Costco rejects proposal to evaluate risks of DEI policy

January 24th, 2025

Costco shareholders have voted against a proposal urging the wholesaler to assess any potential risks associated with its diversity, equity and inclusion (DEI) practices and policy.

Preliminary results disclosed by Costco executives at the company's annual meeting revealed that over 98% of shareholders rejected the proposal, which was initially submitted by the National Center for Public Policy Research’s Free Enterprise Project (FEP).

The FEP argued that companies with DEI policies face risks of litigation, reputational damage, and financial harm, thereby shifting these financial risks onto shareholders.

However, Costco’s board of directors unanimously recommended that shareholders reject the proposal, stating that the company’s commitment to fostering respect and inclusion is “appropriate and necessary.”

In fact, Costco’s board highlighted that its DEI policies contribute positively to the company’s financial performance. For example, it noted that ensuring all employees feel valued and respected in the workplace supports efforts to attract and retain talent, which helps the business succeed.

The board also said that maintaining a diverse supplier base, with an appropriate focus on supporting small businesses, fosters creativity and innovation in the products and services Costco provides to its members.

Though, the board added that, alongside compliance with the law, the benefits of DEI go beyond delivering financial rewards to Costco’s shareholders.

It said: “Our focus on diversity, equity and inclusion is not only for the sake of improved financial performance but to enhance our culture and the well-being of people whose lives we influence.”

In response to Costco’s rejection of the proposal, Stefan Padfield, executive director of FEP, said: “While we are disappointed by the result, we are also not surprised, given the forces aligned against us. These forces include conflicted asset managers and proxy advisers that profit from ESG and DEI.”

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