We share with you Diario Financiero’s interview with our Compliance Group director, Yoab Bitran, who referred to the withdrawal of DEI policies in some companies.
The lawyer analyzed the retreat from DEI policies in some companies, driven by Trump’s return to the White House, and its impact on sustainability strategies.
Good parenting words or bottom-line commitment? Since Donald Trump returned to the White House, investors, employees and consumers are questioning whether large U.S. companies had embraced diversity, equity and inclusion (DEI) out of fashion or because it was really part of their purpose.
Multinationals such as McDonald’s, Disney and Walmart have quickly eliminated or scaled back their DEI policies, to align with the Republican leader’s stance, or to avoid being locked out of contracts with the federal government.
“I think it’s very important to distinguish between the root cause and certain initiatives, movements, even nomenclatures, that arise in certain contexts. And this not only applies to DEI, it also applies to ESG, which is suffering the same impacts, at least in terms of branding”, said in an interview with DF the compliance director of Albagli Zaliasnik (az), Yoab Bitran.
The lawyer recalled the case of Blackrock CEO Larry Fink, who in his first letters to the CEOs of his funds, openly stated that he would stop using the acronym ESG, because it was manipulated and politicized, thus damaging the root cause.
Returning to the contingency and the impact of Trump’s return to power, he said that in the end, “both in terms of sustainability in broad terms and if we focus on diversity, equity and inclusion, it is very difficult for a person to reasonably justify why he or she is opposed. There is enough evidence today of the positive externalities that a more diverse company, board or team brings in terms of innovation, creativity and a number of other aspects. Diversity done well, done seriously”.
Likewise, from a corporate governance point of view, he stated that “it would be wrong for anyone to oppose having a more objective recruitment, hiring or promotion process, based on facts and merit”.
And he added: “What is behind initiatives, nomenclatures, symbologies, it is difficult for us to go back on that. There are certain consensuses and common minimums reached. That said, when we get into concrete initiatives, declarations, particular programs, then I do believe that, unfortunately, we have been victims of political polarization”.
This has happened in the United States, but “undoubtedly in many other countries. Ours is no exception”, he said.
Stakeholder pressure
Bitran explained that many of the movements that are now retreating arose with the death of the African-American George Floyd at the hands of the police in 2020 in the USA. This generated that “many companies quickly raised their voices first, made statements”, and then adopted “initiatives that are very much based on symbols rather than on concrete facts, which is why we are seeing what we are seeing now”.
What has happened is that “different stakeholders have begun to see a certain dissonance between what the company says and what the company does. When not much has been done, it is very easy to backtrack and go backwards, and that is what is going backwards, those carcasses, symbols, statements”.
For the professional, one of the most important challenges for company leaders today is “to balance the interests and voices of their different stakeholders and not only those who are more vocal, so to speak. And that also happens with respect to employees”.
“The root cause not only has minimum consensus, but it has evidence, it has sustainable progress and I see it very difficult to go backwards. In the movements, in the symbols – also in ESG – I think it is inevitable and one can see in the press that there is a backlash,” he said.
Impact in Chile
Bitran qualified the repercussions in Chile of the setback of IED policies, because although there has been a reduction in initiatives or budgets earmarked for this purpose in multinational companies with a national presence, the movements that arose in 2020 were not echoed in Chilean companies.
In addition, for Chilean companies “the European Union plays an important role. For example, in terms of sustainability, supply chain, it has a series of very relevant regulations and there are many companies that have commercial ties with European Union countries. So the US is not the only player and there are causes that are global”.
According to the lawyer, the same applies to anti-corruption issues. “We know that President Trump paused the implementation of the Foreign Corrupt Practices Act. It is not the only law in the world. Today, thanks to organizations like the OECD and others, there is a globalization of anti-corruption standards. What used to be U.S. standards are now fortunately global standards”, he said.
“Climate change, diversity, compliance, anti-corruption – as root causes and not as movements – are long-term issues and here we are living in a very short-term political moment”, he emphasized.
The expert also highlighted “the sustained progress made by Chilean companies in aspects such as the inclusion of people with disabilities and progress in terms of gender equity”.
Going deeper into gender equity, he qualified that “the advances at a national level, although still moderate, are solid in the sense of minimum common consensuses”. However, he warned that some legal initiatives could represent a risk, such as the Karin Law or the one-year postnatal project.
“There are legislations that being very well intentioned, in their application or execution can damage the cause of gender equity and the access of more women to positions of power. That does concern me.
Overuse of the concept of “purpose
Bitran also addressed how the political contingency, especially in the U.S., could have an impact on the purpose of companies, an element that today is considered key to connecting with employees, shareholders and consumers.
“I think there was a certain overuse of the concept of purpose (…) There was a temptation for some leaders to link their purpose to certain causes, even political ones”, he said.
“If we go to the bottom line, I think the purpose of companies and the value assigned to it by different stakeholders is more relevant than ever. I mean, again, there is a lot of evidence that shows that especially the new generations want to work for companies that have a purpose that makes sense to them with their own values. The same goes for a new generation of investors who are accessing more capital and deciding where to invest.
According to Bitran, “from my perspective, again on the substance, the purpose remains more relevant than ever and fully alive. The issue is that it should not be twisted or distorted for the purposes of a political cause”.
