By: Patricia Bood and Kim Willey
In the United States,
“diversity, equity, and inclusion” (DEI) has become one of the most politically charged phrases in corporate life. Over the past few years, U.S. courts, lawmakers, and regulators have steadily applied pressure to roll back DEI programs, and corporate America has responded in kind.
Tech companies, major retailers, and automakers have pared back initiatives that once featured prominently in their corporate identities. Others have shifted their language, dropping explicit references to race or DEI branding to minimize legal exposure and reputational risk.
For those watching from Canada, the natural question is:
will the same retreat happen here?
What’s Driving the U.S. Retreat
The U.S. reversal is fueled by a mix of legal and political forces. A few recent court decisions have been especially pivotal:
- The U.S. Supreme Court ruled that certain college admissions programs considering race violate the Equal Protection Clause of the Fourth Amendment, reshaping how organizations think about race-conscious policies.
- The Fifth Circuit Court of Appeals struck down Nasdaq’s board diversity rules, removing one of the highest-profile regulatory efforts to advance DEI in governance.
On top of these decisions, a flurry of Presidential executive orders ending the previous administration’s DEI programs as well as federal guidance and expanded oversight of contractors and grant recipients have added momentum to the U.S. retreat from DEI initiatives.
The result? A chill across corporate America. There has been a notable decline in shareholder proposal volume in the U.S. which is most pronounced across environmental, social, and human capital management topics. Further, many companies have decided it is safer to step back from DEI, or at least to downplay it. As illustrated in a recent report, U.S. public companies appear to be shifting from DEI language usage, “often by reducing the use of explicitly racial or DEI-branded terms to mitigate legal exposure and reputational risk”.
A “Made in Canada” Context
North of the border, the landscape looks quite different. Canadian courts have consistently upheld programs designed to improve the conditions of disadvantaged groups as consistent with – not contrary to – the Charter’s equality rights. That means organizations here face less legal risk when adopting or maintaining DEI frameworks.
Public companies also operate under a different regulatory regime. Securities and corporate law require disclosure on a range of DEI-related factors, from gender representation on boards to policies on workplace inclusiveness. That disclosure requirement has created a baseline of transparency and accountability that does not exist in the same way in the U.S.
What We’re Seeing in Canadian Companies
To test whether U.S. trends are spilling over, we reviewed the proxy materials of Canada’s 20 largest listed companies over the past three years, spanning sectors from banking and technology to resources and transportation.
The results were telling:
- No management or shareholder proposals sought to end or scale back DEI programs.
- Shareholder proposals that did appear were largely supportive of DEI initiatives, particularly in the banking sector. These included calls for companies to conduct racial equity audits or to disclose data such as languages spoken within their workforce to better understand impacts on non-white stakeholders and communities of colour.
In short, there is no evidence from this group of companies of a Canadian corporate retreat from DEI. If anything, shareholder advocacy continues to push in the opposite direction.
Where This Leaves Us
The contrast between the two markets is stark. While U.S. companies are scrambling to reframe or retract, Canadian public companies appear to have investor support towards the path of organizational inclusiveness.
The U.S. may be pulling back hard. Canada, at least in the large public company environment, is holding its ground. Canadian companies straddling both markets must learn to walk carefully on a narrowing tightrope.
References:
- 1. Patricia Bood, LLB, ICD.D, GCB.D, is a corporate lawyer, governance consultant and director on corporate and other boards.
- 2. Dr. Kim Willey, PhD is a practicing corporate lawyer and an adjunct professor of law at the University of British Columbia, Peter A. Allard School of Law and the University of Victoria, Faculty of Law.