WSJ What’s News - What Trump’s War on DEI Means for Business

Episode Date: February 2, 2025

A blitz of executive orders from President Trump promises to do more than rid the government of diversity, inclusion and equity policies. WSJ workplace and employment reporter Lauren Weber and career and work life columnist Callum Borchers explain how the president’s moves to stamp out DEI efforts are starting to ripple across Corporate America, and what those changes mean for workers. Luke Vargas hosts. Further Reading: How Trump’s Assault on DEI Will Ripple Across Corporate America You Blamed DEI for Hurting Your Career. Now What? Anti-DEI Activists Target Goldman Sachs and JPMorgan Chase Trump’s War on DEI Freezes Diversity Work Across Federal Government Learn more about your ad choices. Visit megaphone.fm/adchoices

What's next for the markets? Join me, Ingrid McIntosh, in conversation with TD Asset Management's Chief Investment Officer, David Sykes, for the year ahead, the most anticipated episode of the TDAMM Talks podcast. You can get expert insights as we break down the trends and outlook for 2025 asset class by asset class. You don't want to miss this essential conversation. So listen now and follow TDAM talks for more expert perspectives on markets, investing and so much more. Hey, What's News listeners. It's Sunday, February 2nd. I'm Luke Vargas for the Wall Street Journal and this is What's News Sunday, the show where we tackle the big questions

about the biggest stories in the news by reaching out to our colleagues across the newsroom to help explain what's happening in our world. And this week, we'll look at how President Trump's bid to stamp out diversity, equity, and inclusion efforts within the U.S. government are rippling across American corporations. And we'll also discuss what changes might be coming to your workplace as a result. Alright, let's get right to it. It didn't take long for President Trump to take an axe to DEI programs within the government when he took office last month, as just hours after his inauguration, he signed an executive order that described DEI efforts pursued by President Biden as illegal and immoral. That order also characterized those programs as having infiltrated the government across nearly every

federal agency, and in the process demonstrating, quote, immense public waste and shameful discrimination. In a few minutes, we'll speak to Wall Street Journal On-the-Clock columnist Callum Borschers, but first I'm joined by journal reporter Lauren Weber, who has been tracking the effects of Trump's efforts to stamp out DEI within the government, as well as crucially beyond it. Lauren, walk us through what we've seen so far. Well, one of the first things he did was sign this executive order on the first day of his administration, basically shutting down all diversity, equity,

and inclusion programs within government agencies. Among other things, it meant that chief diversity officers within agencies and DEI teams were put on leave. I believe the expectation is those teams will just be laid off. So the next day, Trump tried to do similar things with federal contractors. Now, contractors are a huge universe of companies. It includes everything from companies we all know, like Microsoft and Google and Boeing,

to the companies that supply toilet paper or janitorial services and things like that. By some estimates, about one in four workers works for a federal contractor, even if they're not working specifically on a federal contract. Now, at the heart of this is the notion does discrimination still exist? And people might say there's still a lot of evidence of sexism, racism, and other isms that affect whether or not people get access to economic opportunities and jobs. Trump and his team

have taken a very clear point of view that we've moved past discrimination. Discrimination now is affecting men, white men, white people. And so therefore, we need to get rid of these kinds of DEI programs. And Lauren, I've listened to Trump at several points when talking about DEI invoke this 2023 Supreme Court ruling, which was about affirmative action related to university

admissions. How does that connect with this broader DEI debate? So, technically, that Supreme Court decision didn't necessarily affect the workplace, but it was very clear what this meant in terms of legal interpretations of anything that might be considered a preference. So not only did it give conservative activists a reason to ramp up their efforts to try to get rid of these workplace programs,

which can be everything from a mentorship program for young black engineers, or a leadership development program for women, or anything like that. But it also meant that the government now has more basis to say some of these programs might now violate the law. Just very quickly on this point of these efforts to stamp out DEI within the government spilling over to the private sector, to the NGO sector, I actually spoke to Journal White House reporter Ken Thomas, who was telling me a few days ago about a message that government employees had received.

