Impact of US Supreme Court Affirmative Action Decision on Corporate DEI, Part 1

The US Supreme Court struck down affirmative action programs at colleges and universities on June 29th, ruling that race cannot be explicitly considered in admissions decisions. What does it mean for corporate diversity, equity and inclusion (DEI) efforts?

To put it briefly, it’s not great news, but it’s also not death knoll. Today I’ll talk about the negative impact, and I will discuss the resiliency of corporate DEI efforts in my next post.

While the ruling does not legally impact private employers (who are not subject to the Equal Protection Clause cited in the ruling), there are worrisome implications:

The diversity of the labor pool for professional positions will decline, as Black/African American and Latinx/Hispanic enrollment in colleges and universities declines. The number of Black/African American and Latinx/Hispanic students enrolled in colleges and universities has already dropped sharply in states who had previously banned affirmative action programs.

Opponents will likely escalate political attacks and lawsuits against corporate DEI programs and ESG (environmental, social, governance) initiatives. Current examples include the State of Florida pulling investments from BlackRock in response to their ESG investments and a lawsuit against Pfizer concerning a fellowship they offer to Black/African Americans, Latino/Hispanics and Native Americans.

“Reverse discrimination” complaints are likely to rise – something that has started to happen recently after consistent declines from 2011 to 2021. Complaints about hiring practices at several companies including Morgan Stanley, McDonald’s, Starbucks and Hershey have already been filed with the Equal Employment and Opportunity Commission by a conservative legal organization.

Diversity quotas for board leadership are likely to end. The SCOTUS ruling comes soon after a 2022 a federal judge struck down a California law that mandated board-level diversity quotas.

Diversity goals expressed as numerical targets may be endangered, as they may be interpreted as quotas in the courts depending on the circumstances – and the recent ruling makes that practice vulnerable to new legal challenges.

Companies may be tempted to pull back from DEI initiatives to avoid legal risk. However, most corporate DEI programs are strongly supported by legal precent and are unlikely to be affected by the recent ruling. While hiring quotas are unlawful, employers must avoid employment discrimination and hostile work environments, and DEI efforts can help employers abide by these laws.

However, corporate DEI efforts are not dead! Corporations need DEI, and not just for legal reasons. Diverse, inclusive workplaces outperform others, and they help attract and retain valuable talent. Many organizations have embedded cultural and policy practices that can remain resilient even in the face of the affirmative action ruling. I will share more in my next blog post.