What Trump’s War on DEI Means for Business

Summary

WSJ What’s News: "What Trump’s War on DEI Means for Business" – Detailed Summary

Release Date: February 2, 2025
Host: Lou Vargas
Guest Speakers: Lauren Weber (Wall Street Journal Reporter), Callum Borchers (Journalist, On the Clock Columnist)

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Introduction

In the February 2, 2025 episode of "WSJ What’s News", hosted by Lou Vargas, the Wall Street Journal delves into the ramifications of former President Donald Trump's administration's aggressive stance against Diversity, Equity, and Inclusion (DEI) programs within the U.S. government and its broader impact on American businesses. The discussion highlights the swift policy changes introduced by Trump, the ensuing corporate reactions, and the potential future landscape of DEI in the workplace.

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Trump’s Executive Order Against DEI

Lauren Weber opens the conversation by detailing President Trump's immediate actions upon taking office. Just hours after his inauguration, Trump signed an executive order denouncing DEI initiatives as "illegal and immoral."

• Key Actions:
  • Shutting Down DEI Programs: All DEI efforts within federal agencies were halted, leading to chief diversity officers and DEI teams being placed on leave with expectations of layoffs. (00:32)
  • Impact on Federal Contractors: The executive order extended to federal contractors, encompassing a vast array of companies from tech giants like Microsoft and Boeing to smaller suppliers. Approximately one in four workers is employed by a federal contractor, indicating widespread implications beyond the government sector. (01:57)

Lauren Weber emphasizes the administration's stance that discrimination no longer exists in the traditional sense, positing that DEI programs now primarily disadvantage white men. This perspective has fueled the push to dismantle existing DEI frameworks.

• Notable Quote:
  “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.” – Lauren Weber (02:45)

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Legal and Corporate Repercussions

The discussion transitions to the legal underpinnings influencing the DEI debate, particularly referencing the 2023 Supreme Court ruling on affirmative action in university admissions.

• Connection to DEI:
  While the ruling primarily targeted educational institutions, it set a precedent affecting workplace DEI initiatives by challenging any programs perceived as granting preferences based on race or gender. This has emboldened conservative efforts to eliminate similar practices in the corporate sector. (03:16)

Ken Thomas, a White House reporter, contributes by sharing a clip of an email sent to federal workers. The email admonishes agencies against disguising DEI programs under different names and warns of adverse consequences for non-compliance within ten days. (04:22)

• Impact on Businesses:
  Companies, especially federal contractors, face increased scrutiny and potential legal liabilities if their DEI initiatives are perceived as discriminatory. This has led legal teams within corporations to reassess and often curtail their DEI efforts to avoid investigations. (05:10)

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Corporate Responses to DEI Rollback

Lauren Weber and Callum Borchers discuss how prominent companies are responding to the administration’s DEI rollback:

• Policy Adjustments:
  Companies are differentiating between benign DEI activities, like heritage month celebrations, and those perceived as granting preferences, such as mentorship programs for women or diversity-targeted executive bonuses. The latter are being reevaluated or discontinued to mitigate legal risks. (05:42)

• Examples of Corporate Actions:

  • Uber: Altering compensation goals previously tied to DEI targets.
  • Target: Dropping DEI goals, including initiatives to support black suppliers.
  • Costco: Standing firm against conservative pressures to dismantle their DEI programs, emphasizing their legal compliance and the importance of their initiatives. (06:35 - 11:01)

Notable Quote:
"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." – Callum Borchers (07:39)

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Employee Perspectives and Workforce Impact

Callum Borchers provides insights into how employees are reacting to the DEI rollback:

• Mixed Reactions:

  • Disappointed Workforce: Many employees feel that DEI initiatives have been crucial for progress and are disheartened by their removal.
  • Supportive Segment: A significant portion believes DEI was detrimental to their careers, aligning with findings from a Pew Research Center survey where over a third of Americans view DEI as unfavorable to white men.
  • Cautiously Optimistic Group: Some employees advocate for DEI principles but recognize the need for reformulate implementation methods, viewing the administration's actions as an impetus for necessary changes. (07:39 - 09:48)

• Statistical Insights:
  An UNC Chapel Hill and Texas A&M study highlighted a 65% increase in black executives in the S&P 500 from 2020 to 2023. However, this growth represents only a marginal rise in overall executive representation, sparking debates over the adequacy and effectiveness of DEI programs. (09:40)

