Is America’s ‘woke backlash’ a warning?
With Microsoft scrapping a DEI team and Elon Musk moving to Texas, is the tide turning on the ‘woke’ agenda – and should businesses pay attention? Asks Eliot Wilson
When America sneezes, Britain catches a cold. It is an idea that became popular after the Wall Street Crash of 1929, when the fall in New York share prices caused a savage depression in the United Kingdom. Our close dependence on the United States – the necessary but unequal “special relationship” – means we remain at the mercy of events in America and we should always monitor changes in habit, practice and culture there. They will reach us before too long.
In that context, a leaked email last week revealing that Microsoft was scrapping a diversity, equity and inclusion (DEI) team on the grounds that it was “no longer business-critical” is significant. The tech giant insists that its “D&I commitments remain unchanged” but the scope and grandeur of some diversity efforts have come under more and more exacting scrutiny in recent years.
After the death of George Floyd in Minneapolis in 2020 and the subsequent surge in support for the Black Lives Matter campaign, corporations were desperate to show their bona fides on matters of racial and other aspects of equality, seeing a public mood they believed they had to acknowledge. Microsoft did not stint. It pledged to spend $150m and double the number of managers and senior employees of colour by 2025 and increased its support for historically black colleges and universities. The company also gave $25m in seed funding to the Clear Vision Impact Fund, a joint venture with minority and women-owned investment bank Siebert Williams Shank & Co.
With financial retrenchment in 2022, many tech companies like Google and Meta began to scale down their DEI programmes. One consideration was legal: just months after Microsoft announced its ambition to double the number of senior employees of colour, the United States Department of Labor Office of Federal Contract Compliance Programs began to examine whether this kind of initiative was compatible with anti-discrimination legislation.
Another possible sign of a turning tide was Elon Musk’s recent announcement that social media platform X (formerly Twitter) and SpaceX would transfer their corporate headquarters from California to Texas. His professed motivation was Governor Gavin Newsom’s signing of the Support Academic Futures and Educators for Today’s Youth Act, which stops schools requiring staff to disclose a student’s gender identity, gender expression or sexual orientation without the student’s permission. Musk called it “the last straw”.
Many have suggested his real motivation is more cynical: Texas has no individual or corporate income tax, though in fact for businesses it is overall a relatively high-tax state. But the billionaire has skin in the game too: the eldest of his (estimated) 11 children is transgender and he blames her school for exposing her to ideas which led to her male-to-female transition and subsequent decision to cut off contact with him.
Are these just isolated incidents? That is possible, but it would be reckless to ignore the alternative, that we are seeing a gradual shift in culture away from the most extreme expressions of “wokeism”, and an acknowledgement that enthusiasm may have outpaced good judgement when some worthy initiatives were implemented a few years ago. Business leaders have already seen the torrid reputational time that ESG has endured, becoming a focus of anger for populists across Europe and America, and are rightly anxious to avoid a repeat performance.
In the United States, businesses are also acutely conscious that Donald Trump is currently likely to win November’s presidential election. Elon Musk is a long-standing supporter, and PayPal founder and venture capitalist Peter Thiel effectively bankrolled the initial senate candidacy of J.D. Vance, now Trump’s running-mate. With Trump, however, comes an army of acolytes and activists – and in particular those who have coalesced around Project 2025, a radical plan to reshape the federal government and make it more powerful and more conservative.
Nothing is certain. But British business leaders should be aware of this unfolding narrative and balancing it against the developing policies of the new government here. If a “woke backlash” does arrive, business needs to be prepared to change where necessary, adapt to new statutory and regulatory regimes and understand the shifting sands of public opinion. Fundamentally, in private enterprise, you need to stay within the law and keep your customers on-side. That could be challenging over the next few years.
Eliot Wilson is co-founder of Pivot Point Group