The Miscalculation of Corporate DEI Risk

Corporate diversity, equity, and inclusion (DEI) efforts have undergone a dramatic reversal in a remarkably short period of time. In the wake of George Floyd’s murder in 2020, public companies widely embraced DEI as a core component of corporate responsibility, governance, and human-capital risk management, responding to pressure from employees, investors, and consumers. By 2025, however, that apparent moment of reform had given way to rapid retrenchment. Project 2025 and related federal enforcement initiatives reframed corporate DEI practices as legally suspect, creating powerful incentives for firms to dismantle or obscure prior commitments. Although cycles of racial reform and retrenchment are a familiar feature of U.S. legal and political history, the current backlash is distinctive in that it is unfolding within publicly traded firms governed by boards of directors that owe fiduciary duties to identify, assess, and manage material risks.

This Article argues that many firms’ responses to the contemporary anti-DEI turn reflect a fundamental miscalculation of risk. By responding to legal and political uncertainty with abrupt expansion or retreat, corporations have treated DEI as a transient political or compliance issue rather than as a sustained subject of enterprise risk oversight. The result is not risk avoidance but risk amplification: both the adoption and dismantling of DEI initiatives generate legal, regulatory, disclosure, reputational, and workforce risks that demand deliberate board-level analysis. The Article demonstrates that the greatest danger lies not in DEI itself, but in boards’ failure to engage in holistic, process-driven evaluation of these tradeoffs. Only by integrating DEI into ordinary risk-oversight frameworks—rather than treating it as a symbolic commitment or political liability—can corporate boards fulfill their fiduciary obligations and responsibly navigate the current era of racial retrenchment.