The corporate retreat from diversity, equity and inclusion commitments has been framed for two years as a hard financial calculation: keep DEI and risk shareholder anger, regulatory scrutiny and reputational cost, or drop it and protect the balance sheet. A new academic study says that calculation was largely wrong.
Researchers at UC Berkeley and Stanford tracked S&P 500 companies through 2025 and 2026 as the Trump administration’s Executive Order 14173 pushed firms to eliminate DEI programming. Some companies, including Apple, Cisco, Costco, Delta Air Lines, Dollar Tree, JPMorgan Chase, Microsoft and Pfizer, kept their programs in place. Others, including Citigroup, Dollar General, IBM, Target and Walmart, scaled back. The study measured both groups against stock market returns and revenue and found no meaningful gap between them.
The finding HR leaders have been waiting for
For two years, HR and people teams have absorbed a steady stream of anti-DEI shareholder proposals, attorney-general letters and executive-order-driven audits, often without solid data on whether resistance carried a real financial price. This study, titled “Markets Do Not Punish Firms for Maintaining DEI,” is one of the first to test that price directly, using four separate measures of what “maintaining DEI” actually meant in practice: public statements from executives, third-party interest group ratings, the language firms used in their own 10-K filings, and how shareholders voted on anti-DEI resolutions.
Across all four measures, the result held. Firms that maintained programming performed as well as, and in some periods slightly better than, firms that rolled it back. The authors write that “large firms can resist administrative pressure without incurring significant financial costs,” a conclusion that cuts directly against the assumption driving many 2025 and 2026 boardroom decisions.
Why the fear outran the data
The study’s authors point to two forces that made resistance look riskier than it was. First, the threat of direct retaliation, in the form of federal contract loss or regulatory investigation, was real but concentrated: it hit federal contractors far harder than other employers. Federal contractors have been the segment scaling back fastest, and OFCCP’s own rulemaking this year, including the rescission of the Executive Order 11246 affirmative-action framework and the separate rollback of the Section 503 disability-hiring goal for contractors, has narrowed what contractors are required to track at all. Non-contractor employers faced a much lighter version of that pressure, yet many rolled back programming anyway, on the assumption that consumer and market backlash would follow. It largely didn’t.
Second, the researchers found that boycotts and shareholder pressure from either direction tend to cancel out in aggregate market data. A company that draws criticism from anti-DEI activists for keeping a program also tends to retain support from customers and investors who value it, and the reverse holds for companies that drop programming. The net effect on revenue and stock performance, at the scale of the S&P 500, has been close to zero either way. Rolling back programming carries its own backlash risk too: the study points to Target’s yearlong consumer boycott, led by Black church leaders and other activists starting in January 2025, as a direct response to the retailer’s rollback decision, the same kind of reputational cost that rollback was supposed to avoid.
The study’s own survey data helps explain why that net effect lands close to zero. Despite a modest decline in support since 2025, the researchers found that 69% of U.S. adults still say it is “important for business to support DEI,” undercutting the idea of a strong public backlash against companies that keep programming in place. A separate 2025 survey the researchers cite found 76% of workers at large U.S. firms reported being more likely to stay at their jobs if their employer maintained DEI, a retention data point that speaks directly to talent teams weighing the tradeoff.
What it means for the HR leader
The practical takeaway is not that DEI programming is risk-free. Legal exposure under the shifting federal enforcement posture is real and uneven by sector, and HR teams still need to track it closely, particularly if their employer holds federal contracts, where OFCCP has already dropped the affirmative-action mandate and rescinded the Section 503 disability-hiring goal this year. But the study removes one justification that has been used internally to fast-track rollback decisions: the claim that maintaining programming will cost the business market share or investor confidence. That claim, at least at the scale this study measured, is not supported by the data.
For HR leaders building the business case to present to a board weighing a DEI rollback, this gives them a data point that has been largely missing from the conversation: a rollback undertaken purely for financial self-protection may be solving a problem that doesn’t exist. Where legal or contractual risk is the actual driver, that is a separate and legitimate conversation, but it is a different one than the market-performance argument that has dominated boardroom discussion since early 2025.
The harder question this study raises
If maintaining DEI carried no financial penalty, why did so many large employers roll it back anyway? The study’s authors suggest an answer that HR leaders should sit with: executive teams may have overestimated the cost of defiance because resistance to date has been rare enough that no one had good data to calibrate against. Decisions were made on fear of an unmeasured risk, not on the risk itself. As more firms hold their positions and this kind of research accumulates, that information gap should close, which may make 2027 board conversations about DEI look very different from the ones HR teams navigated in 2025 and 2026.
For now, the study’s clearest message for people teams is procedural: before recommending a rollback on financial grounds, ask what evidence actually supports the financial claim, distinguish clearly between federal-contractor exposure and general market exposure, and be prepared to bring data like this into the room the next time the argument surfaces.
Source: Markets Do Not Punish Firms for Maintaining DEI, Hanna Folsz and Jacob M. Grumbach
