How Company Directors can tackle reforms around Inclusion and Diversity

Australian directors and governance experts discuss five key issues that may influence how these seismic shifts could affect DEI governance

The recent US decision to end diversity, equity and inclusion (DEI) programs has been adopted by a raft of global companies, with many arguing the business case for DEI was never properly established.

Boards of directors must grasp the profound implications of the growing backlash against diversity, equity, and inclusion (DEI) initiatives, as the discourse surrounding these programs intensifies worldwide. Several major corporations have already scaled back or discontinued their DEI efforts, following executive orders from US President Donald Trump aimed at reducing DEI roles and initiatives. As international companies operating in Australia grapple with these changes, questions arise about the implications of a global retreat from DEI strategies, especially when an offshore parent company decides to phase out its DEI commitments.

In Australia, DEI programs have long been integral to the “social licence to operate”, playing an observable role in attempts to achieve equal opportunity, mitigating discrimination and harassment, and ensuring safe and respectful workplaces. Initiatives have been increasingly intertwined with legal and regulatory obligations. Australian businesses, particularly those with international parent companies, must continue to adhere to these requirements to maintain compliance and uphold their reputations.

To navigate these complexities, we identify five key insights essential for directors to understand and address the shifting DEI landscape with their stakeholders.

Issue 1: Prepare for rapid shifts in sentiment

The speed of change in the US is a warning to directors in Australia that they need to be aware of rapidly shifting headwinds. On President Donald Trump’s first day of office, he signed an executive order ending DEI programs across the federal workforce. He decried these as “discrimination” and vowed to restore “merit-based” hiring. However, on 21 February, a federal judge granted a preliminary injunction blocking the administration from terminating or changing equity-related federal contracts.

DEI programs were first introduced in the 1960s, designed to redress structural racism and sexism by promoting opportunities in the workplace for women, ethnic minorities, LGBTQI+ people and other under-represented groups.

Almost immediately following the Trump announcement, a slew of Fortune 500 companies followed suit in scrapping their diversity programs. These included Meta, Alphabet, Amazon, Disney, Boeing, McDonald’s, Walmart, Ford, Goldman Sachs and Deloitte. Some companies have simply deleted references to DEI on their websites and annual reports without issuing a statement. These “quiet quitters” of DEI include GM, GE, Pepsi, Intel, PayPal, Chipotle, Comcast, 3M, Regeneron and Philip Morris.

“It’s been interesting to see the speed with which American companies have announced that they’re falling into line with that policy,” says Graham Bradley AM FAICD, chair of Infrastructure NSW and Symphony Infrastructure Partners.

Accenture also declared it was scrapping the global diversity and inclusion goals it set in 2017, along with career development programs focused on people of “specific demographic groups”. The change affects its global workforce, including Australia.

According to an internal memo sent by Accenture CEO and chair Julie Sweet, the company had evaluated “internal policies and practices and the evolving landscape in the US, including recent executive orders with which we must comply”.

Issue 2: Reframe the discussion

Dr Mariano (Pitòsh) Heyden, a professor of strategy and international business at Monash Business School, says DEI programs need to be reframed. He believes many have been introduced as compliance exercises and are seen as a distraction from creating shareholder value.

“It’s been framed as one more thing to do in our already busy lives, and one more cost to incur,” he says. “We need to rebalance conversations with the benefits of a diverse workforce. The way in which we introduce change matters as much as the substantive reasons behind the change.”

However, Heyden notes DEI should be seen as “a sensible business and moral imperative”. He thinks politics and business play out differently in Australia and is cautiously optimistic authentic DEI initiatives will endure here.

“Companies in the US are much more politically aligned than in Australia — and more vocal about it, too,” he says. “They’re reactive in making sure they’re aligned with the dominant parties, and so we have seen an almost instantaneous reaction in the US. American business leaders operate in a more politically polarised environment. Historically, companies in Australia have had the luxury of dealing with more centralised tendencies, maybe a little bit left-leaning or right-leaning, but not on any extremes.”