National Legal and Policy Center has made the removal of diversity, equity and inclusion initiatives from executive pay incentives one of its primary issues in its shareholder proposals for the 2025 proxy season.
Incentive-driven executive compensation programs attempt to solve the principal-agent problem — shareholders elect the board of directors to represent their interests, and the board hires executives to manage the day-to-day operations of the company. Incentives ideally ensure that management’s goals match those of shareholders.
However, corporate boards often abandon their fiduciary responsibilities and direct shareholder recourse towards ends that do not maximize shareholder value, but instead serve the personal interests of the board of directors and of management (which often overlap). These may include politicization of the company to the detriment of its success.
In 2024, NLPC filed proposals at ExxonMobil and ConocoPhillips that targeted the emissions reduction incentives included in compensation formulas for the companies’ executives. In effect, management was financially rewarded for reducing oil and gas production, which contradicted shareholders’ fiduciary interests.
In 2025, NLPC is focused on DEI incentives, which are included in the executive compensation programs at most of our holdings. DEI programs only exacerbate racial and gender divisions and dilute the effectiveness of a workforce by prioritizing immutable characteristics over merit. We believe removing these incentives would better align executive priorities with the best interests of the company and unlock shareholder value. Many companies are beginning to agree with us. In recent months, NLPC and other conservative groups have received substantial media attention from outlets such as the Wall Street Journal and Fortune for driving the destruction of DEI.
Costco is an example of how executive incentives for DEI drive company policy. Recent analysis conducted by Fox Business revealed that “Costco doled out hundreds of thousands in bonuses to its CEO and top execs based on diversity, equity and inclusion (DEI) and environmental metrics between the years of 2021-2024.” While most companies have retreated from DEI, Costco continues to double down on it. When corporate executives stand to benefit financially from the retention of such policies, the more difficult it will be to eliminate them.
