Walmart’s DEI Compromise Holds Lessons for Corporate America

“Robby Starbuck has viewed your profile.”

The LinkedIn alerts for Walmart Inc. executives started appearing on Nov. 18, offering an early signal that the anti-DEI campaigner was setting his sights on the biggest US private employer.

Just a week later, the innocuous notification had rippled into a shockwave. Walmart announced a raft of changes to its diversity, equity and inclusion policies, from shifting how it evaluates supplier programs to ending use of the term “LatinX.”

The retreat by the world’s largest retailer is notable not only for its policy turnaround but also the speed at which it came together. Interviews with Starbuck and people familiar with Walmart’s decision show the company adopted a mix of his demands and changes already in the works just five days after the conservative agitator told executives he was prepared to release a video calling for a boycott just before Black Friday, the busiest shopping day of the year.

Related: Walmart, World’s Biggest Retailer, Will Curb Diversity Efforts

Set against rising DEI backlash — and an incoming US presidential administration that welcomes the crusade — the Walmartagreement shows the new reality that companies face: Toe the fine line between dialing back diversity policies while not abandoning support for underrepresented workers and customers. The balance is getting more complicated following the US Supreme Court’s reversal of race-based college admissions, as employers weigh the legal and business dynamics around programs designed to correct discrimination and promote inclusion.

For Starbuck, what started as pitched battles is evolving into what is more like negotiated withdrawals from the field. He now claims victories at 15 companies, yet he’s only called for public boycotts at four. The rest came in a form of preemptive release, or in the case of Caterpillar Inc., a coordinated release. Each win adds to the blueprint he can take to the next target — and he says many more are in the works.

The key for companies is to make concessions without “completely rolling over,” said Geoff Morrell, president of global strategy and communications at Teneo. Morrell, who was head of corporate affairs at Walt Disney Co. when that company was sparring with Florida Governor Ron DeSantis over the so-called “Don’t Say Gay” legislation, said he advises companies against getting involved in divisive social issues.

“All companies should recognize that this need not be a zero-sum game,” he said. “If you find the right balance, you can — as some have — move forward quickly with minimal internal blowback or impact on your brand.”

The issue is likely to intensify when President-elect Donald Trump takes office with a cadre of advisers who are vocal critics of DEI initiatives. When Starbuck announced Walmart’s shift, the news drew plaudits from the likes of former Arkansas Governor Mike Huckabee and billionaire Elon Musk, one of Trump’s closest advisers.

The president-elect has signaled he may use the Justice Department to challenge diversity initiatives. Last week, he named Harmeet Dhillon, a conservative California lawyer, as assistant attorney general for civil rights and noted her background “suing corporations who use woke policies to discriminate against their workers.” Elsewhere, in another setback for DEI, a federal appeals court last week struck down a Nasdaq rule that required listed companies to either have a diverse board, or explain publicly why they couldn’t do so. Nasdaq said it won’t appeal the ruling.

Quick Response

Starbuck, a 35-year-old Tennessean who made his name as a conservative warrior through social media, has won concessions from the likes of Toyota Motor Corp. and Harley-Davidson Inc. Walmart was his biggest whale yet.

By his telling, he had zeroed in on the retailer by Nov 18. His team reviewed the LinkedIn profiles of about 20 executives the first half of the week with the intention of sending a signal that the company was a target. By that time, Starbuck was putting the finishing touches on a 20-minute social-media video — or story, as he calls it — that he aimed to release criticizing Walmart around the key Thanksgiving holiday shopping weekend.

Starbuck said he contacted the company officially that Wednesday night, and discussions with executives started Thursday Nov. 21 through a series of emails and phone calls. He and Walmart executives went through various changes, going back and forth on issues.

“I felt that there was a very early interest in making a change,” he said. “I knew it would be a change story by Thursday.”

Within Walmart, senior leaders weren’t surprised about Starbuck’s approach following the activist’s public campaigns this year, said a person close to the matter. Executives began conversations with the goal of understanding areas he was interested in. By the end of that Thursday, there was a sense at the retailer that an agreement could be reached.

