Seven days into the second Trump administration, after a raft of executive orders including several targeting “DEI programs,” we published a piece I authored on this blog titled “In Defense of DEI.” In it, I lamented, “the remarkable and rapid capitulation of many corporations to the new administration’s anti-Diversity, Equity, and Inclusion (DEI) crusade.”
The post went on to explain what the pursuit of diversity, equity, and inclusion actually means — word by word — and why, when done right, that effort is essential both morally and from an effectiveness point of view (not to mention totally legal and in some cases even legally-mandated). I acknowledged that, like anything, DEI can be pursued ham-handedly but argued that companies, as well as foundation and nonprofit leaders, should stand firm for diversity, equity, and inclusion even as they seek to continually improve the way they pursue these goals.
More than 20 months later, it’s possible to assess what actually happened, in terms of corporate performance. Did those companies that abandoned DEI actually act rationally, because they benefited relative to those that resisted the administration’s pressure?
The answer is no. Newly published academic research by Hanna Folsz and Jacob M. Grumbach, currently of Harvard and UC Berkeley, respectively, demonstrates that those companies — like Costco, Delta Airlines, and Dollar Tree, among others — that stuck with their DEI programs “performed just as well as compliant firms, both in terms of stock market returns and revenues.” Their findings suggest that “large firms can resist administrative pressure without incurring significant financial costs.”
I predicted in my January 2025 post that companies that sustained thoughtful DEI programs would, in the long run, out-perform those that didn’t. I still believe that will ultimately be the case. But, for now, even the short-term lack of difference in performance between those that stuck with DEI and those that abandoned them is a massive finding, calling into question the analyses that led so many companies to abandon DEI.
Folsz and Grumbach write:
“The second Trump administration has used institutional intimidation to pressure businesses into compliance. Firms are among the most consequential non-state actors in market democracies, and coordinated pushback from them could pose an important obstacle to the consolidation of executive authority. Yet organized resistance by major civil society actors has been surprisingly rare … One reason may be that firms expect significant economic penalties for defying executive pressure. Yet, our findings imply that the relative paucity of resistance may stem from overestimation of its financial costs.”
If companies capitulating was deeply disappointing, foundations walking away from their DEI commitments was even more baffling. Endowed, private foundations, after all, don’t have customers to worry about angering. They also have the resources to fight legal battles. And, of course, they are mission-driven.
Yet I know of foundations that quietly shut down or pared back DEI work and racial equity-focused grantmaking in the early months of 2025.
Others stood firm and some even doubled down or expanded their DEI efforts — and they deserve credit. I have mentioned some of those foundations on this blog in recent posts.
Operating nonprofits, in fairness, are in a tougher position, especially if they receive federal funding. I can’t judge those leaders and boards that have had to make the heart-wrenching choice between backing off their public commitment to their values and the potential loss of essential funding to deliver vital programs.
But I hope that those foundations and nonprofits that acted merely out of fear, self-protection, and risk aversion will now reconsider. Whatever problems there were with certain DEI efforts (or with what Representative Alexandria Ocasio-Cortez recently referred to as “Woke 1.0”), it’s simply not possible to look honestly at the history of this country, or our present realities, and conclude that less, rather than more (and more effective) effort is required when it comes to diversity, equity, and inclusion.
It’s not too late to reconsider and join with those foundation and nonprofit leaders who have been speaking and acting in pursuit of diversity, equity, and inclusion.
I believe what I wrote in January 2025 is only more true today: “It’s essential to stand firm in the face of those who are seeking to intimidate us from doing what is right and just and, more than that, to speak out and speak up. We must do so for the sake of our country, for the sake of our core values (the very ones so many of us touted widely in 2020), and for the sake of excellence and effectiveness.”
Phil Buchanan is president of the Center for Effective Philanthropy, author of “Giving Done Right: Effective Philanthropy and Making Every Dollar Count,” and host of the Giving Done Right podcast which will start its sixth season September 17.
