The DEI Dilemma
We wrote recently about regulatory and policy developments that are ushering in a retreat from ESG at public companies, proxy advisors, and investors. As companies head into proxy season, the appropriate manner and scope of that retreat has been particularly fraught for Diversity, Equity and Inclusion (DEI)-related issues. Companies are grappling with key judgment calls on how to […]
David A. Katz and Elina Tetelbaum are Partners at Wachtell Lipton Rosen & Katz. This post is based on their Wachtell Lipton memorandum.
We wrote recently about regulatory and policy developments that are ushering in a retreat from ESG at public companies, proxy advisors, and investors. As companies head into proxy season, the appropriate manner and scope of that retreat has been particularly fraught for Diversity, Equity and Inclusion (DEI)-related issues. Companies are grappling with key judgment calls on how to adapt DEI policies to make them legally compliant and consistent with business imperatives, as well as how prominently to feature disclosure on those topics, if at all. For years, in response to investor feedback and proxy advisors’ corresponding focus, proxy statements and companies’ websites have highlighted the results of efforts companies have made in diversifying boards of directors, management teams, and employee bases on gender, racial, ethnic and other grounds. Following the January 21, 2025 Executive Order, Ending Illegal Discrimination and Restoring Merit-Based Opportunity, and the issuance of the Justice Department’s report “encourag[ing] the private sector to end illegal discrimination and preferences, including policies relating to DEI,” many companies and boards have evaluated the extent to which such practices and disclosures continue to be advisable.
