Costco’s Wholesale Refusal to Cut DEI Draws Warning From 19 States

It’s a shrinking club, but there are still headstrong CEOs who refuse to bend to the anti-woke winds. None have grabbed more headlines than Costco, the big box holdout who’s clinging to diversity, equity, and inclusion while a stampede of businesses run the other way. After voting down a shareholder resolution last Thursday to return to neutral, the heat is on. And if consumers won’t change the company’s mind, maybe 19 state attorneys general will.

In a surprise move, a coalition of red state law enforcers wrote to the wholesaler, warning that under the new Trump administration and the Supreme Court’s recent decision in Students for Fair Admissions v. Harvard, these extreme identity politics would no longer be tolerated.

“Although Costco’s motto is ‘do the right thing,’” the AGs point out, “it appears the company is doing the wrong thing — clinging to DEI policies that courts and businesses have rejected as illegal. Costco should treat every person equally and based on their merit, rather than based on divisive and discriminatory DEI practices. That reflects President Trump’s executive order encouraging the Private Sector to End Illegal DEI discrimination and Preferences.”

The conservative leaders were referring to one of the president’s earliest orders on Jan. 21, “Ending Illegal Discrimination and Restoring Merit-Based Opportunity.” While the action most directly affected federal agencies, there was a lengthy section in the document intended for the private sector, where the administration “encourages” CEOs like Costco’s Ron Vachris to ditch DEI and instead embrace “individual initiative, excellence, and hard work.”

Not so subtly, the AGs note that other businesses have faced lawsuits or are under investigation for refusing to roll back woke internal policies.

“For the good of its employees, investors, and customers,” the 19 conservatives concluded, “Costco should ‘do the right thing’ by following the law and repealing its DEI policies. Within 30 days, please either notify us that Costco has repealed its DEI policies or explain why Costco has refused to do so. We look forward to your response.”

It was signed by the Republican attorneys general of Alabama, Arkansas, Georgia, Idaho, Iowa, Kansas, Kentucky, Louisiana, Missouri, Montana, Nebraska, North Dakota, Ohio, Oklahoma, South Carolina, South Dakota, Tennessee, Texas, and Virginia.

Days earlier, the Costco board had publicly doubled down, declaring that its commitment to “respect and inclusion is appropriate and necessary.” It joins the stubborn woke—a collection of companies that refuse to heed consumers’ warnings, like Apple and Delta, United, American, and Southwest Airlines.

And they do so at their own peril, Iowa Attorney General Brenna Bird insisted. “It’s time to ditch DEI,” she argued. “While other companies right the ship and abandon their illegal, woke policies, Costco has doubled down. I’m putting Costco on notice to do the right thing and eliminate discriminatory DEI,” the Iowan urged in a statement. “No American should be denied an opportunity because they don’t fit the woke mold.”

Interestingly enough, Costco hasn’t been a public target of conservative activist Robby Starbuck’s, who’s generated the most concessions from major U.S. chains like Target, Walmart, and McDonald’s. In an interview with Yahoo! Finance, the corporate giant killer cut the wholesaler a tiny bit of slack.

“It’s a very nuanced thing here, actually,” Starbuck said, “because Costco is not quite in the same box [as other brands, like Target]. So Costco doesn’t have extremely radical DEI, but they do have DEI policies that I believe are going to be a major legal liability.” Which is why, he clarified, “We did not approach Costco.”

Instead, the Free Enterprise Project, an arm of the National Center for Public Policy Research, offered an anti-DEI resolution that was voted down by 98% of the shareholders after the board frantically lobbied people to vote no. Starbuck isn’t surprised by that. “If you ever have a shareholder proposal, no matter whether you like it or you hate it,” leaders are going to urge their shareholders to vote against it because they don’t want to cede authority. “[If] these people are going to decide for you something that you believe should be an executive decision, you’re always going to say, ‘Please vote against this because this should be under our authority, our control.’”

Stefan Padfield, the executive director of the project that offered the resolution, isn’t deterred. “Fortunately, the truth about DEI is being exposed as never before, and it is only a matter of time until DEI’s inherent shareholder-value-destroying nature forces even managers like those at Costco to get back to neutral and focus on creating value by providing great products and services rather than engaging in neo-Marxist and neo-racist social engineering projects,” he insisted.

On that, he and Starbuck agree. “I think Costco’s executives are just sort of learning about exactly what their DEI programs do and kind of getting familiar with the legal landscape. I don’t think we’ve heard the last of the Costco story.”

Since last week’s shareholder vote, Starbuck says he has reached out to their executives. “Personally, I have engaged,” he said, adding that he would keep the details of those conversations off the record for now. “I have made sure they have all the information,” he explained. “And I think it’s something that they’re going to have to look very deeply at themselves and see if they think that they want to test the waters.”

At the end of the day, Starbuck pointed out, it’s up to management to decide how they want to run their business. “If you see the evidence that this is not making you money or that this is wasting you money, you should get away from it. And that’s why it’s been an easy sell to so many CEOs, because they understand that this has done nothing but bring division. It has cost them money. It’s just been an absolute black hole since the very beginning. It was not what they thought it was going to be. They thought this was going to be about equality. Most of them didn’t even know what ‘equity’ was. And when you actually show them everything their companies are doing, most of them can’t believe it. They think it’s absurd.”

Originally published by The Washington Stand

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