Australian directors and governance experts discuss five key issues that may influence how these seismic shifts could affect DEI governance.
The recent US decision to end diversity, equity and inclusion (DEI) programs has been adopted by a raft of global companies, with many arguing the business case for DEI was never properly established.
Boards of directors must grasp the profound implications of the growing backlash against diversity, equity, and inclusion (DEI) initiatives, as the discourse surrounding these programs intensifies worldwide. Several major corporations have already scaled back or discontinued their DEI efforts, following executive orders from US President Donald Trump aimed at reducing DEI roles and initiatives. As international companies operating in Australia grapple with these changes, questions arise about the implications of a global retreat from DEI strategies, especially when an offshore parent company decides to phase out its DEI commitments.
In Australia, DEI programs have long been integral to the “social licence to operate”, playing an observable role in attempts to achieve equal opportunity, mitigating discrimination and harassment, and ensuring safe and respectful workplaces. Initiatives have been increasingly intertwined with legal and regulatory obligations. Australian businesses, particularly those with international parent companies, must continue to adhere to these requirements to maintain compliance and uphold their reputations.
To navigate these complexities, we identify five key insights essential for directors to understand and address the shifting DEI landscape with their stakeholders.
Issue 1: Prepare for rapid shifts in sentiment
The speed of change in the US is a warning to directors in Australia that they need to be aware of rapidly shifting headwinds. On President Donald Trump’s first day of office, he signed an executive order ending DEI programs across the federal workforce. He decried these as “discrimination” and vowed to restore “merit-based” hiring. However, on 21 February, a federal judge granted a preliminary injunction blocking the administration from terminating or changing equity-related federal contracts.
DEI programs were first introduced in the 1960s, designed to redress structural racism and sexism by promoting opportunities in the workplace for women, ethnic minorities, LGBTQI+ people and other under-represented groups.
Almost immediately following the Trump announcement, a slew of Fortune 500 companies followed suit in scrapping their diversity programs. These included Meta, Alphabet, Amazon, Disney, Boeing, McDonald’s, Walmart, Ford, Goldman Sachs and Deloitte. Some companies have simply deleted references to DEI on their websites and annual reports without issuing a statement. These “quiet quitters” of DEI include GM, GE, Pepsi, Intel, PayPal, Chipotle, Comcast, 3M, Regeneron and Philip Morris.
“It’s been interesting to see the speed with which American companies have announced that they’re falling into line with that policy,” says Graham Bradley AM FAICD, chair of Infrastructure NSW and Symphony Infrastructure Partners.
Accenture also declared it was scrapping the global diversity and inclusion goals it set in 2017, along with career development programs focused on people of “specific demographic groups”. The change affects its global workforce, including Australia.
According to an internal memo sent by Accenture CEO and chair Julie Sweet, the company had evaluated “internal policies and practices and the evolving landscape in the US, including recent executive orders with which we must comply”.
Issue 2: Reframe the discussion
Dr Mariano (Pitòsh) Heyden, a professor of strategy and international business at Monash Business School, says DEI programs need to be reframed. He believes many have been introduced as compliance exercises and are seen as a distraction from creating shareholder value.
“It’s been framed as one more thing to do in our already busy lives, and one more cost to incur,” he says. “We need to rebalance conversations with the benefits of a diverse workforce. The way in which we introduce change matters as much as the substantive reasons behind the change.”
However, Heyden notes DEI should be seen as “a sensible business and moral imperative”. He thinks politics and business play out differently in Australia and is cautiously optimistic authentic DEI initiatives will endure here.
“Companies in the US are much more politically aligned than in Australia — and more vocal about it, too,” he says. “They’re reactive in making sure they’re aligned with the dominant parties, and so we have seen an almost instantaneous reaction in the US. American business leaders operate in a more politically polarised environment. Historically, companies in Australia have had the luxury of dealing with more centralised tendencies, maybe a little bit left-leaning or right-leaning, but not on any extremes.”
Issue 3: Avoid a kneejerk response
“There’s no doubt Trump is shaking this tree very soundly,” says Bradley. “He wants to move the US government, military and corporations towards a more merit-based, what I’d call a race and gender-neutral approach to employment hiring.”
