Walmart’s (WMT) retreat from diversity, equity and inclusion, also known as DEI, could ripple through the industry as other companies reassess their efforts amid conservative backlash.
DEI gained widespread acceptance in 2020 following the murder of George Floyd, but the concept goes back further. Now, America’s largest employer – and Yahoo Finance’s 2024 Company of the Year – is reframing its focus on inclusion and belonging.
In late November, Walmart confirmed to Yahoo Finance that it will no longer use the term DEI or participate in the corporate equity rating system created by the Human Rights Campaign (HRC). It plans to close its $100 million Center for Racial Equity, among other actions such as moving away from the term Latinx.
The retailer is still “the same,” Walmart’s chief people officer Donna Morris told Yahoo Finance in a Dec. 2 interview.
“Our values do not change at all, the specific initiatives or conditions change over time,” she continued. The company began moving to “belonging” in early 2023, although Morris said the move was not due to pressure from any specific group.
“When you’re partly talking about diversity, equity and inclusivity, there can be communities, and often the largest communities, that take a step back and say, ‘Gosh, I’m not sure I’m even involved,’” Morris explained the decision.
After Floyd’s killing, a “majority” of companies felt the need to ramp up their DEI efforts, but now they are reevaluating. “What we saw and felt was really important is that everyone was part of that work, and that’s why we really made the transition,” Morris said.
President-elect Donald Trump’s plans to target DEI policy will likely further hasten its decline. After the Supreme Court struck down affirmative action at colleges in June, a plethora of companies followed suit.
Lowe’s (LOW), Tractor Supply (TSCO), John Deere (DE) and Harley-Davidson (HOG) have scaled back their DEI policies. The University of Michigan ended required diversity statements.
Recently, a federal appeals court blocked Nasdaq’s requirement that publicly traded companies have at least one woman, person of color or LGBTQ member on their boards.
Conservative activist Robby Starbuck, whose mission is to “eliminate wokeness from the business world and the country,” told Yahoo Finance that Walmart’s move was his first post-election “win.”
“Companies must not only consider the financial consequences… [but] Trump is now president,” Starbuck said. “It will make them more likely to change quickly rather than persevere.”
Walmart investors apparently shrugged off the news.
Shares are up 4.6% since Starbuck announced Walmart’s DEI change to X (Walmart did not release an official statement). The stock is up as much as 77% in 2024 after posting a string of earnings and strong growth.
Based on a survey this year of 400 C-suite and HR leaders, executive search firm Bridge Partners found that leaders said the biggest benefit of DEI efforts is a positive impact on recruitment, hiring and retention.
Less than 40% of respondents said this leads to sales and revenue growth, while 22% said it improves the stock price.
Some companies are convinced of the merits of DEI.
Elf Beauty’s (ELF) splashy campaign, called ‘So Many ‘Dicks’, is part of its goal to double the number of women and diverse members on corporate boards by 2027.
The board consists of 78% women and 44% diverse directors.
“There is a strong correlation between board diversity and results,” Tarang Amin, CEO of elf Beauty, said of Yahoo Finance’s Market Domination. The makeup retailer recently posted its 23rd consecutive quarter of net sales growth and market share gains.
Over the past five years, shares are up about 780%, easily surpassing the S&P 500’s 90% gain.
“Companies with above-average board gender diversity see a 15% higher return on equity (ROE) and 50% lower earnings risk a year later compared to their less diverse peers,” according to Bank of America data cited in a study that elf conducted with North Carolina A&T University.
Bloomberg Intelligence’s Women Capital 2025 report shows that companies with a “higher number of women on their boards have achieved 2-5% higher returns in developed markets and 2-6% lower volatility in emerging markets.”
Adeline Diab, Bloomberg’s chief ESG strategist, said the results “suggest that diversity is gaining broader recognition as a quality signal that can strengthen investment decisions and improve board dialogue.”
Similarly, a McKinsey report on 1,265 companies found that diverse management teams led to a greater likelihood of financial outperformance.
On the other hand, research by University of North Carolina professors Sekou Bermiss and John Hand and Jeremiah Green of Texas A&M suggests that diversity in top management has not led to measurable financial differences.
“We found no truly statistically reliable correlations between today’s ‘measure of diversity’ among executives [both in terms of race and gender] and the following one year of solid financial performance,” Hand told Yahoo Finance.
“It was a little surprising to find very little positive and very little meaning one way or another,” Bermiss said. He added that while there are certain companies that “promote diversity and generate profits,” the effect disappears when we look at the average of the entire S&P 500.
Morris argued that Walmart’s decision will help the company “attract, develop and retain the very best talent,” creating the “broadest workforce.”
“The activities they are reversing [Walmart] doing it internally… will have a knock-on effect on their external sales,” Tory Clarke of Bridge Partners told Yahoo Finance by phone.
The retailer could lose talent, and the workforce of some stores will not reflect the community they serve, impacting innovation, culture and customer experience.
Ethan Peck of the conservative think tank National Center for Public Policy, who questioned Nasdaq’s diversity rules that led to the court ruling, said dropping DEI will benefit business stakeholders in the long run.
Hiring “the best people for the job over time — that’s prioritizing excellence over ideology,” he said. “That will make the company more productive, efficient and innovative. That will be reflected in the stock price over time.”
Dartmouth professor Adam Kleinbaum said that, like Walmart, many companies can rebrand their DEI efforts and embed them within an HR function.
“Inclusion, which makes people feel valued and an important part of the organization… which leads to better collaboration… better retention, which lowers HR costs,” Kleinbaum said by phone .
Walmart may have been the newest, but it won’t be the last.
“It’s pretty clear that we’re at a moment in history where the pendulum is starting to swing back the other way,” Kleinbaum said.
Azoria Partners founder James Fishback is gearing up to launch a new ETF in early 2025 under the ticker SPXM. It will focus on ‘eliminating these anti-meritocratic laggards’.
While Fishback did not reveal any companies that will be included in the index, he said Starbucks’ (SBUX) hiring targets are the reason the company will not be included in the fund. In 2022, Starbucks aimed to achieve Black, Indigenous, and People of Color (BIPOC) representation of at least 30% across all business levels and at least 40% of all U.S. retail and manufacturing positions by 2025. the goals.
However, in March, Starbucks eliminated executive compensation packages tied to DEI efforts.
Morgan Stanley’s Calvert US Large-Cap Diversity Research Index focuses on DEI. The index, launched in June 2020, returned 25.82% over the past year. Last year it launched an ETF (CDEI).
Other funds that specialize in DEI or ESG include BlackRock’s iShares Refinitiv Inclusion and Diversity UCITS ETF (OPEN.L) and Impact Shares’ NAACP Minority Empowerment ETF (NACP).
Morgan Stanley, along with Calvert, said it is evaluating companies within its workforce and DEI policies to find companies worthy of inclusion in the Calvert index. Each company is categorized as a DEI Leader, Improver, Neutral, or Laggard. Leaders and improvers are included in the fund.
For example, chipmaker AMD (AMD) was considered neutral in 2023, but as the team sought to increase gender diversity among new hires and its talent pipeline, it now ranks as an improver in the index.
Anthony Eames, director of responsible investing at Calvert, said interest in the index “has remained steady”.
“There is a precedent for investors to vote with their dollars, if they so choose. This is an interesting investment concept. … More people are discovering and getting energized by having a piece of their portfolio, sort of leverage on this theme.”
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Brooke DiPalma is a senior reporter for Yahoo Finance. Follow her on Twitter at @BrookeDiPalma or email her at bdipalma@yahoofinance.com.
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