Let's play a clip of that. In one email that went out to federal workers, the administration said that agencies were aware of some efforts by some in the government to disguise these DEI programs by using different names and it encouraged federal employees to report any attempts by contractors to obscure these connections within 10 days. The email said, quote, there will be no adverse consequences for timely reporting this information. However, failure to report this information within 10 days may result in adverse consequences. Nat Senners Lauren, what about that? It really does seem like that is the kind of message that would have corporate legal teams working overtime to try and figure out what their liability might be for.

Yeah, I've spoken to people who found that part quite alarming. There are tens of thousands of government contractors that sell all kinds of goods and services to federal agencies or to the government. And it's basically saying you better start looking through your programs and making sure there's nothing in here that could make you a target. No company, even if they feel like their programs are defensible, wants to be the target of a civil investigation. What kinds of policies are we talking about that could be risky to businesses? And have we seen certain companies already moving in response to this?

The lawyers that I've spoken to really urge caution for companies because when we talk about DEI, it can mean everything from you have employee resource groups for, let's say, people with disabilities, or for veterans, or for black employees. You celebrate heritage months like Women's History Month or something like that. That kind of thing is quite innocuous. The kinds of programs they're looking at

are more ones that have, say, an explicit preference or would seem to encourage any kind of preference in hiring and promotion. So for example, a mentorship program for women or having executive bonuses tied to reaching diversity targets or even having diversity targets to begin with. I mean, this was not considered crossing a legal line a couple of years ago, but after the Supreme Court decision on affirmative action, companies are much more cautious and the risk calculus has really changed. Yeah, we have reported just recently Uber is changing compensation goals that have been

tied to DEI targets. Target the retailer has dropped some DEI goals, including programs to boost black suppliers. So whiplash here if you're looking at some of these corporate actions that had really been gathering steam just a few years ago. Exactly. Right, we've got to take a very short break, but when we come back we'll bring journal columnist Callum Borchers into the discussion to look at how these anti-DEI efforts are reshaping workplaces at the employee level. Stay with us.

While Lauren and I have been discussing how Trump's executive orders are set to ripple across corporate America and to get a better sense of how companies and workers are experiencing that pullback in DEI programs. I want to invite journal on the clock columnist Callum Borschers to join this discussion. Callum, how is the corporate DEI pullback going over at companies? You've covered this now for several years. Yeah, I would say that the reactions are very mixed. There's definitely a large section of the workforce that's really disappointed that progress that went on in the last few years could be halted or even go in reverse. I certainly also hear some excitement that doors will reopen for people who

feel like DEI was bad for their careers. This is a widely held belief, by the way. I mean, more than a third of Americans believe that DEI in the workplace is bad for white men, according to a recent Pew Research Center survey. And then there's a third group that I would say is cautiously optimistic. These are people who believe in the principles of DEI, but say that it was often clumsily implemented and needs to change anyway.

And sort of this new administration in Washington is a trigger to compel that change to happen more quickly. Tell me about that last cohort. I know you've written about how some of the early leaders in the DEI movement had been questioning the direction of it even before this change in administration. Yeah, some of this is just a result of having enough of a body of evidence

to figure out what has worked and what hasn't worked. We're now several years past George Floyd's murder at the hands of police, which was a big impetus for a lot of DEI programs in corporate America. And so Harvard sociologist Frank Dobbin, who's been studying corporate diversity for decades, finds that some kinds of diversity training actually can backfire counterintuitively in workplaces. A specific example would be the unconscious bias training. What he finds is that people don't like being told you have a hidden bigot in your brains.

It causes people to shut down and it actually doesn't foster the more inclusive warm environment that people are going for. You know, the second factor too is that even before Trump returned to office, there was an increase in regulatory scrutiny. The Federal Appeals Court just recently in December struck down the NASDAQ stock exchange's diversity targets for listed companies and the lawsuit had argued that it amounted to an unlawful quota. And so that's a tool that companies have used with some frequency to say, here's a goal we're gonna set and we're meaning to hold ourselves accountable.

