RIP DEI?

Diversity, equity and inclusion or DEI has been in the news lately, predictably for the wrong reasons. It has suffered alongside its sister discipline of ESG investing as part of the “anti-woke” agenda of right wing politicians in the US.

Perhaps to some extent this trend is a pendulum swing after pushes in favour of DEI over the past few years. If the likes of Nasdaq are imposing diversity thresholds with the apparent endorsement of the likes of Forbes magazine, then perhaps pro-DEI initiatives have already gone far enough.

However, the backlash appears to have gone too far and into unprecedented territory.

The key leader in many such campaigns is not even a politician per se: it’s Robby Starbuck, a former music video director who has transformed himself into an activist against DEI initiatives at major US companies. He ran as a write-in candidate in a Republican congressional primary in 2022 and lost. Yet Brown-Forman Corporation, the manufacturer of Jack Daniel’s whisky, has just announced that it will drop its DEI programmes, apparently in tacit response to Starbuck’s campaigning. This follows a similar campaign against gay-positive initiatives at John Deere.

Unlike ex-music video producers, investment managers have direct financial responsibilities to deliver returns. The investment case for DEI has been rehearsed ad infinitum. Some opponents might argue that the positive figures in favour of DEI are overblown, but they should then at least be able to produce financial counterarguments. Companies shouldn’t tamely submit to demagogy and abdicate their duties to shareholders and policy beneficiaries.

Companies and investors who yield to such pressures will be forced to deal with the consequences long after political fashion has changed, and populists and demagogues have moved on to other targets. They would do well to stick to their guns and state their cases now.