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Future of DEI in Corporate America

Callum Borchers and Lauren Weber offer prognostications on the trajectory of DEI in the United States:

• Callum Borchers:
  Optimistic that DEI principles will persist, albeit under different frameworks. He suggests that companies will increasingly align diversity initiatives with business objectives to attract top talent, despite changes in terminology and strategy. (12:36)

• Lauren Weber:
  Predicts a short-term focus on specific areas like veterans' employment and opportunities for people with disabilities. She notes that DEI is a fluid social issue, subject to cyclical shifts influenced by external events and evolving legal interpretations. (13:10)

Notable Quote:
"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." – Callum Borchers (12:36)

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Conclusion

The episode concludes with Lou Vargas summarizing the key insights from both guests. Despite the aggressive rollback of DEI programs under the Trump administration, there remains a significant undercurrent within corporate America advocating for diversity and inclusion, albeit through revised approaches. Companies like Costco exemplify resistance to dismantling DEI efforts, signaling that the principles may endure under transformed frameworks. The future of DEI appears poised for adaptation rather than obsolescence, shaped by legal landscapes, corporate strategies, and evolving societal values.

Final Thoughts:

• Corporate Resilience: While terminology and specific initiatives may shift, the fundamental need for diverse and inclusive workplaces is likely to persist.
• Employee Advocacy: The workforce remains divided, with passionate support and opposition influencing corporate policies.
• Evolving Strategies: DEI programs may become more integrated with business goals, focusing on tangible outcomes rather than discretionary initiatives.

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Producers: Anthony Banci and Christina Rocca
Contributing Editors: Scott Salloway and Chris Zinsley

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This summary encapsulates the critical discussions and viewpoints presented in the podcast, providing a comprehensive overview for those who have not listened to the episode.

Transcript

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[Lou Vargas]

Hey, what's news, listeners? It's Sunday, February 2nd. I'm Lou 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 US Government are rippling across American corporations. And we'll also what changes might be coming to your workplace as a result. Alright, let's get right to 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 agency and in the process demonstrating immense public waste and shameful discrimination. In a few minutes, we'll speak to Wall Street Journal on the Clock columnist Callum Borchers. 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.

[Lauren Weber]

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 supplied 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.

[Lou Vargas]

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?

[Lauren Weber]

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.

[Lou Vargas]

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.

[Ken Thomas]

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.

[Lou Vargas]

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.

[Lauren Weber]

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 defensive, wants to be the target of a civil investigation.

[Lou Vargas]

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.

[Lauren Weber]

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 innocu. 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.

[Lou Vargas]

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.

[Lauren Weber]

Exactly.

[Lou Vargas]

All 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. Well, 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 Borchers to join this discussion. Callum, how is the corporate DEI pullback going over at companies? You've covered this now for several years.

[Callum Borchers]

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.

[Lou Vargas]

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.

[Callum Borchers]

Yeah. Some of this is just a result of, like, 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 that causes people to shut down. It actually doesn't foster the more inclusive, warm environment that people are going for. 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 afoul of the, then it's maybe not a strategy that is going to work in the long run.

[Lou Vargas]

And in terms of what this means for workers. Callum, have you spoke to folks who've been processing this sort of reversal in and around them in the workplace?

[Callum Borchers]

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 and M together. They looked at how many black executives are there in the S&P 500, for example, and they noted that between 2020 and 2023, there was a huge surge. It went up by 65%. So 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.

[Lou Vargas]

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?

[Lauren Weber]

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 at Davos, stood up and, and defended their programs.

[Callum Borchers]

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 Teneo, the consulting firm, and 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.

[Lou Vargas]

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?

[Callum Borchers]

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.

[Lou Vargas]

And Lauren, what will you be watching in, say, the next year?

[Lauren Weber]

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 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.

[Lou Vargas]

Journal reporter Lauren Weber covers workplace issues and employment for us. And Callum Borchers writes the Journal's on the Clock column. Lauren, Callum, thank you both.

[Lauren Weber]

Thanks for having me.

[Callum Borchers]

Glad to be with you, Luke.

[Lou Vargas]

And that's it for what's new Sunday for Sunday, February 2nd. Today's show was produced by Anthony Banci 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. So until then, thanks for listening.