GCs Can Guide, Protect Boards Facing Global Tug-of-War on DEI

Executive orders and agency actions from the Trump administration have altered the risk assessment for 2026 of corporate diversity, equity, and inclusion programs, creating a complex environment that requires sophisticated board oversight.

These challenges are especially pronounced for multinational corporations balancing global priorities and diverging laws across jurisdictions. Keeping a board informed as management navigates this changing environment requires careful execution.

How to do so confidentially and in a well-documented fashion benefits from thoughtful structuring. To maintain privilege, practitioners should:

• Clearly label any privileged communications as privileged and confidential.
• Consider who is present at board meetings. The presence of advisors or other non-employees may break privilege.
• Ensure that communications concern the interests of the company, rather than any purely personal interests of board members.
• Be careful not to waive privilege, such as through public disclosures or external communications.
• Engage outside counsel to brief the board and management. Privilege rules differ across jurisdictions, and not all jurisdictions recognize in-house counsel privilege.

Best practices for minutes include:

• Documenting that the board discussed DEI matters and that counsel provided legal advice.
• Avoiding including detailed legal analysis or subjective language in minutes.
• Considering having counsel prepare separate privileged memoranda containing detailed legal advice.

Beyond the “how,” the next question is “what” boards should be covering. Under Delaware’s Caremark doctrine, boards must exercise reasonable oversight of company affairs and may face liability for consciously failing to monitor or oversee existing controls.

Boards therefore have an affirmative duty to understand and oversee DEI-related risks. These risks are heightened in the current environment, particularly for federal contractors, given Executive Order 14173 and various agency pronouncements that DEI is at the top of their enforcement agendas. The board should be provided with a privileged briefing about DEI-related enforcement.

Management also should have a comprehensive understanding of the company’s past and present DEI efforts to evaluate any potential historical and ongoing risks for board consideration. This inventory should encompass policies, procedures, trainings, external and internal communications, contracts, funding of third parties, demographic tracking, compensation arrangements, prior DEI audits, and DEI-related lawsuits and resolutions.

To mitigate risk, management should consider whether any global DEI programs should be decentralized and what, if any, risks there are of maintaining DEI programs as a foreign entity with US government contracts.

The board should be made aware that Title VII of the Civil Rights Act of 1964 can apply to US citizens employed in foreign countries by a US employer as well as to employers who are controlled by a US employer. Compliance with foreign law is a defense against a Title VII violation.

Separately, management should review director and officers’ liability insurance for Title VII, False Claims Act, and related coverage. The board of directors must understand management’s risk mitigation efforts post-DEI inventory and the scope of risk post-mitigation.

The highest risk areas—compensation and demographic targets—warrant particular attention. The Trump administration has identified any disparate treatment in compensation based on race, sex, or other protected characteristics as unlawful discrimination. Compensation committees should review existing incentive plans that tie compensation to diversity metrics.

Multinational companies should realize that if compensation is tied in any way to diversity levels of US employees, the Trump administration may view the compensation arrangement as problematic, even if the compensation itself is only for non-US employees.

For example, where global executive compensation is tied to diversity metrics that include US workforce data, the administration may view this as motivating employment actions based on protected characteristics at US subsidiaries and potentially as unlawful discrimination.

Another important risk relates to demographic targets. Setting targets or goals could bring scrutiny, because such targets risk being characterized as a quota system and imply decision-making that uses protected characteristics as factors in employment decisions. Any demographic targets required by non-US laws should be clearly separated to the extent possible from US operations.

Finally, management and the board should consider risks associated with rolling back DEI programs. Management and the board should assess whether the manner and timing of any rollbacks could be perceived as evidence that past programs were unlawful, how the rollbacks may impact talent retention and the company’s reputation as an employer, and the extent to which modifications may create exposure to discrimination claims or non-US legal scrutiny.

To address these risks, companies should conduct a privileged risk-benefit analysis for rolling back each DEI program, including whether such programs are required under non-US law and how to “deglobalize” any such programs, and should develop communications that avoid implying past wrongdoing while emphasizing continued commitment to equity and support of all employees.

Monitoring legal developments, conducting and updating privileged risk assessments, and reporting in a privileged but documented way are crucial to ensuring a board fulfills its fiduciary duties.

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

Author Information

Breon Peace is a partner at Cleary Gottlieb focused on high-stakes complex litigation, regulatory and enforcement matters, government and internal investigations, and white-collar defense.

Jennifer Kennedy Park is a partner at Cleary Gottlieb focused on white-collar defense, enforcement, crisis management, and complex disputes.

Christopher Kavanaugh is a partner at Cleary Gottlieb focused on enforcement and litigation.

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