”

What Happens Next?

Whatever the reason companies step away from DEI, conversation surrounding the best, most effective way to create equity in society and the workplace remains.

“Regardless of if you’ve made a statement around, ‘We’re not going to do DEI work anymore’ or ‘Yes, we’re doubling down,’ you need to have a plan,” Thompson says. “Your population, be it internal or external, is going to continue to be diverse, continue to have different identities, continue to have different needs, and so you need to be ready and available to meet those needs, not just of your employees but of your client and customer base.”