Republican AGs Say Costco Faces Legal Risks Over ‘Divisive’ DEI Policies

A coalition of more than a dozen Republican attorneys general warned Costco on Monday that its embrace of diversity, equity, and inclusion (DEI) policies may expose it to legal risks in light of the Supreme Court’s decision to strike down affirmative action. 

Led by Iowa Attorney General Brenna Bird and Kansas Attorney General Kris Kobach, the group wrote in a letter to CEO Ron Vachris that the company should ditch any DEI policy and adopt a merit-based approach. Last week, Costco shareholders overwhelmingly shot down an effort to pass an anti-DEI measure. 

“Although Costco’s motto is ‘do the right thing,’ it appears that the company is doing the wrong thing—clinging to DEI policies that courts and businesses have rejected as illegal,” the Republican officials wrote. “Costco should treat every person equally and based on their merit, rather than based on divisive and discriminatory DEI practices.”

Approximately 98% of the retailer’s shareholders reportedly voted last week to block a resolution from the National Center for Public Policy Research on merit-based hiring. Costco’s decision to maintain DEI practices comes after other companies, such as McDonald’s, Target, and Walmart, have all rolled their policies back. 

“Inexplicably, Costco has doubled down on DEI,” the AGs wrote. “Last month, Costco’s board of directors unanimously recommended that shareholders vote against a proposal requiring Costco to study and report on financial risks associated with its DEI policies.”

The Republican officials cited the Supreme Court’s decision to overturn affirmative action and said the company’s position “raises concerns about Costco’s compliance with State and federal laws.” They added that Costco should rethink its decision, pointing to a recent executive order from President Donald Trump eliminating DEI from the federal government and encouraging private companies to do the same. 

“And beyond eliminating legal exposure, repealing its DEI policies would provide Costco with time to deal with other important issues, such as questions regarding the alleged connection between Costco products and slave labor in China,” the letter said. 

The attorneys general of Alabama, Arkansas, Georgia, Idaho, Kentucky, Louisiana, Missouri, Montana, Nebraska, North Dakota, Ohio, Oklahoma, South Carolina, South Dakota, Tennessee, Texas, and Virginia signed the letter. They asked Costco to respond within 30 days stating whether the company would still stand by its policies. 

Costco chairman Hamilton James has said that the company’s DEI initiatives are meant to help their employees feel “included and appreciated and that they transmit these values to our customers.” 

Costco has several DEI initiatives in place, including a “supplier inclusion program. ” The company tracks the number of non-white men it has employed and placed in management positions to measure how “inclusive” it is.