Speaker 1: Diversity, Equity and Inclusion, or DEI, is a term you've probably heard quite a bit.

Speaker 2: DEI, DEI, DEI, DEI, DEI, DEI is representation. It's the number of people that you have in the organization that mirror the labor force availability.

Speaker 1: The police killing of George Floyd and subsequent protests became a tipping point for companies across America. Fortune 1000 companies publicly acknowledged the importance of racial diversity, pledging $340 billion to promote change. But that is starting to change. The commitment to DEI appears to be wavering.

Speaker 3: Squawk Deere is pulling back from DEI measures.

Speaker 4: Technology companies made big cuts to those DEI programs.

Speaker 5: Lowe's is the latest company to roll back DEI efforts.

Speaker 1: Major players have pulled back their initiatives amid growing conservative pressures, uncertain economic conditions and a politicization of the practice.

Speaker 3: Harley joins tractor supply company and Polaris in scaling back or changing DEI policies following a campaign by activist Robbie Starbuck.

Speaker 4: Well, there's a new player in the marketplace, and that is the conservative consumer who has woken up to the fact that many companies have divorced from the idea that customers are king.

Speaker 1: But DEI advocates argue that this retreat may be overstated. Is it the normal ebb and flow of social initiatives or is there a shift in corporate culture?

Speaker 2: DEI is diversity is representation. It's the number of people that you have in the organization that mirror the labor force availability.

Speaker 6: When we're challenged with growth opportunities, we're often told to think bigger. You've got to think bigger. Well, you in and of yourself and your existing team and your existing structure can't think bigger without new perspectives. And that's what leading bigger is, is widening your perspective by including others.

Speaker 1: Despite challenges, a 2024 study found 75 percent of U.S. executives highly prioritize DEI, and those executives are being more vocal about their support. In a letter to shareholders, JP Morgan CEO Jamie Dimon said that the initiatives are driving inclusivity, innovation and stronger financial performance. And MasterCard's chief administrative officer acknowledged the company's continued commitment to equality and fairness. Diversity among CEOs is also improving, with more women, black, Asian and Latino people occupying the position since 2019.

Speaker 6: Over 70 percent of leaders choose proteges that are of the same race and gender. We like comfortable. We gravitate to comfortable. But what we have to realize in today's world and tomorrow's future, comfort means stagnation. It means a lack of change, a lack of forward movement.

Speaker 2: So if you look around the room and everybody who's sitting there is a white male and you're trying to sell products to a multiracial world marketplace and you don't have anybody who represents that thinking, then you're probably not going to do very well in the marketplace.

Speaker 1: DEI advocates point to several benefits, including improved innovation, recruitment and company reputation.

Speaker 2: We say we don't want to have people figure out how they fit in. We want to help people figure out how they stand out.

Speaker 1: In 2023, more than 75 percent of companies in the S&P 500 use DEI metrics in the pay of CEOs and other C-suite executives. Still, less than half of U.S. corporate employees say their executive teams reflect the diversity of their employees in 2024. One of the problems with diversity initiatives is getting shareholders on board, especially when it is hard to translate to dollars.

Speaker 2: Everything doesn't have to be quantitative. So we live in a society where if you can't count it, if you can't quantify it, then it doesn't matter.

Speaker 6: And these are some of the sample metrics around the power of inclusion and inclusive workplaces. You've got over 70 percent more likelihood to generate revenue from innovation revenue, which is new products and services revenue. You have 70 percent more likelihood to capture new markets. You have a higher level of team performance. You have a higher level of collaboration. And importantly, given how critical talent is today, you have a much lower risk of attrition.

Speaker 1: In recent years, DEI efforts have seen an uptick in pushback, and more than 100 bills have been introduced in 30 states aimed at restricting these initiatives. And some executives are increasingly wary of taking public stances on social issues, which could cause legal risk to businesses. Nine in 10 executives believe taking a public stance on a social issue is riskier than staying silent, according to one study.

Speaker 4: It's a broader swath of Americans who are just sick of all the divisive woke stuff. They just want to be able to exist in the marketplace.

Speaker 1: Recently, several major publicly traded companies and household names, including Tractor Supply, John Deere, Harley-Davidson, Ford and Lowe's, scaled back their DEI policies.

Speaker 4: As we look down that list of most trusted brands by conservatives in America, we realized they all had these policies and they were all opposed to the fundamental values and tenets and beliefs of conservative consumers.

Speaker 1: Robby Starbuck has over a million followers across his social media platforms, has been able to galvanize conservative consumers.

Speaker 4: So there's a real financial incentive for companies to look and take very seriously what we're saying and pull back where it's appropriate to pull back.

Speaker 2: More people now have permission to be, quote, anti-DEI. And I think that for those organizations, they probably were already only doing it because they felt it was the socially acceptable thing to do. So they really weren't doing it because they saw this as a critical aspect of their business success.

Speaker 1: U.S. companies spend an average of $8 billion a year on DEI. Training can be costly, ranging from a couple of thousand dollars to well over a million, depending on company size.

Speaker 4: The DEI departments at large have cost quite a bit of money and have borne very little fruit.

Speaker 2: The budgets are definitely being cut. We do find that in this era where there's so much backlash, we do find that organizations' budgets, you know, have been cut.

Speaker 1: Although business leaders are supporters of DEI initiatives, shareholders and board members are far less likely to prioritize it.

Speaker 4: The board has a fiduciary responsibility to shareholders. These boards are understanding that when we reach out to their company, that there is proof already in the marketplace that we move the markets. And I don't want to destroy any businesses. I want to help restore the heart and soul of corporate America, which is the idea that the consumer is king.

Speaker 1: One study found that while only 20 percent of U.S. companies plan to cut or eliminate DEI initiatives in 2024, the landscape is complex. Many organizations continue to view it as essential for business success.

Speaker 2: There are many, many organizations who are still doing diversity, equity, inclusion and who have come out and said, this is not optional for us because we know that it is a business imperative. This work goes in waves. Right. And so there's the time when things are kind of quiet and you can just work the system and get things through. Nobody's really talking about it to the extent that we are now.

Speaker 1: DEI pullback is a bit overstated as organizations are largely doubling down on commitment. But risks are apparent, particularly to organizations who take public stances on social issues.

Speaker 4: I think there's no question that the future is going to be won by companies that choose neutrality on divisive political and social issues. There's no reason that we need to know the social position of a diaper company.

Speaker 2: Our values of liberty and justice for all, our values of equality, you know, should take us there because we want to create a world that works for all. The better off I am, the better off other people are.