CLS Blue Sky Blog

Wachtell Lipton Discusses Corporate DEI Initiatives After Harvard Affirmative Action Case

It is no secret that American corporations face vigorous — and often conflicting — demands concerning diversity, equity and inclusion (DEI) initiatives.  Over the past year, DEI initiatives and commitments have come under pressure in the face of macroeconomic headwinds, political scrutiny and legal challenges.  That pressure has only grown following the Supreme Court’s recent decision against affirmative action in SFFA v. Harvard (as discussed in our prior memo), after which Attorneys General from both red and blue states sent conflicting letters to Fortune 100 companies on what the SFFA decision meant for corporate DEI initiatives.

Managing the tension between proponents and opponents of DEI programs and initiatives is particularly complex because of the range of stakeholders involved.  Shareholders, employees, customers, suppliers, regulators, stock exchanges and state legislatures are among the groups that have sought to shape the DEI agenda.  And DEI is no longer a domestic issue:  The European Union’s Corporate Sustainability Reporting Directive, which is expected to affect over 3,000 U.S. companies, includes disclosure standards that require firms to assess and disclose workforce and supplier diversity, equity and inclusion policies, practices and metrics to ensure equal treatment and opportunities for all.

Boards and management seeking to navigate across this rapidly shifting DEI landscape should keep the following principles in mind:

The Supreme Court’s decision in SFFA has not altered the fiduciary obligations of employers nor has it redrawn the permissible legal contours of DEI initiatives.  We nonetheless expect companies to continue facing heightened scrutiny from all sides over why and how they go about identifying, evaluating and implementing DEI policies and goals.  For these reasons, we encourage all companies to periodically review and assess their DEI strategies and commitments to ensure they align with broader business purposes and are being implemented in a manner that promotes equity and inclusion for all.

This post comes to us from Wachtell, Lipton, Rosen & Katz. It is based on the firm’s memorandum, “DEI Initiatives Post-SFFA:  Considerations for Boards and Management,” dated August 8, 2023.

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