But if you really can't do it without running a foul of the courts, then it's maybe not a strategy that is gonna work in the long run. And in terms of what this means for workers, Cal, have you spoke to folks who've been processing this sort of reversal in and around them in the workplace? I hear from them all the time.

And there are folks who are totally crestfallen. They feel as though the corporate DEI efforts of recent years have been hugely important to making some progress. And they would say, not enough. There's a really interesting study from UNC Chapel Hill and Texas A&M together. They looked at how many black executives are there in the S&P 500, for example. They noted that between 2020 and 2023, there was a huge surge. It went up by 65%.

People who say, oh, DEI moved too quickly, they point to that increase. Wow, two-thirds in just three years. But the baseline was so low that as a share of all executives in the S&P 500, the increase was only 3.4% to 5.1%, which is still way below parity, not at all representative of the general population. So there's another camp that points to that and says it didn't go nearly far enough. But I think you can have the same data points and people can look at it very differently and feel very differently about how DEI was implemented in their businesses in recent years. Lauren, we've been talking here about a major reversal from companies on their DEI efforts. I'm curious though, are there some prominent companies that are bucking this trend?

I would say the one that has gotten the most attention is Costco. Costco always had some programs but very recently when a conservative organization tried to require them to do an analysis of whether or not their DEI programs put them at any kind of legal risk, the leaders at Costco sent back a very very sharply worded response basically saying we stand by everything we do, we're not breaking the law and this is a waste of our resources. There have been a number of other corporate leaders who, like Atavos, recently stood up and defended their programs. I think it's worth noting too, Luke, how companies are actually handling their business internally.

So you see some walking away from the terminology of DEI, for example, especially dropping the word equity. But if you look at that whole bucket as some version of DEI, still 94% of companies in the S&P 500 included some kind of DEI measure in their sustainability reports last year. That's according to a survey by Tenio, the consulting firm. That was only down from 99% the year before. So it's not like it's gone off a cliff, right? It's not like all these companies are just ditching their commitment to DEI altogether.

Some are just making tweaks around the margins or changing terminology that they think is liable to raise the ire of the new president. I guess the question is going to be what do the 2025 annual statistics show then? I'd be very curious about that, Which brings me to my final question for both of you and starting with Callum as one of our columnists. What do you predict the future of corporate DEI is likely to be in the US given all these changes we're seeing? One thing I hear consistently from managers is they want to be more clear about tying diversity to business goals. I'm optimistic that we're not going to see the principle just die off entirely because I think

companies understand that if you want to recruit a talented workforce, you need to look everywhere. If you exclude or overlook certain groups of people, you're just going to miss out on talented people. I think the way that people talk about it in the workplace is going to change and the brand name is going to change. And Lauren, what will you be watching in, say, the next year? Well, I think in the short term, we are going to see diversity teams focus more on issues like veterans employment and opportunities and people

with disabilities, which is a huge swath of workers and people who cut across race and gender and some of the other hot button issues for people and particularly for this administration. So I think we'll see that in the short term. In the long term, I do think some of this is cyclical, whether it's external events like the killing of George Floyd or just kind of an evolution of some of the legal thinking or changes like that. This is a social issue where feelings and actions tend to evolve and change and you never know what's going

to tip things one way or the other. Journal reporter Lauren Weber covers workplace issues and employment for us and Callum Borschers writes the journals on the clock column. Lauren, Callum, thank you both. Thanks for having me. Glad to be with you, Luke. And that's it for What's New Sunday, First Sunday, February 2nd. Today's show was produced by Anthony Bansi with supervising producer Christina Rocca, and we got help from deputy editors Scott Salloway and Chris Zinsley. I'm Luke Vargas, and we'll be back tomorrow morning with a brand new show.

Until then, thanks for listening.