A growing number of America’s biggest companies are revising diversity metrics for executive pay, a possible sign that conservative-led attacks on DEI are weighing more heavily on corporate culture.
A review of about 1,200 companies found that the proportion of corporations using a diversity, equity and inclusion metric to set compensation has dropped to 28% from closer to 33% in 2023, according to an analysis of regulatory filings by Farient Advisors. So far this year, 56 companies, including Best Buy Co., Chipotle Mexican Grill Inc. and Johnson & Johnson, removed or de-emphasized DEI when setting executive pay, the consulting firm said.
“Companies and boards are especially trying to be careful when they’re setting these goals,” said Brian Bueno, head of Farient’s environmental, social and governance practice. “It’s possible we could see movement away from diversity or movement towards broader measures of human capital or workforce-related measures.”
Conservative activists have been targeting executive compensation that rewards management for meeting DEI goals because they contend that such incentives may encourage improper hiring behavior to meet diversity targets. It’s part of a broader backlash against corporate diversity programs that’s been amplified by billionaires, including Elon Musk and Bill Ackman, after the US Supreme Court ruled a year ago that affirmative action in college enrollment is illegal.
Ally Financial Inc., Carnival Corp. and Lazard Inc. are among more than 60 companies that have made changes that eliminate or materially change references to DEI in compensation, according to a separate analysis of 1,500 companies by Strive Asset Management. The changes were material enough for those companies that the fund switched a vote against the executive compensation plans in 2023 to a vote in favor of the plans in 2024, Strive said.
Farient and Strive’s analysis each identified more than 50 companies that made revisions, and shared 12 of the names with Bloomberg News.
“Compensation should incentivize executives to drive long-term shareholder value, not to focus on irrelevant non-pecuniary factors,” said Justin Danhof, Strive’s head of corporate governance. “And while ESG is often a distraction, companies that continue to tie executive compensation to DEI factors may also be putting themselves in legal jeopardy.”
Strive, which opposes ESG-related corporate policies, was co-founded by former Republican presidential hopeful Vivek Ramaswamy.
In Carnival’s latest proxy filing, the company removed DEI from a section called “culture essentials,” where it had been included in the 2023 compensation discussion.
A spokesperson for the cruise operator said DEI remains a priority. Carnival has shifted DEI from being a single “culture essential” to being embedded throughout its culture, strategy and business priorities, which remain drivers for compensation, the spokesperson said, adding that the company disagrees with Strive’s analysis.
Best Buy changed “inclusion and diversity” to “culture and belonging” and Chipotle switched from a goal to increase workforce diversity to reducing turnover of existing diverse workers, according to Farient. J&J dropped a reference to DEI goals for female, Black and Hispanic representation.
Starbucks Corp. was among the first companies to adjust the compensation language in its annual proxy filing. The coffee chain dropped a bonus tied to DEI goals for its executives and replaced it with a more general workforce target. The company also linked a larger part of compensation to financial-related performance metrics.
Starbucks said it continues to support ways to improve employee diversity and retains specific workforce goals.
| Company Name | Proxy Pay Changes | Response |
|---|---|---|
| 3M | Dropped DEI workforce mention in performance highlights | Remains committed to DEI and shares progress in other sections of the proxy and DEI reports |
| Ally Financial | Shifted from key DEI metrics to an environment of “inclusiveness and belonging” | DEI commitment hasn’t changed. Inclusive and belonging are interchangeable terms |
| Best Buy | Shifted DEI bonus components into “culture of belonging” | Didn’t Respond |
| Carnival | Removed references to supporting and promoting DE&I in executive compensation metrics | DEI remains a focus of compensation |
| Chipotle | Changed internal people goal from increasing diversity to decreasing turnover of diverse workers | Didn’t respond |
| J&J | Removed references to DEI goals, including representation of Black and Hispanic vice presidents | Didn’t respond |
| Kontoor Brands | All references to DEI removed in the compensation section. | Didn’t respond |
| Lazard | Dropped reference to DEI in compensation discussion | Didn’t respond |
| PayPal | Removed “diversity” and “DEI&B” references and replaced them with “Belonging” | Belonging is an extension of DEI and remains a priority |
| Regions Financial | Dropped references to DEI achievements in executive performance ratings | Didn’t respond |
| Sempra Energy | Removed references to diversity and inclusion, recruitment efforts that include more women and people of color. Used “workplace equality” instead | Didn’t respond |
| Uber | Continued to include DEI metrics in incentive programs but added: “While we recognize the importance of DEI to our long-term value and performance, we don’t make employment or other contracting decisions on the basis of any legally protected characteristic” | Bonus programs are adjusted annually and Uber remains committed to DEI goals. |
| Source: Bloomberg analysis of Strive and Farient data |
Companies started adding incentives in executive pay to improve company diversity after the murder of George Floyd by police in 2020 brought fresh attention to the lack of diversity in executive ranks. About 80% of S&P 100 companies promised to make changes at that time to rectify what they say were past disparities.
But while companies may not be talking about diversity as much as they had before, they’re still doing the work, according to Ivy Jack, a co-founder of the Diverse Investing Collective, a San Francisco-based group that advocates for diversity.
“CEOs know that diversity is important because populations are changing,” she said. “And those who take their eye off the ball on diversity will miss out on business opportunities as their customers become increasingly diverse.”
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