Possibly the most controversial element of the new Trump administration is the approach to diversity, equity and inclusion programs or DEI. It took President Trump two days to essentially obliterate DEI efforts with an executive order that cut DEI policies in the US federal government.

Essentially, all discriminatory programs, including DEI and “diversity, equity, inclusion, and accessibility” (DEIA) mandates, policies, programs, preferences, and activities in the federal government, under whatever name they appear” were terminated. Moreover, all existing federal employment practices, union contracts and training policies or programs to comply with this order will be subject to review. Federal employment practices, including federal employee performance reviews, shall reward individual initiative, skills, performance, and hard work and shall not under any circumstances consider DEI or DEIA factors, goals, policies, mandates or requirements.

All US government diversity staff were placed on paid leave “immediately.”

This move is not without precedence: In 2020, then-President Trump signed an executive order targeting “race and sex stereotyping and scapegoating,” which laid the groundwork for widespread attacks on diversity efforts in public institutions. When Joe Biden became president, he rescinded this order and issued his own. 

But some recent events indicate that the cultural winds started to shift, even before Trump returned. There is the recent decision by the US Fifth Circuit Court of Appeals to strike down Nasdaq’s board diversity rules. Nasdaq—the tech-focused stock exchange—had implemented several ESG-focused rules on diversity and inclusion at board level. One rule required Nasdaq-listed companies to disclose data on the gender and racial makeup of their boards. The other rule required companies to work towards minimum targets for diversity of board members. These targets only required a company to have at least one female director, and at least one director from an ethnic minority or who identified as LGBTQ.

Nasdaq defended the rules, arguing they standardised disclosures and aligned with investor interests, citing studies linking board diversity to improved financial performance. But the court sided with two conservative groups who argued that the rules constituted unlawful quotas, with one of the judges even stating that the SEC had intruded into areas beyond its jurisdiction by approving Nasdaq’s request. The court’s decision clearly reflects the broader political and legal backlash against “woke” corporate policies, such as ESG initiatives and affirmative action. The ruling effectively strikes a blow on how companies manage their own regulations on DEI initiatives.

There have also been legal challenges to policies addressing racial preferences that have recently gained momentum, culminating in a landmark Supreme Court decision last year that invalidated affirmative action in university admissions. The college admissions cases were brought by Students for Fair Admissions, a group started by anti-DEI activist Edward Blum who also financed the successful challenge to Nasdaq’s rules.

Does this all spell an end to DEI efforts?

The truth is most of the largest US companies continue to champion DEI. Very few are completely abandoning it. A recent analysis by the Heritage Foundation, a conservative think tank, indicated that 486 of the Fortune 500 companies still publicly affirm their dedication to DEI initiatives.

But there’s no doubt that the court’s Nasdaq ruling and the new political landscape under Trump will have significant implications for corporate board diversity. Companies should certainly be hesitant about making instant changes to their DEI programmes, or just ceasing them altogether. Instead, it is important to think strategically about diversity policies, and focus on the return on investment which DEI brings to business. 

Still, many companies will keep investing in these programs to meet the expectations of employees, consumers and investors.

All this might not directly influence UK and EU laws, but the cultural shift could embolden anti-DEI voices globally. Currently, the EU, and increasingly the UK, are moving in the opposite direction. The EU Green Deal and the Labour government’s expanded Equality Act in the UK will likely keep ESG and DEI at the forefront. And for companies in the UK and EU, stakeholder expectations are still  high. This means that even if US federal incentives are reduced, UK and EU companies should continue investing in ESG and DEI initiatives.

The bottom line is don’t lose sight of your company values. This way no matter what happens you’re in a good place. 

At Vinciworks, we believe the time is now for compliance and DEI teams to invest in tech, if they haven’t already. Compliance monitoring and DEI impact measurement tools are game-changers. And don’t forget training. Make sure everyone, from the C-suite to entry-level employees, know how to navigate these issues.