Woke, But Not Broke: The DEI Conundrum Solved

In recent years, the “go woke, go broke” narrative has dominated discussions around diversity, equity, and inclusion (DEI) policies. In January 2025, Donald Trump’s executive orders threatened to target companies that continued to support DEI efforts, prompting many high-profile firms like Google, Goldman Sachs, McDonald’s, and Walmart to hastily announce an end to their DEI policies.

However, a study published this month by Jacob Grumbach at the University of California at Berkeley’s Goldman School of Public Policy suggests that these companies may have been premature in their decision-making. The research analyzed the financial performance of S&P 500 companies after Trump’s executive order and found that firms that maintained their DEI policies performed just as well financially, even after the orders, as those that did not.

Grumbach’s study used “abnormal returns” – a metric measuring the difference between expected and actual stock performance – to isolate the impact of a company’s DEI decision on its bottom line. The results are striking: companies that maintained their DEI policies outperformed their competitors in some cases, even after Trump’s executive orders.

One potential explanation for this finding lies in consumer behavior. Companies that publicly stood firm on their DEI policies may have known they could weather a political storm, particularly if they had a strong brand identity and loyal customer base. Apple, for example, has long been associated with progressive values, and its decision to maintain its DEI efforts likely came as no surprise to customers.

The “go woke, go broke” movement gained momentum in 2023, with high-profile conservative backlashes against companies that featured LGBTQ+ individuals or supported social justice causes. The US Supreme Court’s ruling on race-conscious admissions policies in higher education created fear and panic among corporate leaders, leading many to quietly scrap their DEI promises.

However, the reality of this pullback was likely more nuanced than what was seen in headlines. According to David Glasgow, executive director of the Meltzer Center for Diversity, Inclusion and Belonging at New York University’s law school, many companies made adjustments to their diversity principles on account of legal and regulatory environments.

Grumbach’s research provides a much-needed dose of reality in this debate. By examining company policies through various metrics – including news coverage, anti-DEI shareholder proposals, and data from activist groups – he found that holding on to DEI promises ultimately had no impact on financial performance.

The implications of Grumbach’s findings go beyond the world of corporate finance. They suggest that large US corporations have the leeway to resist authoritarian policies, even in times of great fear. This is a crucial finding for civil society organizations, which often rely on corporate support to advance their causes.

As the debate over DEI continues to rage, Grumbach’s research offers a much-needed respite from the hype and hyperbole. It’s time for companies to reevaluate their approach to DEI – not because of some mythical “go woke, go broke” threat, but because they want to do what’s right by their employees, customers, and communities.

Companies that resist pressure to abandon their DEI efforts will ultimately emerge stronger, more resilient, and more committed to creating a better world for all. The question now is: which companies will take this lesson to heart?