Late last year, the Human Rights Campaign (HRC) and a sustainability consulting firm published their joint report titled “The Link Between LGBTQ+ Inclusion And Business Performance.” Drawing from HRC’s decades of data on corporate diversity practices, the report found that queer-friendly firms have typically enjoyed higher revenue growth, net income, gross profit, and stock price stability. Corporate social justice, it seems, still pays the bills.
From a certain vantage, this message was far from controversial—mundane even. Since its introduction in the early 2000s, the HRC’s Corporate Equality Index has become increasingly influential in the C-suite, where corporate managers and human resource officers have implemented antidiscrimination policies, expanded healthcare benefits for transgender employees, and introduced Pride-themed product lines. The Harvard Business Review, major consulting firms, and progressive economists have all backed the message that chasing the “gay dollar” and appealing to skilled white-collar workers’ social-justice sentiments is indeed a sound economic strategy. Corporate America has also frequently affirmed the value of national antidiscrimination protections before the Supreme Court.
Despite this long history of corporate support, HRC President Kelley Robinson sounded defensive in a press release accompanying the nonprofit’s latest analysis. Business leaders that “sideline inclusion in moments of political pressure,” Robinson warned, “damage their brand, alienate consumers, and lose the trust of employees and shareholders.” Though the phrasing here suggests that diversity initiatives still generate value for firms and investors, escalating assaults on “woke capitalism” and Donald Trump’s return to the presidency have cast doubt on that formula’s veracity.
On his first day back in office, Trump signed an executive order denouncing the corporate world’s “pernicious identity-based spoils system.” By the end of 2025, the Justice Department had opened False Claims Act investigations into major corporations’ diversity, equity, and inclusion (DEI) initiatives. Far from working alone, the Trump administration has buttressed longer standing shareholder activism and litigation that has sought to combat the notion that the market prizes LGBTQ+ and racial equity measures.
Though the ongoing “war on woke” portrays diversity initiatives as inherently fraudulent and economically risky, these conservative campaigns and executive actions are in fact creating those risks rather than merely exposing them. Historically, the reality of diversity’s economic returns has been shaped by queer employees and labor-union caucuses, socially conscious consumers, LGBTQ+ advocacy groups, and asset managers who have pressured clever and opportunistic business leaders. Today, conservative campaigns are transforming economic reality with their own shareholder activism, boycotts, and litigation. The shift from rainbow capitalism to today’s anti-woke agenda reveals the political economic and legal construction of diversity’s value in the marketplace.
Viewpoint Diversity and Shareholder Activism
While the Alliance Defending Freedom (ADF) has gained much notoriety for its near annual appearances before the Supreme Court, the powerful Christian conservative group has recently led a coalition pressuring businesses to check their math on the value of diversity.
Borrowing from the strategy of mid-twentieth-century civil rights, anti-war, and environmental activists, the ADF and its partners have made use of shareholder resolutions to incentivize corporate leaders away from progressive issues. Many of these resolutions cite the ADF’s new Viewpoint Diversity Score that, in measuring a corporation’s commitment to “religious and ideological diversity in the market, workplace, and public square,” is intended to rival the HRC’s influential business index. Since 2022, ADF and its allies, like the fossil fuel-funded National Center for Public Policy Research, have filed a range of resolutions against corporate commitments to DEI and related environmental, social, and governance (ESG) programs, which they claim threaten profitability.
Recently, these conservative shareholder resolutions have grown in both volume and aggression. The ADF and others have moved beyond merely requesting reports on hiring demographics and have begun demanding that corporations demolish their social justice policies and cease collaborations with LGBTQ+ and other liberal nonprofits. Although these resolutions have almost always failed to garner significant shareholder votes, the specter of a new Trump administration has induced business leaders to meet with activists and to make policy changes outside of the corporate ballot process.
For example, just before Trump’s second inauguration, Meta scaled back its Hateful Conduct Policy, eliminating content moderation practices that had prevented users from conflating LGBTQ+ identity with mental illness. Robert Netzly, an ADF political ally and CEO of the “biblically responsible” firm Inspiring Investing LLC, took credit for the change, boasting that his eight-month shareholder battle with the company over “censorship” had been successful. The ADF joined in celebrating Meta’s restoration of previously banned content and other anti-DEI actions taken by companies like Johnson & Johnson, Verizon, and PepsiCo that had largely resisted conservative-led shareholder activism until the moment that they fell under the shadow of a second Trump administration.
The Target Saga: Social Justice Stakeholders or Securities Fraud?
Target’s recent legal troubles offer a window into the broader dynamics of the fight over the value of corporate diversity. Just months after the first Trump presidency came to an end, former members of the administration Stephen Miller and Russell Vought founded America First Legal. Though the Biden administration was the primary target of the new organization, Miller directed its legal firepower at major corporations, including Meta, Amazon, IBM, and Shell, accusing them mainly of reverse racist practices in employee recruitment and training. Its 2023 lawsuits against Target, however, focused on the retail giant’s recent LGBTQ+ Pride Month sales promotions that had precipitated an impressive boycott led by the conservative American Family Association. According to some estimates, that boycott led to falling sales and tens of billions of dollars lost in market capitalization (although those losses stemmed at least in part from rising inflation’s impact on consumer spending).
In its lawsuit, which Inspire Investing quickly joined, America First Legal and its shareholder client argued that Target had breached its fiduciary duties and violated federal securities law. Specifically, Target was accused of acting recklessly, ignoring and failing to alert investors to the “risk” that its pro-LGBTQ+ initiatives were likely to invite. The episode was analogized to a successful ongoing boycott of Anheuser-Busch for its Bud Light advertisement featuring trans TikTok star Dylan Mulvaney. Rather than serving its shareholders, the suit claimed that Target was now at “the beck and call of pro-LGBT stakeholder organizations like the Human Rights Campaign,” which had led the company down a financial cliff.
