When "voice" is silenced: the rise and fall of DEI

John Paul Rollert at the University of Chicago Booth School of Business examines why major corporations are retreating from Pride sponsorships across the USA and argues that fear - not profit - is driving corporate conduct

 

By now it seems clear: In the age of Trump, DEI is DOA.

 

In the past two months, companies from Mastercard to United Health to Major League Baseball have all taken steps to distance themselves from Diversity, Equity, and Inclusion initiatives. Some have hoped that a semantic sleight of hand will suffice – Warner Bros Discovery, for example, has chosen to rename its DEI group "Inclusion" – while others, like IBM and Goldman Sachs, have simply eliminated efforts that supported hiring goals that, just a year ago, were widely embraced.

 

To understand what has happened, it is helpful to be clear about why so many companies embraced DEI in the first place. Many observers have viewed these efforts as no more than Corporate Social Responsibility run amok. They believe that companies have taken their eyes off the bottom line, with senior executives choosing to do good rather than do better by their shareholders. 

 

Maybe this is true in some cases, but such a belief gives a lot of credit to companies for having an urgent concern for the common good. It also seems to doubt the efficacy of the stock market, which would presumably punish companies that trade profitability for broad social aims or moral respectability.

 

I take a different view. To me, the efforts by major companies to champion DEI and CSR initiatives over the past few years appear less naive and inspiring than strategically clear-eyed and even somewhat calculating.

 

Take Victoria’s Secret.

 

For a decade now, the lingerie company has consistently taken steps to create a more inclusive brand image and work environment. It even went so far as to suspend its legendary fashion show in 2018, a televised annual event that was famous for featuring a coterie of shockingly thin (and overwhelmingly white) women circling the catwalk while they were serenaded by hitmakers of the moment. 

 

Why did they do so? The choice by the company had little to do with a sincere change of heart about the impossible and ethnically skewed beauty standards the company had promoted for over two decades. No, it was the result of widespread protests against the company that were made possible by the rise of social media.

 

In 2014, Victoria’s Secret ran an online advertisement titled, "The Perfect ’Body’" for its Body by Victoria lingerie line. Unsurprisingly, the ad featured a line-up of rail-thin and mostly milky white models. 

 

By then, however, social media had become a potent tool for organizing online protests, and the ad campaign quickly became a popular target. "it’s the 21st century and we still have to tell big corporate companies to stop body image shaming young girls," read one representative protest Tweet with the #iamperfect hashtag. It had been called for by a Change.org petition that drew nearly 30,000 signatures and successfully compelled the company to change the ad’s title to the more inclusive "A Body for Every Body."

 

Such a timeline of events is an illustration of what I have come to call "Activist Capitalism," a phenomenon I have written about in the pages of the Chicago Booth Review and one that attempts to explain why companies have recently become unusually willing to take actions that seem the stuff of corporate social responsibility or even political action. As I describe there, companies have always been sensitive to public protests, but, for the most part, the cost of sustained protest has been incredibly high. 

 

Before social media, to protest a company, one had to grab a magic marker and posterboard and be ready to hit the pavement. Moreover, to be successful in such a protest, you needed more than just one person – a lot more – and more than a single day circling in front of some business.

 

Social media changes this math – dramatically so. Now, from the comfort of your home, you can post your dissatisfaction with some company on a social media channel and call upon an indignant, online horde to echo your concerns from the comfort of their homes. With a little luck (and a lot of virality), you can spark a major, worldwide protest of some company that generates substantial negative press, all without ever having to bother to put on your pants.

 

In his famed 1972 book, Exit, Voice, and Loyalty, the economist A. O. Hirschman took up how the fear of protests (Voice) and the loss of patrons or consumers (Exit) shaped the strategic decisions of many different types of institutions, companies included. 

 

Economists, he noted, tended to focus on Exit, the evidence of which is neatly reflected in sales numbers and other business statistics, while political theorists were more concerned with Voice. It is “political action par excellence,” Hirschman said of Voice, for it attempts “to change, rather than escape from an objectionable state of affairs.”

 

While sustained and high-profile public protests have certainly shaped business decisions in the past, historically, the price of conducting them has been incredibly high. The advent of social media has helped to radically lower the cost of such protests. Today, they are far easier to organise, publicise, and sustain, with the consequence that companies have felt themselves forced to respond to them or risk terrible publicity and substantial damage to their bottom line.

 

In the case of Victoria’s Secret, social media protests in response to "The Perfect Body" campaign and revelations about rampant bullying and harassment forced the company to clean up its act and lean into the very diversity goals it’s now retreating from.

 

So what’s changed? A basic assumption of Hirschman’s analysis: the absence of state power. When the government threatens companies with lawsuits, new regulations, or simply the possibility of a scathing presidential tweet, the actions of individuals recede in significance. 

 

Yes, left to their own devices, companies like Victoria’s Secret would probably continue to embrace DEI initiatives, assuming that is what the consumer public is crying out for, but when the government gets involved, the public gets pushed aside. The entity with the power to threaten taxes, regulations, and sanctions becomes the chief concern.

 

Unless public sentiment dramatically shifts, one suspects that, when power passes to a new administration, the forces of Exit and Voice will start operating again, and DEI initiatives, in some shape or form, will make a comeback. 

 

Until that time, however, when it comes to questions of Diversity, Equity, and Inclusion, there will be only one voice that matters, Donald Trump’s.

 

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John Paul Rollert is Adjunct Associate the University of Chicago Booth School of Business where his teaching and research focus on the intellectual history of capitalism, the ethics of leadership, and the application of empathy to law, business, and politics

 

Main image courtesy of iStockPhoto.com and designer491