In Bradley’s view, the US has gone a lot further than Australia in mandating racial and ethnic quotas. Until it was purchased by a French company last year, Bradley chaired United Malt Group, which had 90 per cent of its executives based in the US, but listed on the ASX.
“When we were hiring people, I was surprised how much further the policies in the US had gone in mandating roles for minorities,” says Bradley. “I found it distorted the decision-making. For quite a lot of roles, we’d be looking only for minority candidates. Because it had gone a lot further in the US than in Australia, I think the pendulum is swinging back more strongly there than it is likely to do [here].”
Bradley believes while there may be more of a willingness to make merit the primary basis for hiring policies rather than a secondary one, it is unlikely that companies will be revising their corporate codes of conduct, which is where many of the diversity principles have been embodied. Nor will any anti-discrimination laws be changed in Australia. “I just don’t see any kind of mass abandonment of company policies in Australia.”
Issue 4: Approach research with caution
Some of the most influential studies advancing the cause of workplace diversity were published by McKinsey & Co between 2015–23. The series of reports purported to establish that greater workplace diversity leads to improved financial performance. However, in a peer-reviewed paper published in Econ Journal Watch last year, the researchers were unable to reproduce the results of the McKinsey studies.
On 3 February, McKinsey sent a memo to its staff stating it will “continue to prioritise diversity in our meritocracy”, but without giving up on DEI. Bradley received the memo as a former McKinsey partner, but he was long sceptical of the veracity of the research. “I’ve always dismissed those studies as poor science,” he says. “I didn’t find any of them cogently managed to control for variables unrelated to gender diversity. Take commodity prices. Mining stocks do well in certain periods. If you select the right period, they’re going to do brilliantly. Is that because they had more women or ethnic diversity on the board? Absolutely not.”
In this case, suggests Bradley, correlation does not equate to causation. However, disputing the validity of the findings doesn’t mean Bradley supports winding back DEI programs. “I’ve always been a great supporter of having more women on boards and in management positions, and I’ve chaired companies where we’ve achieved a 50–50 balance of men and women on the board without having quotas or explicit targets. We had that for nearly a decade at Energy Australia.”
Issue 5: Stay on the front foot
Simon McKeon AO FAICD, on the board of Rio Tinto until May 2024, emphasises the DEI issue will not solve itself. “You can’t just say DEI is a sensible policy and will evolve over time. It requires serious focus and, most importantly, constant reminders of its benefits... It requires intentionality over a period of time... You have to be on the front foot to ensure it leads to an improved competitive position.”
Pushback to DEI initiatives at Australian companies is rarely shared publicly. This makes it difficult to understand how sentiment is tracking. Rio Tinto is an exception. In November 2024, the mining multinational reported opposition to its diversity efforts, expressed in an internal cultural survey of more than 11,600 staff. The pushback was largely from men who felt that they were being discriminated against.
“It was pretty tough to see this,” says McKeon. “Let me be blunt, it appeared to be long-serving male employees grumbling about how they now felt — that they were being unfairly treated.”
According to the report, the rise in harassment of women was partly due to increased retaliation in the form of gendered bullying as a response to Rio Tinto’s efforts to promote gender diversity and inclusion. McKeon emphasises that while he is no longer on the board and not privy to internal discussions, he was not surprised Rio Tinto shared the results of the study.
“It is consistent with the Rio Tinto that emerged after damaging the Juukan Gorge rock shelters [in 2020]. This thoroughly inappropriate act prompted a very large corporation to have a serious think about what it stood for and how it should operate.”
Rio Tinto published the first external review of its workplace culture in 2022. That report, by former Sex Discrimination Commissioner Elizabeth Broderick, found widespread cases of bullying, sexual harassment and racism, as well as instances of rape. “The view then was that if we tried to present a summary of the Broderick report, we ran the risk of misrepresenting an important piece of work, which might simply exacerbate dealing with the root problem,” says McKeon. “Rio Tinto sensibly did not try to simplify the situation with a corporate summary.”
He notes that while the original report and its recent update make for sobering reading, it was the correct way to reinforce the need for change.
“Rio Tinto ploughed ahead with doing as much as it could to equalise gender representation and fair treatment in the workforce. This was not confined to office environments, but all of its operations — many of which are, of course, in remote areas. That wasn’t easy. There were people who had spent an entire career with Rio Tinto and were accustomed to a blokes-only environment, and they felt disaffected. I can understand that.”
