Faced with backlash, some business leaders are going “under the radar” with DEI

Over the past two years, as Ishan Bhabha and his colleagues at the law firm Jenner & Block prepared briefs for the affirmative action case that the Supreme Court ruled last year, Mr. Bhabha realized: if higher education institutions like Harvard were the first to be targeted lawsuits over diversity, equity and inclusion, the boardrooms of American companies were likely next.

Mr. Bhabha began working with dozens of Fortune 500 companies to evaluate their diversity programs and ensure they were on solid legal footing if they were to be sued.

Proponents of corporate diversity, equity and inclusion programs, commonly referred to as DEI, argue that they are important for hiring and retaining people of color. Critics now claim that some such programs can unfairly exclude white and Asian people from recruitment processes.

In recent months, hundreds of companies have reexamined these initiatives following a series of challenges to diversity programs: the threat of lawsuits in the wake of the Supreme Court's decision to ban admissions to race-conscious universities, criticism of DEI initiatives from some high-profile business leaders , and a wave of layoffs in the tech industry that hit DEI teams hard.

This setback — which comes after more than two dozen states considered or passed new laws last year targeting DEI initiatives — has had a chilling effect on some DEI offices, according to diversity consultants.

“When the economy is booming and politics is receptive, we see a lot of growth in diversity programming,” says Frank Dobbin, a DEI expert at Harvard and author of the 2022 book “Getting to Diversity.” in the political winds – which is happening now – or of a recession, we have seen cuts.”

The response, said Dr. Dobbin, has prompted some HR professionals to keep their DEI efforts “under the radar.” At recent conferences he has attended, Dr. Dobbin added, business leaders have discussed how to approach DEI “in a less in-your-face” way.

Some have explored how to move away from initiatives that attract a lot of public attention, such as mandatory anti-bias training, and instead focus on lower-profile DEI strategies, such as diversity task forces that bring together leaders from different business departments.

“If companies lighten up on things that are ineffective, that could be a good outcome,” said Dr. Dobbin, noting that mandatory anti-bias training can sometimes even worsen bias. “But I am afraid that the baby is going out with the bathwater.”

So far, few companies appear to have scaled back their programs because of the Supreme Court's ruling. Three-quarters of employers surveyed by Littler Mendelson PC, the labor law firm, said they had not changed their approach to DEI because of last year's ruling, and only 1 percent reported a significant decline in their efforts, according to a survey published this year . month.

And some executives say they are doubling down, like Crystal Castille-Cromedy, who leads DEI strategy for Hines, one of the world's largest real estate companies. Ms. Castille-Cromedy joined the company in June 2020, days after the killing of George Floyd, and has overseen a number of diversity efforts, including the creation of a mentorship program for underrepresented groups in the real estate industry.

Mr. Bhabha, a partner at Jenner & Block and chairman of the firm's DEI Protection Task Force, said he had “a number of clients who said, 'Look, if I get sued for this and I have to be the face of the defense of DEI against a conservative backlash, I would be happy to do that.'' But he said: 'The vast majority of my clients don't fall into that category. They think, 'We'd like to keep our heads down.'”

The American Alliance for Equal Rights, a conservative nonprofit dedicated to challenging race-based policies, last year sued a handful of law firms over their diversity grant programs, arguing that the programs discriminate against white and Asian applicants.

American Alliance founder Edward Blum also founded Students for Fair Admissions, the group that sued Harvard over its affirmative action policies and won.

“These lawsuits have sent a strong message to corporate America: the law firms you turn to for DEI legal advice are themselves breaking the law,” Mr. Blum said.

American Alliance has filed lawsuits against the law firms Perkins Coie, Morrison Foerster and Winston & Strawn. These companies have all since opened their diversity grants to candidates of all races and backgrounds, and Mr. Blum's group has dropped the lawsuits.

“Following the Supreme Court's landmark decision striking down race-conscious affirmative action in college admissions, we have overhauled our programs,” Winston & Strawn said in a statement. Perkins Coie said in its statement that the program's revised criteria would continue to ensure the firm hires attorneys with a diversity of backgrounds and experiences.

Morrison Foerster said it was working on opening up the fellowship even before the lawsuit.

In addition to the threat of lawsuits, some prominent business leaders have recently criticized diversity programs. Billionaire financier Bill Ackman wrote one essay this month in The Free Press, following Claudine Gay's resignation as president of Harvard, criticizing what he said was “the penetration of DEI ideology into the corporate boardroom.” Elon Musk wrote in a post on X: “Discrimination based on race, which is what DEI does, is literally the definition of racism.” (Billionaire investor Mark Cuban, meanwhile, wrote on X that “DEI-Phobic companies' loss is my gain.”)

Industry leaders who have been critical of specific types of diversity programs argue that broad criticism of DEI can be counterproductive and distract from meaningful efforts to reform corporate diversity initiatives.

“I've criticized things like our relative lack of metrics, the relative lack of accountability, and the fact that leaders can release a DEI statement and otherwise do nothing,” said Lily Zheng, a DEI strategist and author of “ Reconstructing DEI ” Mx. . Zheng sees criticism of racial quotas as aimed at “a stooge of DEI”

In 2020, following a wave of protests for racial justice in the wake of the killing of George Floyd, corporate DEI programs received an outpouring of support and hundreds of employers stepped forward to announce new diversity initiatives. In that year alone, companies spent an estimated $7.5 billion on DEI-related efforts. But some DEI leaders say the attention and investment hasn't been sustained since then.

“It's a sugar rush phenomenon,” says John Amaechi, a retired basketball player who now works with companies on DEI strategy. “It creates a tremendous amount of energy, followed by a pullback.”

In some cases, DEI programs have been hit hard by job losses. RevelioLabsa workforce database, published a study last year that looked at 600 companies that have laid off employees since 2020. It found that the turnover rate for people working in DEI was almost twice as high as for employees in non-DEI roles.

Many executives still claim that their efforts to recruit diverse employees contribute to company performance. For example, Armughan Ahmad, the CEO of artificial intelligence company Appen, says a diverse talent pool allows the company to build products trained on diverse users, preventing racial bias in AI algorithms.

Many business leaders share that view.

“Even in places where anti-DEI legislation is being passed, this isn't about somehow relieving companies that they don't have to do this work,” said Jensen Harris, co-founder of Textio, an AI workforce platform which is used by more than 1,000 companies. “It's them thinking, 'Okay, DEI work is still very important, so how do we get around this legislation?'”

The Supreme Court's recent ruling on race-conscious admissions policies does not directly apply to most employers. The decision focused largely on Title VI of the Civil Rights Act of 1964, which covers institutions that receive federal funding and does not apply to most private companies. But many employers worry that their DEI initiatives could be legally challenged under Title VII, which deals with labor relations, or under Section 1981 of the Civil Rights Act of 1866, which covers contracts.

Kenji Yoshino, director of the Meltzer Center for Diversity, Inclusion and Belonging at NYU School of Law, advises executives at Fortune 500 companies to code their DEI programs as green, yellow or red. A red program indicates an initiative that poses a high risk of potential litigation, such as a hiring process that favors candidates of color; on the other hand, a program that provides mentorship at scale to everyone in the company can be categorized as green.

Mr. Yoshino noted that some DEI critics have a limited view of what the programs consist of. Many corporate diversity programs go beyond recruitment processes to focus on mentoring, training and career development.

“The pessimists say, 'This is a terrible moment for DEI, DEI is over, the sky is falling,'” Mr. Yoshino said. “I want to ask people what they think DEI actually is.”