Carolina Sanchez – Costco Wholesale is making headlines for more than just its $1.50 hotdog combos. Costco shareholders recently took a decisive stance on diversity, equity, and inclusion (“DEI”) by overwhelmingly rejecting a proposal to assess any risks posed by its DEI practices–98% of its shareholders voted against the proposal. Meanwhile, other major corporations, including Amazon, Meta, and Walmart, have significantly reduced or eliminated their DEI initiatives.
On the first two days of his second term, President Trump signed three Executive Orders aimed at dismantling DEI initiatives. While these Orders primarily target federal agencies and contractors, their ripple effects have left the private sector grappling with strategic and ethical questions: Should companies comply with the new administration’s directives or stand in defiance?
Shareholder activism has surged, with investors increasingly submitting proposals urging companies and boards of directors to take specific actions on DEI. These proposals are typically disclosed to the public through a company’s proxy statement per the Securities and Exchange Commission’s Rule §240.14a-8. This Rule dictates when a company must include a shareholder’s proposal in its proxy statement and identify it as a matter for annual or special shareholder meetings, ensuring transparency and minimizing speculation about a corporation’s position on various issues, including DEI, in the wake of these Executive Orders.
The key question confronting these corporations is how to navigate the intersection of these Orders, the fight to uphold the Civil Rights Act of 1964, the need to maintain a positive public image, and, ultimately, how to protect their bottom line by maximizing shareholder equity. Consumer data suggests that inconsistent corporate stances on these issues can drive sales down.
Target’s shifting approach–first promoting, then scaling back DEI–has sparked an ideological crisis, impacting its cultural relevance and contributing to a steady stock price decline. Overall, Target’s stock dropped 12% after the corporation announced their DEI rollback. This reversal has also triggered significant backlash, including a 40-day consumer boycott.
By contrast, Walmart began rolling back DEI initiatives even before President Trump’s Executive Orders, responding to pressure from conservative activists and the Supreme Court’s decision overturning affirmative action. Unlike Target, Walmart appears to have weathered the controversy with minimal impact, as its sales remain largely unaffected by the broader push against “illegal DEI.”
Costco, which has maintained a strong support for DEI, has seen increased sales since the Trump administration took office, with Hispanic and Latino households driving more than one-third of its gains–nearly double what demographic representation alone would predict. In year-to-year visits, Costco saw an increase of 7.7 million visits in just a four-week period.
While multiple factors, including product pricing, can influence corporate sales, it is evident that consumers closely watch how companies respond to shifting policies.
At times, it may seem as though lawmakers wield unchecked power, shaping policies that affect millions. However, consumers hold significant influence. Regardless of one’s stance on DEI, one reality is clear: corporations respond to financial pressure. Recent months have only reinforced that consumers expect companies to take a stand, making their values known.
From there, the free market allows consumers to decide where to spend their hard-earned money. By consciously choosing where to shop, consumers send a powerful message about the laws and policies enacted by the new administration. Of course, these decisions do not occur in a vacuum. Rising inflation and tariffs complicate these financial decisions. Yet history has shown that corporations cannot afford to ignore widespread boycotts and consumer-driven movements. Even if boycotts do not always succeed in the long run, they often leave a lasting impact. Ultimately, the bottom line dictates corporate action, giving consumers a powerful voice that businesses would be unwise to ignore.
