DEI became widely adopted in 2020 following the murder of George Floyd, but the concept dates back further. Now, America’s largest employer — and Yahoo Finance’s 2024 Company of the Year — is reframing its focus to inclusion and belonging.
The retailer is still “the same,” Walmart’s chief people officer Donna Morris told Yahoo Finance in a Dec. 2 interview.
“Our values are absolutely not changing, the specific initiatives or terms, they change over time,” she continued. The company started moving to “belonging” in early 2023, though Morris said the move wasn’t due to pressure from any specific group.
“When you talk about diversity, equity, inclusion, all in part, there can be communities, and often the largest communities, that step back and say, ‘Geez, I’m not sure if I’m even actually included’,” Morris explained of the decision.
After Floyd’s murder, a “majority” of companies felt the need to boost their DEI efforts, but now they are reevaluating. “What we observed and felt was really important is that everyone was part of that work, and that’s why we really made the shift,” Morris said.
“Companies not only have to consider the financial effects … [but] Trump is president now,” said Starbuck. “It’s going to make them more inclined to quickly change rather than hold out.”
Walmart investors seemingly shrugged off the news.
Shares are up 4.6% since Starbuck revealed Walmart’s DEI change on X (Walmart did not release an official statement). The stock is up a whopping 77% in 2024 after it posted a string of earnings beats and strong growth.
Based on a survey this year of 400 C-suite and HR leaders, executive search firm Bridge Partners found leaders said the top benefit of DEI efforts is a positive impact on recruiting, hiring, and retention.
Less than 40% of respondents said it leads to bottom-line and top-line growth, while 22% said it improves share price.
Some companies are convinced of DEI’s merits.
E.l.f. Beauty’s (ELF) splashy campaign, dubbed “So Many ‘Dicks,'” is part of its goal to double the rate of women and diverse members added to corporate boards by 2027.
Its own board is comprised of 78% women and 44% diverse directors.
“There’s a strong correlation between board diversity and the results,” e.l.f. Beauty CEO Tarang Amin said on Yahoo Finance’s Market Domination. The makeup retailer recently posted its 23rd consecutive quarter of net sales growth and market share gains.
In the past five years, its shares are up roughly 780%, handily beating the S&P 500’s 90% gain.
“Companies with above-median board gender diversity see 15% higher return on equity (ROE) and 50% lower earnings risk one year out compared with their less diverse peers,” according to Bank of America data quoted in a research study e.l.f. conducted with North Carolina A&T University.
Bloomberg Intelligence’s Women Capital 2025 report found companies with a “greater number of women on their boards have delivered 2-5% higher returns in developed markets and 2-6% lower volatility in emerging markets.”
Bloomberg’s chief ESG strategist, Adeline Diab, said results “suggest a wider recognition of diversity as a quality signal that can reinforce investment decisions and enhance board dialogue.”
Similarly, a McKinsey report spanning 1,265 companies found that diverse executive teams led to a higher likelihood of financial outperformance.
On the flip side, research from University of North Carolina professors Sekou Bermiss and John Hand and Texas A&M’s Jeremiah Green suggests diversity in top management did not result in measurable financial differences.
“We did not find any really statistically reliable correlations between today’s “measure of diversity” in executives [both in terms of race and gender] and subsequent one-year firm financial performance,” Hand told Yahoo Finance.
“To find very little positive, very little significance, one way or the other, was a bit surprising,” Bermiss said. He added while there are certain companies that would be “cases for diversity driving profit,” the effect disappears when looking at the average for the entire S&P 500.
Morris argued Walmart’s decision will help it “attract, develop and retain the very best talent,” creating the “broadest workforce.”
“Rolling back the activities that they’re [Walmart] doing internally … will have a knock-on effect on their external sales,” Tory Clarke of Bridge Partners told Yahoo Finance over the phone.
The retailer could lose talent, and some stores’ workforces won’t reflect the community they serve, which will impact innovation, culture, and customers’ experience.
Ethan Peck of the conservative think tank National Center for Public Policy, which challenged Nasdaq’s diversity rules that led to the court’s ruling, said dropping DEI will benefit corporate stakeholders in the long run.
Hiring “the best people for the job over time — that’s prioritizing excellence over ideology,” he said. “That will make the company more productive, more efficient, and more innovative. That will show over time in the stock price.”
Dartmouth professor Adam Kleinbaum said, similar to Walmart, many companies may rebrand their DEI efforts to embed them as an HR function.
“Inclusion, making people feel like they are valued and important parts of the organization … that leads to better collaboration … better retention, which drives down HR cost,” Kleinbaum said over the phone.
Walmart may have been the latest, but it won’t be the last.
“It’s pretty clear that we’re at a moment in history when the pendulum is beginning to swing back in the other direction,” Kleinbaum said.
Azoria Partners founder James Fishback is gearing up to launch a new ETF in early 2025 under the ticker SPXM. It will focus on “eliminating these anti-meritocratic laggards.”
While Fishback didn’t disclose companies that will be in the index, he said Starbucks (SBUX) ‘s hiring targets are the reason it won’t be in the fund. In 2022, Starbucks set out to achieve Black, Indigenous, and people of color (BIPOC) representation of at least 30% at all corporate levels and at least 40% of all retail and manufacturing roles in the US by 2025. It has since hit the targets.
However, in March, Starbucks dropped executive compensation packages tied to DEI efforts.
Morgan Stanley’s Calvert US Large-Cap Diversity Research Index focuses on DEI. The index, launched in June 2020, returned 25.82% in the past year. It launched an ETF (CDEI) last year.
Other funds that specialize in DEI or ESG include BlackRock’s iShares Refinitiv Inclusion and Diversity UCITS ETF (OPEN.L) and Impact Shares’ NAACP Minority Empowerment ETF (NACP).
Morgan Stanley, along with Calvert, said it evaluates companies across its workforce and DEI policies to find ones worth including in its Calvert index. Each company is categorized as a DEI leader, improver, neutral, or lagger. Leaders and improvers are included in the fund.
Chipmaker AMD (AMD), for example, was considered neutral in 2023, but as the team tried to increase gender diversity among new hires and its talent pipeline, it’s now in the index as an improver.
Calvert managing director of responsible investing strategy Anthony Eames said the interest in the index “has been steady.”
“There is a precedent for investors to sort of vote with their dollars, if they will. This is an interesting investment concept. … More people are discovering in and are energized about having part of their portfolio, sort of leverage to this theme.”
Read more about Yahoo Finance’s 2024 company awards:
Brooke DiPalma is a senior reporter for Yahoo Finance. Follow her on Twitter at @BrookeDiPalma or email her at bdipalma@yahoofinance.com.
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