Demonstrators protest the US rollback of DEI outside Georgia State Capitol in Atlanta, Georgia on 4 March
Graham Bradley, Infrastructure NSW (below)
Pushback threat
The US-led withdrawal from DEI programs carries local risk in Australia. Clayton Utz partner and employment lawyer Amanda Lyras sounds a warning.
Debate around DEI programs in Australia is heating up, with some large global corporates announcing plans to deprioritise or abandon their efforts after Trump signed executive orders to wind back DEI offices, roles and initiatives. But there are questions about what an international push against these programs might mean for global companies operating in Australia, particularly where an offshore parent company adopts a policy to phase down its DEI approach.
DEI programs have been a key feature of corporate social responsibility agendas in Australia, but they are also important in meeting ever-increasing legal and regulatory obligations aimed at encouraging equal opportunity, reducing discrimination and harassment, and supporting safe and respectful workplaces. Australian businesses — including those with international parent companies — must continue to ensure they meet these legal requirements.
The past decade has seen a significant increase in DEI reporting obligations in Australia, including on companies with 100 or more employees, to report annually on gender equality indicators such as workplace gender composition and the gender pay gap.
Companies with 500 or more staff are additionally required to have internal policies and strategies to support these indicators. While non-compliance won’t result in financial penalties at this stage, companies may be “named and shamed” and lose out on lucrative government contracts.
How it works in Australia
Under Australian laws, it is illegal to discriminate against a person or group based on protected attributes, including gender, race, sex, sexual orientation, age and disability.
Following the Australian Human Rights Commission’s national inquiry into workplace sexual harassment, Australian companies are also now required to take reasonable and proportionate steps to eliminate sex discrimination and sexual harassment, and other forms of unlawful workplace conduct. Failure to comply can result in enforcement action, financial penalties, and reputational damage.
Alongside these laws, DEI programs help address systemic biases in recruitment, promotion and remuneration, and mitigate against discriminatory practices. These programs typically include training and policies to prevent discrimination and harassment. They also often involve structures to support employees with specific needs, such as disabilities or family and carer responsibilities, by providing workplace adjustments or flexible working arrangements to facilitate workforce participation.
A concurrent duty arises under work, health and safety (WHS) legislation to eliminate, so far as is reasonably practicable, physical and psychosocial hazards from the workplace.
Queensland introduced regulations last September that impose express obligations regarding proactive management and prevention of WHS risks from sexual harassment and gender-based harassment at work. From March this year, employers in Queensland will also be required to prepare a prevention plan to manage any identified risks.
Impact on compliance
Winding back DEI programs can have impacts on WHS compliance. This ranges from potential increases in psychosocial hazards following complaints of workplace harassment, bullying or discrimination, to unreported safety issues, and the potential for poor morale and higher staff turnover to destabilise safety initiatives.
Where DEI programs form part of control measures that are implemented to discharge WHS duties, organisations will need to consider their broader approach to the identification and management of WHS risks, such as sexual and gender-based harassment, to ensure that appropriate controls remain in place. Employers who fail to comply with WHS duties may face significant financial penalties that can run into millions of dollars — and in the worst instances, even jail time for business leaders and directors.
Alongside their legal obligations, listed companies need to consider recommendations under the ASX Corporate Governance Principles and Recommendations. These recommend boards actively address DEI by having a diversity policy, setting measurable objectives to achieve greater diversity, and reporting on the gender of their board members, senior executives and workforce. While the recommendations are not mandatory or prescriptive, a company board must explain why it has not adopted a recommendation under the “if not, why not” approach.
Multinational businesses operating in this country should be cautious about scaling back DEI programs. Doing so can impact compliance with Australian laws. It is important Australian companies remain committed to their reporting obligations, anti-discrimination requirements and WHS duties. Navigating how the shifting of internal policies at an international parent company is treated by local subsidiaries can be complex, but the legal requirements on Australian businesses remain clear.
“Employers who fail to comply with WHS duties may face significant financial penalties... and in the worst instances, even jail time for business leaders and directors.”
This article first appeared under the headline ‘Shifting Sands’ in the March 2025 issue of Company Director magazine.
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