Activist opposition to Diversity, Equity, and Inclusion (DEI) policies is targeting corporate board diversity, but a new analysis reveals that companies had already largely abandoned these goals. An examination of board data indicates that S&P 500 companies are currently adding female and minority directors at a rate no faster than a decade ago—a time just before DEI initiatives became widespread in the corporate world.

Doug Chae, President of consulting firm Soundboard Governance, stated, "This suggests that diversity policies were considered optional from the very beginning."

Over the past ten years, under pressure from institutional investors and states like California, companies adopted diversity policies in an attempt to alter the predominantly white male composition of their boards. As recently as a year ago, Goldman Sachs had made board diversity a mandatory criterion for companies listing on its exchange.

However, as the political climate has changed, companies have quickly retreated. It was reported this week that Goldman Sachs plans to drop a policy requiring the consideration of candidates' race, gender, ethnicity, and sexual orientation in new director searches.

Other firms have already followed suit. According to human capital data analytics firm PeopleReturn, only a quarter of S&P 500 companies maintained gender, racial, or ethnic diversity policies for new director appointments last year, a significant drop from roughly half the year before. So far this year, among the nearly 30-plus companies that have disclosed such information, that figure has fallen to 14%.

Companies are also reducing the appointment of female, Black, and Hispanic directors. PeopleReturn data shows that nearly three-quarters of new directors appointed to S&P 500 boards last year were male, and approximately four-fifths were white.

This level is on par with 2016 and represents a sharp decline from the peak in 2021. In that year, 40% of new directors were women, and 45% were non-white.

Mr. Chae pointed out that even if boards are not intentionally de-emphasizing diversity, a tendency to favor candidates with more seniority and longer tenures in response to economic and political uncertainty will ultimately result in more white men joining boards. "They are looking at an older generation of directors, a group that is typically less likely to be women or minorities."

Adinuke Adidiran, a Fordham University law professor who has studied corporate diversity policies in her book "The Land of Disclosure," said that simply reducing the emphasis on diversity could cause board composition to revert to being less varied. "Once the emphasis on diversity is removed, companies tend to revert to promoting people from their own circles, as they did before."

Data from PeopleReturn indicates that board turnover is slow, with roughly one seat per board changing annually. Consequently, the overall composition of S&P 500 boards changes little year-to-year: for several years, about three-quarters have been white, and about two-thirds have been male.

The old criticism of boards as "pale, male, and stale" has not fully returned. Data shows that a decade ago, 79% of directors in what are now S&P 500 companies were male, and 85% were white.

Compensation and governance data firm Equilar predicts that, given the current slowdown in the rate of adding female directors, Russell 3000 index company boards will not achieve gender parity until 2044. This is five years later than predicted last year and eleven years later than predicted two years ago.

Several factors are reducing the pressure on companies to pursue board diversity:

In December 2024, a federal appeals court overturned a short-lived Nasdaq rule that required boards to meet racial and gender targets or publicly explain their failure to do so. California laws mandating minimum numbers of women, minority, and LGBTQ+ directors have been repealed. Early last year, influential shareholder advisory firm Institutional Shareholder Services (ISS) announced it would no longer consider a director's gender, race, or ethnicity when making voting recommendations. Major investors have also stepped back:

BlackRock dropped its target for S&P 500 companies to have boards that are 30% diverse. Mutual fund giant Fidelity no longer threatens to vote against boards with insufficient diversity. Goldman Sachs, JPMorgan Chase, and Morgan Stanley have all rescinded similar requirements. Goldman Sachs stated that its change in shareholder voting policy reflects the evolving legal landscape. A spokesperson said, "This does not change our strong belief that successful boards benefit from diverse backgrounds and perspectives."

Additionally, there is pressure from activists. Data from ISS-Corporate shows that groups opposing DEI submitted more shareholder proposals last year—123 in total—targeting diversity policies and other ESG (Environmental, Social, and Governance) practices they view as misguided or overly liberal.

Most shareholder proposals fail, and anti-ESG proposals typically garner only single-digit support. However, like other activists, their supporters can sometimes secure concessions from companies in exchange for withdrawing proposals.

These activists also have influential allies. Upon taking office, President Trump ordered federal agencies to terminate contracts and programs related to diversity. Late last month, the General Services Administration (GSA) proposed new certifications for entities receiving federal funds, requiring them to attest that their operations do not violate federal anti-discrimination laws, explicitly including "programs labeled as Diversity, Equity, and Inclusion (DEI)."