Companies that jumped on the DEI bandwagon under public pressure should now reassess and reconsider the strategic importance and legal risks of their programs

The pace of change of the Trump administration has been astonishing and is leaving a wake of decimated programs and departments, including recent trends in Diversity, Equity & Inclusion (DEI) principals. This sharp turn in public sentiment serves as a dramatic shift compared to the last few years where corporate America was pressured to implement such programs as part of a social mandate.

Today, the harshest criticism against DEI is that it went too far with backlash aimed at arbitrary demographic quotas deemed discriminatory, mandatory unconscious bias training, over-emphasis on LGBTQ+ issues, and a de-emphasis on merit-based business decisions. As businesses recalibrate and reassess whether such programs are truly aligned with their core values and strategy, a return to foundational diversity principles is underway– one that emphasizes inclusion, fairness, and performance-driven outcomes.

Back-to-Basics Shift of Corporate Diversity

Last year we wrote about Robby Starbuck’s meteoric rise as a DEI activist and his success in pressuring companies to roll back DEI initiatives. We suggested that companies should assess the business value of their diversity programming tied to everything from attracting employees, to building customer loyalty, or gaining favorability in local communities — and to determine what efforts they will or won’t abandon. Since then, many of Starbuck’s corporate targets, along with some industry-leading companies, have made meaningful changes to their diversity programs while maintaining select efforts that deliver positive business outcomes. This back-to-basics approach is helping diversity live on through the following strategies:

• Reframing the Definition of Diversity: Some companies are looking at diversity through a broader lens that goes beyond race and gender to help teams find common ground and understanding. Examples include different experiences, ways of thinking, and backgrounds that allow for more collaboration, inclusivity, and new ideas to solve business challenges.
• Excellence and Merit-Driven Business Decisions: Most companies are reemphasizing key tenants of high performing companies including expertise, innovation, customer-center service, and other skills as the foundation for hiring, promotions, and leadership selection.
• Systemic Culture-Building Focused on Belonging: Changes that build stronger cultures are viewed as more impactful than awareness training. These include creating opportunities for meaningful dialogue and self-reflection, transparent decision-making processes that apply to everyone, inclusive leadership styles, and formal career growth and mentorship programs that reach all employees.

Legal Risks of Corporate DEI Programs

Multiple significant events in recent months have further ignited controversy surrounding the legalities of DEI and opened up the potential for legal risks:

• In December 2024, the U.S. Court of Appeals struck down Nasdaq’s board diversity disclosure rules, citing disclosure requirements do not support the Exchange Act’s purpose of protecting investors. As a result, companies are no longer required to publicly disclose board diversity information.
• President Donald Trump issued several Executive Orders to eliminate federal DEI programs that also impact the private sector, especially contractors of the federal government. The goal is to dismantle mandates and policies that could result in reverse discrimination. Additionally, in February 2025 the Dismantle DEI Act was introduced in Congress to prevent future administrations from reviving federal DEI programs.
• The state of Florida filed a security fraud lawsuit against Target and Missouri sued Starbucks for violating federal and state civil rights laws.
• A MAGA hitlist of 45 companies with a combined market value of almost $10 trillion are under consideration for further criminal investigation by the U.S. government for “discriminatory” DEI programs. Companies include Amazon, American Airlines, Target, Anheuser-Busch, Hershey, McDonald’s, Lyft, Nike, Morgan Stanely, Mattel, Nike, Nordstrom, Walt Disney and others.

Furthermore, some activist challenges to corporate DEI practices have increasingly invoked the Civil Rights Act, prompting companies to reassess their programs in order to mitigate the potential for lawsuits. In response, some organizations have scaled back DEI efforts or removed explicit references to race targets from their annual reports.

Some companies have even cited diversity initiatives as a risk factor in board elections as well as their recent 10-K filings and proxies, signaling a broader trend of reevaluating how these programs are publicly presented amid growing legal and political scrutiny.

Enforcing this point, global governance firm Glass Lewis recently issued a statement that says it will be assessing this issue further over the coming weeks and will advise of any modifications to its policies. They added, “While we firmly believe that diversity contributes to improved company performance and long-term shareholder value, given the uncompromising, hardline position of the current U.S. Administration, we may determine that it is in our clients’ best interest for Glass Lewis to change its approach to voting guidance on board elections and DEI-related shareholder proposals at U.S companies.”

Considerations for Communicating Diversity in a Challenging Environment

As a strategic communications firm, ours is not to judge the strategic importance or impact of DEI programs across corporate America. Clearly, there are components of them that have significant merit for companies with diverse employee and customer bases, and are a part of those companies’ cultures and core values. In other situations, their value may be inherently different.

But from a corporate reputation and communications perspective, Alpha recommends that companies conduct a reputational risk assessment to understand where they might find themselves vulnerable, and whether they should scale back programming if the company is at legal risk or receives legitimate outside pressure to do so. Organizations where diversity serves a critical business value can shift their strategies to make themselves less vulnerable to scrutiny as they navigate stakeholder, legal, and political pressures.

As a result, cross-functional Corporate Communications, Investor Relations, Human Resources, and Legal teams are making decisions to support this shift as they update policies, public disclosures, corporate websites, intranets, social media profiles, and other public-facing forums.

There are some important questions to consider when making these decisions:

• Will rebranding diversity efforts align with your values and other workplace culture initiatives?
• How can you emphasize inclusivity without using politically charged language?
• Will community investment and philanthropy strengthen your corporate reputation locally and support business objectives such as hiring?
• What are your long-term employee retention strategies such as mentorship, professional development, and inclusive workplace policies?
• How can inclusion link to broader corporate metrics, focusing on employee satisfaction and engagement rather than demographic targets?

The Bottom Line

Our takeaway is that mass campaigns pressured companies into publicly supporting diversity, sustainability and corporate responsibility efforts in the post-COVID era before they truly understood how to align those concepts to their core business values. In today’s new world, those companies could have real reputational risks and need to reassess and realign such programs to their strategic focus and corporate values. Alpha sees this as a natural exercise in crisis preparation planning and updating that all companies should be doing annually.

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About Alpha Advisory Group:  Alpha Advisory Group, which includes its subsidiary Alpha IR Group (collectively “Alpha”), is a premiere C-Suite Advisory firm that brings deep sector expertise and senior-driven programs focused on clients’ most critical stakeholders. The firm’s work includes strategic investor relations consulting, corporate communications and reputation advisory, as well as transactions and special situations counsel. Alpha is the right choice to manage clients’ reputations, credibility, and ultimately, their corporate and investment brands. Alpha is headquartered in Chicago, with offices in New York, Boston, and Dallas. Alpha serves clients across all industries and through multiple inflection points in the business cycle. Additional information can be found at www.alphaadvgroup.com.