Business school teaching case study: how can managers navigate the changing mood on DEI policies?

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Since late last year, employers in the US and beyond have started rolling back their diversity, equity and inclusion policies. This is deepening divisions in an already polarised debate and posing important challenges for managers.

Ford, John Deere, Walmart, McDonald’s, Accenture and Meta are among those to have publicly diluted or terminated DEI policies. Of the top 400 companies in the S&P 500 index, 90 per cent that have filed an annual report since Donald Trump’s election have cut at least some references to DEI and many have ditched the term entirely. The scale and timing mark an abrupt reversal from a broad cross-industry movement following the murder of George Floyd in 2020, when companies rushed to make DEI efforts a central pillar of their strategies. 

The actual changes being made are more subtle than the headlines, however. In many, but not all, cases, companies are repositioning parts of their policies, rather than ditching them altogether. But the recent rollbacks have sent a clear signal to society about the valuation of diversity and inclusion on Wall Street and at the top levels of management. 

There is already some evidence of consequences, including a reduction in the number of companies offering programmes for the advancement of women. The Association to Advance Collegiate Schools of Business, a body that accredits more than 1,000 business schools around the world, recently purged diversity and inclusion from its reporting standards, in a move sure to affect the next generation of managers, entrepreneurs and investors.

Opponents of the most extensive DEI policies tend to equate them with “wokeness” and a “toxic” work environment. Such policies are painted as fundamentally unfair and inconsistent with meritocratic principles. They point to the lack of enthusiasm and potential boycotts from stakeholders (such as customers and investors) that do not want to be associated with products or services from companies with extensive DEI policies.

For example, farm equipment retailer Tractor Supply said in June 2024 it had “heard from our customers that we have disappointed them” and pledged to “retire” its diversity goals and climate pledges. Opponents of DEI have argued that DEI can lead to deteriorating shareholder returns.

The critics also question the legality of some initiatives, at a time of reverse discrimination lawsuits following the US Supreme Court’s decision in June 2023 to strike down affirmative action in higher education. Meta referred to “a shifting legal and policy landscape” when reversing its DEI policies in January 2025. 

However, proponents of more far-reaching DEI efforts make the case for fair representation. They argue that the workforce should resemble the population a company serves. The policies are needed to correct a wrong, proponents argue, and they can point to research suggesting they do not harm business performance. 

Some evidence suggests board diversity promotes the discussion and evaluation of alternatives, leading to better decision-making. Moreover, actively discouraging people from certain jobs because of discrimination results in suboptimal talent allocation, which curtails economic growth. 

Proponents are also worried about the broader and potentially unintended consequences of the current rollbacks, which may affect not just corporate America and its attitudes towards race and gender, but could also set back other areas of DEI, such as accessibility for people with disabilities.

Besides the arguments for and against, one important consideration relevant to the current debate is an organisation’s motives for engaging in DEI efforts. Christine Moorman, professor of business administration at Fuqua School of Business, Duke University, suggests there are at least seven different approaches — so-called mental models — behind decisions linked to activism. For companies with a “political mission view” approach, policies may be important tools for creating change in the world, while those taking a more “calculative view” take the approach that DEI should only be engaged when it helps the company succeed. 

The current political landscape is ultimately testing the robustness of specific DEI policies and exposing companies’ motives and values for engaging in the first place.