For years, Marc Benioff, CEO of Salesforce, has crusaded for stakeholder capitalism, the idea that business leaders should value the well-being of people and the planet along with the interests of shareholders.
These “woke” beliefs – Salesforce offered to relocate employees concerned about being able to get an abortion in Texas, stopped selling software to retailers that stock military-style rifles and Benioff spoke out against Georgia and North Carolina for passing laws that would allow LGBTQ+ discrimination – have gotten this activist CEO in hot water with conservatives who say he’s sacrificing profits for politics.
But Benioff hasn’t backed off. Last fall, Salesforce sided with Harvard University and the University of North Carolina in a pair of cases before the Supreme Court challenging the practice of considering race in admissions to build diversity on college campuses.
In a 6-3 decision written by Chief Justice John Roberts, the high court on Thursday struck down affirmative action in college admissions.
The decision is limited to higher education and won’t directly affect employers like Salesforce, which are governed by a different statute. But the ripple effects from the ruling could come quickly, starting with a decline in college graduates from underrepresented backgrounds, meaning the loss of “a pipeline of highly qualified future workers and business leaders,” companies from Google to General Electric warned the Supreme Court.
Legal experts say the move to restrict affirmative action could also lead to more challenges in how corporations make hiring and promotion decisions.
What’s more, the affirmative action reversal could emerge as the latest flashpoint in the nation’s culture wars. Observers expect the ruling to embolden attacks on corporate diversity, equity and inclusion initiatives as tensions rise over how corporate America should address lingering workplace inequality.
In response, companies are holding discussions and contemplating changes to diversity programs. Some are second-guessing setting public targets for racial diversity in their executive ranks or running leadership training programs exclusively for underrepresented groups. Others are wondering if they should remove “diversity” from job titles to avoid scrutiny.
But many employers – including Salesforce – say they plan to stay the course.
The company says one of its core values is equality and it has built diversity initiatives from recruiting individuals from underrepresented backgrounds to creating an employee advocacy program for people of color that take into account that talent is spread evenly but opportunity is not.
“We don’t waver,” Salesforce Chief Equality Officer Lori Castillo Martinez told USA TODAY. “Equality is our value and that is something we will continue to focus on, especially in these challenging times.”
Affirmative action decision will increase scrutiny of diversity programs
Coming as conservative groups push back against diversity programs and consumers vent frustrations over corporations becoming more vocal on progressive issues like LGBTQ+ rights, abortion and racial equity, the Supreme Court decision will likely invite greater scrutiny of the strategies companies use to increase diversity, according to Andrew Turnbull, a labor and employment partner at law firm Morrison & Foerster.
Federal law prohibits employers from considering race and other protected characteristics in employment decisions. Diversity, equity and inclusion initiatives, on the other hand, help employers make their workforces less homogeneous and their workplaces more inclusive by casting a wide net for qualified workers from different backgrounds, Turnbull said.
“We may see an increase in challenges to those programs because some employees may incorrectly assume this means that their employers can no longer have workplace affirmative action or DEI programs,” he said.
The debate swirling around diversity programs has increased the possibility that corporations will be hit with discrimination lawsuits – from those who support these initiatives and those who oppose them.
In the decade from 2011 to 2021, the number of reverse discrimination claims filed with the Equal Employment Opportunity Commission dropped from about 4,000 to 2,000 a year, according to data USA TODAY obtained from the EEOC. While white people account for about two-thirds of U.S. workers, those claims made up about 10% of overall race-based discrimination claims.
Lawyers see an uptick in reverse discrimination claims as GOP backlash escalates
But Turnbull says lawyers are seeing an uptick in reverse discrimination claims. Earlier this month, a federal jury in New Jersey ordered Starbucks to pay $25.6 million to a former regional manager after determining that the company fired her because she was white.
As the GOP backlash increasingly targets the private sector, legislative challenges to diversity policies in red states are also proliferating, Turnbull said.
Much depends on how employers respond to the ruling, said Stanford law professor Richard Thompson Ford.
Few employers engage in the type of affirmative action used by selective colleges and universities, according to Ford. And, he says, it’s unclear how much private employers consider race when making employment decisions.
“It is lawful for employers to affirmatively recruit people so that they have the widest range of applicants and pick the most talented candidates,” said Amalea Smirniotopoulos, senior policy counsel at NAACP Legal Defense and Educational Fund. “I don’t think that will change.”
Affirmative action is latest GOP target after CRT and ESG
Corporations have turned to diversity programs to right decades of lost opportunities for Black people and other groups who have been historically underrepresented, especially in leadership roles. Those efforts intensified following the 2020 killing of George Floyd.
