Companies need to deftly navigate and carefully communicate around the Trump administration’s new DEI executive order

By Mike Hotra and Liz Sidoti

Within a day of assuming office, President Trump made good on campaign-trail promises with an executive order that could significantly reshape DEI policy across the federal government. It also puts private companies, especially those that work with the government, on notice, and, likely for some, in a tough position that requires deft navigation and careful communication.

The order eliminates DEI offices and terminates or reassigns their employees, and it rescinds several federal workforce personnel-related executive orders stretching back more than 50 years to President Lyndon B. Johnson’s administration.

Section Four specifically focuses on the private sector, encouraging federal agencies to “End Illegal DEI Discrimination and Preferences,” and authorizes the attorney general and the Office of Management and Budget to identify:

“A plan of specific steps or measures to deter DEI programs or principles (whether specifically denominated “DEI” or otherwise) that constitute illegal discrimination or preferences.  As a part of this plan, each agency shall identify up to nine potential civil compliance investigations of publicly traded corporations, large non-profit corporations or associations, foundations with assets of 500 million dollars or more, State and local bar and medical associations, and institutions of higher education with endowments over 1 billion dollars.”

While many companies have been focused on recrafting their DEI policies for months, this announcement, with its acute private sector focus, was a surprise to many — a sudden, significant and newsworthy political jolt. Now, organizations large and small, public and private, must navigate carefully after leaning into DEI following George Floyd’s death and Biden administration policies that put DEI at the center of federal programs.

Moving too quickly to roll back programs could alienate important stakeholders, especially employees and customers. Ignoring the missive in favor of business-as-usual risks the administration’s wrath, which could be existential for companies that contract with the government.

To be sure, some companies, like Meta, have leaned aggressively into the moment, making significant moves in DEI and other areas as part of broader efforts to curry favor with the new administration. They may also be using this moment as a way to streamline operations and departments.

For most though, a tempered approach is likely the safest option. Here’s what that can look like:

Business leaders should move both quickly and prudently to reassure employees of their own commitments around DEI and belonging, while also communicating changes they may need to make to comply with this administration’s interpretations of applicable law and regulation, which were issued on Tuesday, January 21. Leaders will likely need to square possible conflicts between prior corporate DEI commitments and prior administrations’ policies.

This already challenging situation is even trickier for companies doing business with the federal government, and the pressure on them to disclose how they are thinking about this issue is even greater. Employees may voice concerns and feel vulnerable. Leaders may be nervous. Shareholders could weigh in, and boards may be uncertain. So, a very deliberate approach to communicating is even more important.

Most companies should avoid rushing to put out a position or statement. Rather, they should quickly but thoughtfully translate the pressure to communicate into a catalyst within each company to immediately work on a thoughtful and informed approach to this complex, individualized and — for many employees — deeply personal issue.

A consensus-based communications approach should include input from:

Legal & HR: To determine the company’s exposure and compliance obligations, especially if there are government contracts, or if there are state “copycat” policies expected, and because all or parts of the executive order may be subject to legal challenge.

Government Relations: To articulate the soft expectation of policymakers and elected officials on these controversial issues, and the political push, or pushback, that an organization should expect based on its relationships in both major political parties.

Leadership: To assess the expectations of the board of directors and leadership team. If Tractor Supply represents one end of the spectrum, and Costco the other, where is the company on that line?

A Peers Analysis: To learn what actions corporate competitors in the sector are taking, how they are communicating about any changes and what’s informing them.

Investor Relations: To consider what shareholders are saying, and whether the company can expect any proxy activity on these issues.

Colleagues: To understand the chatter around the traditional or virtual water coolers and the direct feedback the company is receiving from employees or employee resource groups.

A thoughtful, consensus-built approach allows companies to be deliberate in squaring who they are and what they believe in with the new realities of the political environment, and that will allow them to be prepared for the next time the pendulum swings the other direction.