SCOTUS affirmative action ruling leaves opening for corporate DEI, former AG Holder says

The Supreme Court’s June 2023 decision knocking down race-based university admission practices won’t necessarily scuttle corporate DEI efforts, former Attorney General Eric Holder told the Economic Club of New York last week.

Holder, a partner at Washington, D.C.-based Covington & Burling, said the decision won’t necessarily bleed into other areas such as business, based in part on the Supreme Court’s carve-out for military service academies.

“If businesses make the case that their bottom lines can be impacted by diversity initiatives, [there is] the possibility of another carve-out,” said Holder, suggesting that what applies to higher education doesn’t necessarily apply to the business community. At least a couple of justices would likely explicitly support such an idea, he said.

The outcome would depend on the trajectory of litigation, but given demographic changes across the U.S., a broad consensus is taking hold, he argued, that diverse businesses have healthier bottom lines than their competitors.

How businesses can defend DEI initiatives

Much of the backlash against diversity efforts has been politically driven, which will likely be exacerbated in the leadup to the general election, he said. “We’ll have a better sense of what the political interest in this whole thing [is] … after the elections presumably have been decided.”

In the interim, businesses should take a data-driven approach to DEI initiatives, he said. 

“[It’s about] making sure that you are looking at statistical information,” he said. “How many people of diverse natures do you bring on board? What is the journey of those people once they become a part of the institution? Do they lead in greater numbers than their counterparts? Are their opportunities for promotion the same?” 

The importance of DEI assessments

His firm has carried out about a dozen company DEI assessments that have been publicly reported, he said. Each of these efforts looked at quantitative and qualitative components of DEI compliance.

“There’s this statistical case — and the numbers will tell one story — but the anecdotal evidence, or what people share in a verbal way, I think there’s another compelling part of it,” he said. “We put it all together and try to identify the strengths that we have seen as a result of the work that we’ve done and what opportunities exist.”

Companies that have released these reports haven’t become targets, he noted, but a challenge among many was the absence of a holistic approach to DEI implementation.

“In some ways, the biggest failing that we see is that there’s a lack of coordination with regard to the DEI efforts that they have underway,” he said. “They can actually get more efficiencies if there’s greater centralization of those efforts.”

Holder recognized that DEI compliance has an impact on the public perception of a company. His firm, he said, advises its corporate clients to follow a proactive approach to reputation management. To get ahead of potential crises, he recommends a “tabletop exercise,” reminiscent of simulated emergency drills.

“You try to imagine situations where [for example] you got a group of disgruntled employees perhaps complaining about something. How does the company react to that so that you’re not surprised when something like that actually happens?” he said. “What I always tell companies when I engage with them is that you don’t want to learn about a problem by reading the New York Times.”