Pledges from corporations to address racial inequities drew a sharp backlash, from legislation in GOP-controlled state houses restricting how corporations talk to employees about racism to the targeting of trillions of dollars in investments that take into account ESG, short for environmental, social and governance principles.
If there is any sense in these C-suites, companies will take this as the catalyst, the catapult, the warning they need to get back to not discriminating.
Scott Shepard, director of the National Center for Public Policy Research’s Free Enterprise Project
The Supreme Court ruling is a warning to corporate elites to stop foisting their liberal agenda on the nation, said Scott Shepard, director of the National Center for Public Policy Research’s Free Enterprise Project.
In August, the conservative think tank sued Starbucks executives and directors on behalf of a Starbucks shareholder, claiming that by setting hiring goals for Black people and other people of color, awarding contracts to diverse suppliers and tying executive pay to diversity, the coffee chain is engaging in racial discrimination.
Stephen Miller’s America First Legal has filed complaints with the Equal Employment Opportunity Commission asking for investigations into the hiring and employment practices at companies including Starbucks, McDonald’s and Morgan Stanley.
“If there is any sense in these C-suites, companies will take this as the catalyst, the catapult, the warning they need to get back to not discriminating,” Shepard said.
Affirmative action ruling chilling effect? ‘I’m already seeing this downturn in DEI’
Natalie Gillard, who created Factuality – an employee training tool used by companies such as Google, Nike and American Express – says she’s worried the affirmative action decision will have a chilling effect, much like President Trump’s 2020 executive order banning the U.S. government and federal contractors from teaching employees about systemic racism caused some private employers to pause training.
“I’m already seeing this downturn around DEI efforts in institutions, organizations and corporations,” said Gillard, who has lost business in Florida and Texas where public universities are barred from spending money on diversity programs.
Alvin B. Tillery Jr., director of the Center for the Study of Democracy and Diversity at Northwestern University, says he’s concerned about what conservatives may have planned next. He expects they will double down on efforts to rid the public sector of affirmative action, from government hiring to contracting.
“Supplier diversity programs and federal contracting, that’s the big prize,” said Tillery, founder of the 2040 Strategy Group, which works closely with Fortune 500 clients. “It’s really about taking away set-aside programs and racial equity programs, including at the local government level. Those are things that have a much bigger impact on society than affirmative action at colleges.”
Will big businesses like Apple, Google, Nike and Starbucks back off diversity efforts?
Last fall, some of the nation’s largest companies, including Apple, Google parent Alphabet and Starbucks, filed briefs siding with colleges and universities that consider race as one of the factors in their admissions process.
“Racial and ethnic diversity enhance business performance,” the companies told the Supreme Court. “Research and experience demonstrate that racial diversity improves decision-making by increasing creativity, communication, and accuracy within teams.”
Our clients are coming to us, not saying how do we stop this, but saying, how do we educate our team around why this is still important.
Evelyn Carter, president of diversity firm Paradigm
Will corporate America shrink from diversity initiatives under growing pressure from the political right? Evelyn Carter, president of diversity firm Paradigm, doubts it.
A Bain & Company survey of CEOs showed that 85% of the nearly 300 business leaders view social issues − labor standards, human rights, DEI, health; and product safety − as “urgent” concerns for their companies. When asked about the primary role of their business, 60% said either creating “positive outcomes for society” or “balancing the needs of all stakeholders.”
“Our clients are coming to us, not saying how do we stop this, but saying, how do we educate our team around why this is still important,” Carter said.
Corporations are just starting to see the benefits from the progress they’ve made in diversifying their workforces and leadership, said Lanaya Irvin, CEO of Coqual, a think tank that researches workplace diversity, equity and inclusion.
Data shows that corporate America still has very little diversity, especially at the top.
White men represent 7 in 10 executives at the very top of the nation’s 100 largest publicly traded companies, according to a USA TODAY analysis of named executive officers. In fact, they are even more likely today than their grandfathers to be managers despite a diversifying workforce.
“It’s definitely not time to take one’s foot off the gas or to retrench,” Irvin said.
Nike CEO John Donahoe recently commended Bob Iger for standing up Walt Disney’s values in a spat over LGBTQ legislation with Florida Gov. Ron DeSantis, who announced his presidential campaign late last month.
Corporations should pick their battles but speak out on issues that are “core to who you are,” Donahoe said.
For Nike, that means standing up for the values of racial and social justice, according to Donahoe.
“Our core consumer for the Nike brand, the Jordan Brand, the converse brand, are urban Black and brown communities – that’s where sneaker culture started,” Donahoe said during the CNBC CEO Council Summit last month. “We listen to our athletes and to our consumer about what they care about and they care about racial and social justice and so we view that as core to who we are, core to our identity.”
