#United States #New York #Corporate Governance #shareholder activism #DEI Proposals

Increasing Scrutiny on Corporate DEI Initiatives

As the 2025 proxy season unfolds, corporate diversity, equity, and inclusion (DEI) initiatives are attracting unprecedented attention from policymakers, regulators, and investors. A new report from The Conference Board highlights a significant climb in shareholder proposals aimed at countering, amending, or completely rolling back DEI efforts in U.S. public companies.

Surge of Anti-DEI Proposals

The latest findings are illuminating a troubling trend: by early April, 13 anti-DEI proposals had been filed — nearing the total number submitted throughout all of 2024. This shift marks a stark increase in opposition to diversity initiatives, as these proposals made up just 23% of all DEI-related proposals last year, soaring to approximately 40% so far in 2025.

Andrew Jones, a Principal Researcher at The Conference Board, notes that although support for these anti-DEI proposals remains quite low, they serve strategic purposes for their proponents, including raising awareness, exerting influence, and attracting media attention. He comments, "The goal is often not to secure passage but to amplify opposition against established DEI frameworks."

Trends in Shareholder Proposals

The data compiled from Russell 3000 companies reveals a dramatic fluctuation in shareholder proposals over the years. From 2021 to 2024, the number of anti-DEI proposals rose from just 1 to 17, while pro-DEI proposals have seen a downturn, dropping from 102 to only 57 in the same span. As of April 1, 2025, 18 pro-DEI proposals have been filed, indicating a complex landscape where both supporters and adversaries are fiercely vying for influence.

Understanding Support Levels

Despite the escalating volume of proposals, both anti-DEI and pro-DEI proposals encounter low levels of shareholder support. In the 2024 proxy season, anti-DEI proposals received an average approval of less than 2%, a trend that continues into 2025, with support ranging from 0.8% to 2.3%. Meanwhile, support for pro-DEI initiatives has dropped from 36% to 22% over recent years, signaling a waning interest in corporate diversity practices amongst investors.

Core Themes of Shareholder Proposals

The report outlines several key themes underpinning these proposals.

• - Anti-DEI Proposals:

- Legal and financial risks: Many proposals request assessments of potential legal ramifications tied to DEI programs, including allegations of reverse discrimination.
- Executive pay metrics: Proposals call for the elimination of DEI-based performance metrics from executive compensation frameworks, positing that such standards introduce bias.
- Calls for reconsideration or abolition of DEI programs: A significant number of proposals advocate for scaling back or completely removing DEI strategies, questioning their legality and efficacy.
- Political neutrality and viewpoint diversity: Some requests aim to include political positions as a factor in equal employment opportunity policies, promoting ideological neutrality in workplaces.

• - Pro-DEI Proposals:

- Enhanced corporate transparency: Advocates stress the need for improved reporting mechanisms around corporate DEI efforts.
- Commitments to increased board diversity: There are calls for ensuring that diverse candidates are considered for leadership roles.
- Pay gap disclosures: Proposals that push for transparency regarding pay disparities based on race and gender are becoming frequent.

Ariane Marchis-Mouren, a Senior Researcher at The Conference Board, underscores the evolving nature of engagement around DEI proposals, noting, "Companies are finding themselves in tougher negotiations due to increasingly prescriptive or contentious requests from proponents."

Richard Fields, from Russell Reynolds Associates, reflects on the drops in DEI proposal support, attributing it partly to greater representations on boards and enhanced disclosures while also indicating a perception of heightened risks associated with diversity commitments.

The Role of Institutional Investors

Institutional investors generally oppose anti-DEI measures, reinforcing a stance that aligns with established corporate governance principles. Matteo Gatti of Rutgers Law School remarks that most anti-DEI proposals originate from a narrow set of activists, which undermines their legitimacy among broader investor frameworks.

As the proxy season develops, corporations must navigate the challenges posed by a spectrum of DEI-related proposals from competing perspectives, effectively managing the balance between investor expectations, regulatory pressures, and their commitments to fostering inclusive and equitable workplace environments. The ongoing discourse surrounding DEI will likely shape corporate strategies and governance models in the years to come.