The end of DEI?

U.S. companies’ DEI, or diversity, equity and inclusion, efforts lost momentum in 2023 after the Supreme Court’s affirmative action ruling in June. The U.S. Supreme Court ended affirmative action in higher education; a long-awaited decision addressing the legality of race-conscious affirmative action in college admissions programs.

The 2023 slowdown of DEI hiring is a sharp reversal from the explosion in corporate DEI after George Floyd’s death in 2020 pushed companies to act to address perceived corporate inequality. As a result, there was a distinct shift in hiring based on the new equity policy. DEI efforts after 2020 had real impact. 94% of the headcount increase at large firms in 2021, from the previous year, stemmed from hiring people of color, according to a Bloomberg analysis of 88 S&P 100 firms.

Whereas equality means providing the same opportunity to all, equity means recognizing that candidates are different, and the hiring firms would make adjustments to imbalances and hire based on race or sexual orientation instead of skills or merit. There might for example not be enough black transexuals in a firm, so if there are several candidates for a position, the decision to hire would not be based on education, experience or suitability, but instead on the fact that the firm needs to hire more black transexuals. Most major firms embraced the DEI idea and ended the previous equality policy in order to promote equity and create a more diverse workforce.

Based on the Supreme Court ruling, 2023 has started to shift the DEI landscape for years to come. External forces and political pressure are no longer pushing companies to invest in DEI; instead, they are pushing back on further investments. If schools cannot explicitly base admission one race or sexual orientation, why should corporation be allowed do that?

The group that brought the affirmative action case to the Supreme Court, the American Alliance for Equal Rights, sued two law firms, challenging minority fellowships that were open only to students of color, those who identify as LGBTQ+ or those who have disabilities. The group also sued a venture capital fund, the Fearless Fund, for investing solely in black women. In response, the law firms revised the programs, broadening their criteria to all law students at a certain stage at school. The suits were dropped.

Several republican state attorneys general urged Fortune 100 companies to take another look at their DEI programs after the high court’s decision. It would seem logical that firms will start deprioritizing DEI as the hiring frenzy of the past few years has slowed. More firms have also started to question why they should not hire the best candidate and use equality criteria.

Radical change requires radical programs, and the DEI program would likely transform the U.S. labor force over time. The question is whether the idea is appropriate. The mood in the country seems to be changing in favor for hiring based on equality instead of equity. This trend will likely continue, in particular if lawsuits continue as a result of DEI programs. The big question is if hiring should be based on knowledge, education, skills, and suitability or if it should be based on gender, race and ethnicity and sexual orientation?