Providing Equity in Opportunities Is Good DEI Business Policy

The goal of several recent executive orders from President Donald Trump has been to eliminate diversity, equity, and inclusion programs and policies in the federal government and to encourage the private sector to do the same.

Business leaders were already changing the terms they use to talk about DEI because of the current political climate. There are now questions about whether Delaware law limits business leaders from committing their firms to DEI-related initiatives, among other activities related to environmental, social, and governance performance.

The substance of the new federal policy toward the private sector will require time and involvement of several agencies to formulate and then enforce.

In the meantime, businesses can articulate an approach that is legal, creates benefits, and likely would remain legal even if anti-DEI policies are developed, because it would stop short of DEI factors being dispositive decision criteria.

We can describe an approach that opens talent and supplier pipelines, and directly and rapidly boosts profits. By providing equity in opportunities, managers of any sized company in any industry or location can avoid wasting time; angering employees, customers, or owners; and losing money.

We don’t favor tolerating people or ideas that simply don’t work. We would be the first to advocate killing an idea if it hurts your organization. What we’ve seen work—to speak about and to execute value-adding initiatives—is to focus on equity: the idea of your company searching as widely as possible for the best talent and suppliers.

Here’s an example of how a focus on equity in opportunities cut costs and boosted profits. Among the companies with whom we have worked, when there is an effort to solicit bids for supply contracts from businesses founded by a woman, a racial/ethnic minority, disabled person, LGBTQ+ person, or a veteran, that extra effort to receive more offers produces a menu of lower-cost options.

How? Because these firms tend to be younger, smaller, and scrappier. They have lower overhead costs than big, dominant legacy companies. Their leaders know that, to compete, they must promise lower prices and then deliver equal or better results. This is brutal survival of the fittest—dare we say Darwinian—American capitalism.

But often in our experience, managers wouldn’t necessarily have searched out, solicited, and received the best bids on the market if their organization didn’t have a policy on boosting equity in opportunities. Some competitive suppliers wouldn’t have known about the ability to become a supplier absent that relatively small extra outreach effort to solicit offers.

At their core, many of these programs (both supplier-facing and talent-facing) are about creating pipelines of qualified and capable candidates. Without an equity-boosting program, both sides are blind to opportunities.

Because women now own nearly 40% of US firms, according to 2024 data from Wells Fargo, and minorities own over 20% of companies in the US, based on 2023 Census data, organizations can’t risk failing to consider such a large pool of potential suppliers as a matter of fiscal responsibility.

A panel hosted by the Zicklin School of Business at Baruch College in November discussed whether and why Delaware law could allow executives and directors to deploy DEI and other ESG initiatives. A key point was that, given the business judgment rule and a variety of precedent cases, executives and board members have wide discretion in deciding what will serve their firm.

If they can show care and loyalty consistent with the duties of a fiduciary, they can point out that some investments and initiatives eventually will serve their corporation well. There is no bright-line definition of a deadline by which an action must show a benefit to a firm or its shareholders, or what kind of benefit will eventually accrue.

The example described above, because it is an effort to solicit bids that results in lower cost options, would allow any executive or director to defend an equity-in-recruitment initiative as safely within their discretion to embrace.

For decades, and sometimes in amicus briefs in the context of US Supreme Court cases involving affirmative action programs, senior business and military leaders have argued that we can be blind to finding, recruiting, and maximizing the potential value of the best talent if we don’t take some extra steps to assure equity in opportunities.

Some recent examples of these were the 2022 amicus briefs officers filed representing “centuries of combined military experience” and dozens of US business leaders.

The short version of an argument that both groups of leaders make: Organizations need a diverse pool of management talent that can relate to the rest of the country, whether they’re employees, investors, clients, or military personnel. And those pipelines of management talent start with higher education admissions decisions.

Their argument in favor of affirmative action was pragmatic, not idealistic. And even though the Supreme Court limited affirmative action programs, the justices specifically exempted federal service academies—the US Naval Academy, West Point, Air Force Academy, Merchant Marine Academy, and Coast Guard Academy.

Why allow these critical and selective institutions, which graduated 3,500 military officers a year and roughly 20% of the total number of new officers, to practice a form of DEI? Apparently, the court accepted the argument of former officers that “a diverse Armed Forces under the command of homogeneous leadership is a recipe for internal resentment, discord, and violence.”

Fostering equity in opportunities should be seen as a boon, not a bane, to business. Done correctly, it can boost management’s awareness of how to improve an organization’s functioning and financial outcomes.

Encouraging equity in opportunities is pragmatic, politically palatable, and 100% consistent with the fiduciary duties of executives and board members under Delaware law. It can open new talent pipelines and supplier networks, create new product classes, and drive significant savings—ultimately boosting firm profits and value.

This article does not necessarily reflect the opinion of Bloomberg Industry Group, Inc., the publisher of Bloomberg Law and Bloomberg Tax, or its owners.

Author Information

Adam Sulkowski is professor of law and sustainability at Babson College and author of an entrepreneurship book series.

Jane C. Edmonds is vice president for programming and community outreach at Babson College and a partner at Jane’s Way, a DEIB consultancy.

Jason Cipriano is founder and CEO of Tivore, a business consulting firm.

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