The war on DEI

Several days into the new Republican administration, a coalition of state attorneys general sent letters to a group of prominent financial services companies: Bank of America, BlackRock, Citigroup, Goldman Sachs, JPMorgan Chase, and Morgan Stanley.

They were asked, not so subtly, to open up about any DEI initiatives at their respective companies.
“Your answers to the attached questions, along with interviews of relevant employees, will demonstrate whether violations have occurred, whether they will continue, and the necessity of enforcement actions to vindicate federal or state laws,” the letters read.

“Each of you appears to unlawfully advance discriminatory employment quotas.”

The messages came just after President Donald Trump signed a flurry of executive orders, two of which were aimed at widely curbing practices that promote diversity. One promises to end all diversity, equity, and inclusion work and initiatives within the federal government. Another would end it for federal contractors and reverses a 1965 order by former President Lyndon Johnson that sought to bolster civil rights protections by instructing federal contractors not to discriminate against employees or job applicants.

“What the order is going after is the application of preferences based on race and gender,” said Samia Kirmani, principal at law firm Jackson Lewis and co-leader of the firm’s corporate diversity counseling practice groups. Parts of that executive order, entitled “Ending Illegal Discrimination and Restoring Merit-based Opportunity,” conflates illegal practices with DEI in general, she said.

“The law hasn’t changed as a result of the executive orders. It’s always been unlawful to discriminate,” she said.

And that, similarly, hasn’t changed what she recommends companies do, which is to assess what their DEI practices are, how they describe them, and how they implement them, she said.

“How are organizations communicating to their employees, [and] externally to all their stakeholders, about what they’re doing? Using shorthand allows for assumptions to be made,” she said.

In future, “there is going to be a lot more specific language,” she said. “That recommendation is not new.”

The companies targeted by the Republican state attorneys general did not comment on the inquiries or their DEI policies.

However, the ways in which companies identify any programs are potential risks. That has been the case since the US Supreme Court in 2023 ruled against Harvard University and the University of North Carolina over the use of affirmative action in admissions – a decision seen as having a chilling effect extending to the corporate world.

There are signs of forthcoming legal fights over so-called reverse discrimination, in which people in majority groups – white, straight, male – allege they are denied opportunities by virtue of not being part of a minority group.

For example, Stephen Miller’s America First Legal has brought numerous cases against employers and government offices and filed cases with the Equal Employment Opportunity Commission. Trump’s appointed acting chair of the EEOC, Andrea Lucas, hinted at being open to hearing such claims.

“We must reject the twin lies of identity politics: that justice is measured by group outcomes and that civil rights exist solely to remedy harms against certain groups,” Lucas said in an announcement of her appointment. “I intend to dispel the notion that only the ‘right sort’ of charging party is welcome through our doors.”

It is likely that private companies could face investigations over their DEI practices, Kirmani said. That could extend to mentorship or development programs that are restricted to gender or race, for example, she said.

“We can’t just look at the executive orders in a silo. The EEOC has also made clear what its priorities are going to be,” she said.

Even so, DEI programs and initiatives are not by themselves illegal, and they may help companies comply with the law. DEI practices are widespread in the corporate world and have been viewed as important in promoting diversity, so much so that academic programs have been designed around them. In 2023, the Wharton School started offering DEI as a major for its MBA program.

Widely, Americans support diversity but don’t like being divided by race, said Robert Raben, executive director of the Diverse Asset Managers Initiative.

The Supreme Court’s ruling, while it narrowed what race can be used for in applications, did not strike down considerations around race entirely – something that critics of DEI get wrong, he said.

“What the right has done is mischaracterize that ruling. Instead, they talk about what they want … which is race not being taken into account,” he said. But “race has been taken into account for 400 years…. That’s why 95 percent of CEOs and chairs of boards are white.”

Conversely, if companies will be forced to say whether they curate by race, those that are almost entirely white and male will have to explain that, he said.

On the new administration’s pushback, “there’s nothing new here,” he said. “Generation after generation, we see continual progress on diversity generally, and fantastic pushback.”

What is new is calling out DEI without defining exactly what it is, he said.

“They have picked a concept, DEI, which has no scientific, HR, or legal definition. And they keep saying it’s terrible,” he said. “And we don’t know what to do with that, because the next sentence they say is, ‘We want to get to merit,’” which could be read as implying that people in minority groups are not viewed as qualified. “They’re threatened by the inclusion of women or people of color … in the elite levels of the talent pool.”

In response to the pushback, company leaders appear to fall into three categories, he said. They either continue their efforts under a different name, they quit whatever initiatives they had because they never wanted them, or they support diversity but don’t know what to do, he said.

Some evidence of what may come is highlighted by California’s Proposition 209, a 1996 ballot measure that outlawed affirmative action in public employment, education, and contracting, he noted. Shortly after that was passed by voters, underrepresented groups dropped in enrollment at the University of California. However, in the years since, and with Proposition 209 still in effect, racial diversity in enrollment has improved considerably.

Within the financial advice profession, it appears diversity is improving. Last year, “the number of racially and ethnically diverse CFP professionals surpassed 10,000 for the first time, increasing to 10,239 (9.9 percent of all CFP professionals) and signifying a growth rate of 8.8 percent – twice the overall growth rate of all CFP professionals,” a spokesperson for the CFP Board said in a statement. The number of CFP professionals who are Black has been growing by roughly eight percent per year since 2020, reaching 1,936 people in 2024, according to the board. Still, that represents 1.9 percent of all CFPs, 81.8 percent of whom are white, 2.6 percent Latino, and 3.8 percent Asian.