The language of “stakeholder” here is instructive. Throughout its initial complaint, America First Legal directly challenged the Business Roundtable’s controversial 2019 statement, which Target’s Chairman and CEO had signed. In that statement, the roundtable called for the end of shareholder primacy, redefining the purpose of the corporation to serve all “stakeholders” including “customers, employees, suppliers, communities and shareholders.” In America First Legal’s telling, this approach to corporate social responsibility could not make good on its promotion of “long-term value for all stakeholders” precisely because some of those stakeholders—in this case, LGBTQ+ nonprofit partners, business suppliers, customers, and employees—had introduced a meaningful threat to the firm’s bottom-line.
None of this is to say that America First Legal’s arguments were entirely sound. In a particularly deceitful moment, its attorneys criticized Target’s past positions on trans rights, positing that its statement condemning North Carolina’s 2016 anti-trans bathroom bill had led to an immediate drop in sales. Though the company’s vocal commitment to open its restrooms to trans customers and employees did earn it some especially vitriolic right-wing media hits pieces, there’s little evidence that it hurt Target’s bottom-line. The only real data provided for the investor’s legal claim was one Wall Street Journal graph demonstrating declining sales over three quarters. America First Legal failed to mention that the business press attributed this drop largely to Amazon’s aggressive move into Target’s retail territory. Moreover, just two years after the bathroom bill saga, Target boasted its highest annual growth in well over a decade, an achievement made through its expanded online presence. And rather than curtail its diversity work, Target spent those years expanding its DEI and ESG benchmarks and collaborations with LGBTQ+ and racial justice nonprofits and suppliers. Clearly, such diversity initiatives were no threat to growth—according to the company’s 2023 report to shareholders, those measures were essential to its human capital management strategy.
In the past few years, though, Target’s outlook has changed. Within months of the lawsuit’s filing, Target caved to the pressure. The company announced that it would offer only a limited Pride collection at select stores. Later, when Trump handed down his anti-DEI executive order, Target officially withdrew its participation from the HRC business index and rolled back other diversity initiatives. Though the company’s actions have engendered some liberal backlash—Target CEO Brian Cornell acknowledged that declining sales in early 2025 were at least partially caused by negative consumer reaction to its rollback of DEI initiatives—these efforts have been largely small-scale in their impact and have begun to wind down.
Despite Target’s acquiescence, two new class-action lawsuits alleging securities fraud have added to the company’s woes. One of these, filed by the City of Riviera Beach Police Pension Fund, essentially echoed America First Legal’s arguments in accusing Target of not learning from its role in the North Carolina bathroom bill drama, referring to its trans-inclusive reforms as “antagonistic.” The police union’s pension managers also argued that they were misled when Target presented its executive compensation proposal at a 2023 shareholder meeting, which the company claimed was “aligned with shareholder value when, in reality, they included substantial incentive payments to executives for meeting ambiguous and subjective ‘DEI progress’ mandates.” Whereas shareholder value and diversity mandates once seemed to be naturally harmonious, they now appear at stark odds.
It is especially notable that the police union pension was represented by Grant & Eisenhofer, a plaintiff-side firm which also runs an “ESG Institute” that has forced polluters like Monsanto and diesel-emissions fraudsters Volkswagen to pay out billions of dollars in settlements. Like Target, this work has earned the firm both accolades and reproach. Grant & Eisenhofer has been repeatedly singled out by Federalist Society co-chairman Leonard Leo’s Alliance for Consumers, which designated the firm as one of a larger “Shady Eight” and sought to expose its ties to the Democratic Party and its work for progressive causes. That reputation is hard to square with the firm’s ongoing attacks on Target’s capitulation to its “left-wing ideological” stakeholders. It seems that even liberals are getting in on the lucrative business of anti-DEI litigation.
As Target’s recent experience reveals, diversity initiatives that may once have seemed a safe bet now make corporations vulnerable not only to boycotts but also to litigation alleging that they destroy shareholder value. While Target’s economic prospects likely have more to do with inflation, fluctuations in consumer spending power, and the scale of their online presence than with their Pride month sales, litigants have successfully created the appearance that diversity initiatives are damaging to value. And the cost of litigation and threat of federal investigations appear to be enough to scare corporations off. In this way, anti-diversity litigation claims to be exposing diversity as an economic risk, while simultaneously working to create and sustain this risk.
Speculations
Defending itself against critics of rainbow capitalism, the HRC has continued to insist that “[w]orkplace fairness is not a short-term PR play. It’s a proven long-term business strategy.” Even if that was true for much of the twenty-first century, the “long-term” may have ended somewhere around the middle half of the Biden presidency when the right figured out how to make corporations pay for their LGBTQ+ advocacy and marketing schemes. After all, both the Trump administration’s investigations into corporate policies and shareholder lawsuits against companies like Target are still in their early days—the real pain may have yet to come.
The market value of diversity today is unclear also because the terrain upon which DEI and ESG battles have been fought is presently shifting. The Securities and Exchange Commission may soon abdicate its historic role in the shareholder proposal process, which could make it more difficult for activists, both on the left and the right, to intervene in the construction of diversity’s economic value or risk. The Chamber of Commerce has hailed the impending defeat of the “tyranny of the minority” shareholder activist, a celebration in which many corporate managers are likely to partake. The decline of the truly shareholder-owned corporation and the rise of far more insulated patrimonial firms are also likely to blunt the usual strategies for affecting business change in one ideological direction or the other. In that respect, today’s vibrant debates over diversity’s place in stakeholder or shareholder capitalism may actually be the last utterances in a dying language.