Discussions with Starbuck were matter-of-fact and moved quickly because many of the changes were already underway, said the person, who asked not to be named because the discussions were private. Starbuck’s 20-minute video included topics and areas that were new to some executives involved in the discussions. They quickly agreed on some issues, such as monitoring marketplace merchandise to remove items marketed to children that are judged to be inappropriate sexual or transgender products, while others required more in-depth conversations, the person added.

Most changes were in place by Saturday and were final by Sunday, the person said. Walmart held discussions with executives so that they could answer any questions from employees about upcoming changes. Starbuck recordedthe four-minute video he would use to announce the changes, which Walmart executives viewed. On Nov. 25, when the clock ticked over to 5 p.m. local time for Starbuck’s Franklin, Tennessee, farmhouse and Walmart’s Bentonville, Arkansas, headquarters, he broke the news.

“MASSIVE news: Walmart is ending their woke policies. I can now exclusively tell you what’s changing and how it happened,” he said on X. Walmart informed its employees via a memo two days later, the night before Thanksgiving.

Legal Issues

Walmart was already weighing a backtrack on DEI partly for legal reasons before Starbuck showed up.

“Call it what you want to call it, as long as the intent of the work is still there,” said LaTricia Hill-Chandler, chief DEI officer at Arkadelphia, Arkansas-based Southern Bancorp Inc. Hill-Chandler, a Walmart diversity manager for about three years before she left in 2019, said the changes initially stung, given how many people the retailer employs — about 1.6 million in the US— and its millions of customers across the country.

At the same time, they reflect the new norm that companies across all industries are grappling with as the discussion around DEI changes, partly to avoid legal issues, she said. At Southern Bancorp, which focuses on lending and banking services for underrepresented people, she’s examining whether to change the “racial equity” strategy to “inclusive economic” or “inclusive engagement” strategy.

Walmart Chief Executive Officer Doug McMillon wrote in a Friday memo to employees that he’s received feedback in person and digitally about the recent policy changes.

“Some of the notes shared appreciation while others shared concern and disappointment,” he said in the memo viewed by Bloomberg News. “We have been and will continue to be committed to ensuring every associate feels valued and part of the team.”

Walmart concluded that some of the criticism about its past practices was fair, he said, adding that the company is aiming to evolve by learning and taking feedback. Changes aren’t about politics but fostering a sense of belonging for all employees, shoppers and suppliers, McMillon said.

As one of the biggest companies and employers in the country, Walmart has tried to stay out of the political spotlight. Its diversity representation among executives has risen in recent years, and the company has promoted more people of color. It runs education and mentorship programs for staffers, along with internal councils with executives who work with employee resource groups. The retaileralso partners with historically Black colleges and universities and Hispanic-serving institutions.

Outsider Influence

Jo-Ellen Pozner, associate professor at Santa Clara University’s Leavey School of Business, said it’s concerning from a corporate governance perspective that Starbuck is making changes along with company executives.

“Bullies have power because people give them power,” she said. It’s not “a wise move on part of Walmart or anybody else to let an actor who shareholders have not actively supported, whom the board hasn’t vetted, to change the strategic direction of any aspect of organizational functioning as a kind of fealty payment.”

For his part, Starbuck said his goal is always the same, to get companies to be more “neutral” and focus on their products and services, not social causes, which is what he said he explained as part of the first formal discussions with the retailer.

Starbuck isn’t backing down. He has said that he has seven companies under close study, including three more that may be soon ready for their own videos. One of his kids even gave him a Christmas list of companies they’d like him to “fix” so they can shop there, he said.

It’s a question if they’ll ever be seen. Starbuck’s Walmart video — at 20 minutes, his longest so far — won’t be made public because the two sides reached a deal. In his view, a win is better than a fight.

Photo: Photographer: Patrick T. Fallon/Bloomberg