The Right-Wing Crusade Against DEI Isn’t Actually Working

The backlash to corporate America’s embrace of diversity, equity, and inclusion policies didn’t take very long. Last year, Google and Meta set the tone for Silicon Valley when they started cutting DEI positions and pulling back on investment. Billionaire investor Bill Ackman led the crusade against it at Harvard and on Wall Street, calling it the “root cause” of antisemitism on campuses. Governor Ron DeSantis passed the so-called Stop WOKE Act, which not only barred teaching topics related to race in schools but also barred businesses from using diversity-training programs. (Last month, a federal court spiked the law, saying that it violated businesses’ First Amendment rights.) Even supporters have withered on it. While the Human Rights Campaign’s corporate equality index shows that most Fortune 500 companies have some form of DEI policies, its critics on the left have countered that much of it is merely lip service.

A general rule in business is that, if there is a trend, someone will find a way to capitalize on it, and in this case, that somebody is Robby Starbuck. A conservative documentarian who once directed music videos for the likes of Gucci Mane and Snoop Dogg, he started targeting corporate DEI policies this summer, arguing that they’re bad for business. This week, Starbuck took credit after Lowe’s and Ford ended some of their DEI-related commitments, including working with minority-owned suppliers and donating to LGBTQ Pride events. That brought the tally up to six companies that have buckled after his social-media campaigns, after Harley-Davidson, Tractor Supply Co., Jack Daniels’s parent company, and John Deere pulled back. The problem for Starbuck, though, is that his crusade is showing exactly the opposite of what he is arguing and that at the very most, DEI policies are benign and have no effect on how much a company makes or how well it does.

Whatever Starbuck’s real motivations are, he dresses up his argument so that it appears to be one of dollars and cents. “If DEI and supplier diversity quotas were making you money, do you really think Tractor Supply and now Harley-Davidson would drop those initiatives? I don’t think so. We all know the DEI is not making you money,” he said in one of his videos. This is the kind of argument Wall Street might be amenable to if it were true. After all, corporate policies affect how companies spend money, which is what hedge funds and money managers care about. If money is not being used efficiently, investors tend to dump their shares and vice versa. But a strange thing has happened. Perhaps unwittingly, Starbuck has gone after companies that all happen to trade on Wall Street, giving the public a window into how the investor class thinks about his victories. So far, the reaction has been a shrug. After he posted about Ford’s changes on Wednesday, the stock essentially didn’t move after falling in early-morning trading. Lowe’s shares fell slightly but held steadier than Home Depot’s. The stock movements for the rest, coming after Starbuck’s social-media posts, are all slight movements up or down that show little to no interest from investors.

In fact, Starbuck may be getting it all backwards. In a paper published in June, Hoa Briscoe-Tran, an assistant professor of finance at the University of Alberta, found that Wall Street had punished Florida-based companies after DeSantis’s Stop WOKE Act was first announced. The change in the law, and subsequent drop in stock price, was a “natural experiment,” he later wrote in a post for the Columbia Law School’s Blue Sky blog. The reasons why aren’t exactly straightforward. Policies that diversify executive ranks have no real correlation to higher profits, studies show. (They don’t show lower profits, either.)

“The idea that DEI brings more perspectives, and that improves problem-solving and the collection of knowledge and expertise — that is actually documented from psychology field experiments or lab experiments. But on a large scale, at the company level, there is no evidence,” Briscoe-Tran said in an interview. “A lot of research also documents that when companies have a lot of diversity [among employees], they disagree with each other more often, and they reach conclusions slower. So in the short run, diversity and inclusion could hurt the company in terms of speed, you may slow down.  But in the long run, all these benefits may accumulate.”

Dropping DEI policies also creates an economic advantage for companies that retain their policies and want to promote from rivals, according to Briscoe-Tran. “A lot of minorities, when they face backlash from a company changing their policies, how likely are they going to speak up?” he said. In essence, this is causing a company to look like it is doing the inverse of what it intends. By ending DEI policies, companies create a perception that they are restricting whom they hire, mostly to white men. That might give non-white employees who work at, say, Lowe’s more of a reason to work at Home Depot and for job applicants to think twice about sending a résumé for an open position.

In an e-mail, Starbuck appeared to be putting some of the blame on DEI policies on Wall Street’s biggest investors. “Sanity will rule again and the customer will be king, not BlackRock, not the HRC, not State Street and not Vanguard,” he said. “Companies need customers to walk through their doors to buy products and it appears that our movement has done an effective job of reminding them of that.” (In his research, Briscoe-Tran notes that it’s smaller investors, rather than giants like BlackRock, who are more likely to dump company shares after a change in DEI policies.) He also claimed that both John Deere and Tractor Supply were down during his campaigns, but recovered after. “Clearly rejecting wokeness doesn’t crash your stock price!”

But there is, probably, a better reason why Wall Street has not reacted — and that is that Starbuck’s supposed wins don’t add up to much. Ford’s biggest change, for instance, amounted to a change in its “employee resource groups” for underrepresented groups, which will now be open to all employees. At Jack Daniels, the changes may be even smaller. Starbuck claims that the liquor company changed how it gave out bonuses, trained employees in diversity, and worked with diverse suppliers after his crusade. But the actual wording from the company says nothing like that — it’s just mushy corporate-ese that makes vague promises to change “ambitions” and “ensure” that bonuses are tied to business performance. (It also stopped contributing to the Human Rights Campaign’s index — about as de minimis as you could get.) In a follow-up email, Elizabeth Conway, a spokeswoman for Jack Daniels’s parent company, Brown-Forman, told me that its change in DEI policies has had “no impact on jobs.” To translate: The changes here amount to mere lip service.