The Fight Over D.E.I. in the C-suite

The D.E.I. debate is far from over

Even though Claudine Gay’s resignation as president of Harvard was tied to plagiarism allegations, debate on a broader culture war’s role in the move is grabbing lots of attention.

Some of Gay’s most outspoken detractors have cited efforts to improve diversity on campus and in boardrooms — known as diversity, equity and inclusion, or D.E.I. — as a reason for her downfall, saying she wasn’t qualified to lead the university. (Their critics, including Gay, have suggested that such an assertion is racist.)

Many prominent business leaders are weighing in on the debate that is taking place amid a broader pushback against policies like those around environmental, social and governance — or E.S.G. — that have been criticized by some as politically motivated rather than business-minded.

D.E.I. detractors are feeling emboldened. The billionaire financier Bill Ackman, one of Gay’s most tenacious critics, writes in a lengthy essay for The Free Press that D.E.I. is “inherently a racist and illegal movement” that effectively discriminates against white people. Such policies, he writes, should be wiped out of decision-making at Harvard and elsewhere.

And on X, Elon Musk argued that the basis of D.E.I. was “literally the definition of racism.”

Others are pushing back. The billionaire entrepreneur Mark Cuban challenged Musk in a series of posts on X, defending the three principles of D.E.I. as good for business:

• On diversity, “Good businesses look where others don’t, to find the employees that will put your business in the best possible position to succeed.”

• On equity, “Put your employees in a position to succeed. Recognize their differences and play to their strengths where ever possible.”

• And on inclusion, “Great companies create environments that reduce unnecessary stress of their employees.”

Meanwhile, Gay defended herself and attacked her critics. In a Times Opinion guest essay, the former Harvard president writes that her ouster was about more than the plagiarism allegations against her. The bigger issue, she contends, is fear of generational and cultural change at top institutions:

In other university news, Sally Kornbluth, M.I.T.’s president who also faces calls to resign, announced four focuses for the school, including better understanding of free speech on campus and ensuring the efficacy of D.E.I. programs. And Penny Pritzker, the head of Harvard’s governing body, is resisting calls to resign over the Gay controversy.

HERE’S WHAT’S HAPPENING

Several associates of Jeffrey Epstein arementioned in new documents. Released as part of a federal judge’s order, the documents identified people including Bill Clinton, Donald Trump, the businessman Tom Pritzker and Prince Andrew of Britain, adding new context into the disgraced financier’s relationships over the years. (Neither Clinton nor Trump has been accused of committing crimes; Andrew settled a lawsuit by an accuser.) But the documents revealed few, if any, new smoking guns.

SpaceX illegally fired employees critical of Elon Musk, a regulator finds. Eight workers who had circulated a letter calling on the company to distance itself from Musk’s social media posts, were wrongly dismissed, according to the National Labor Relations Board. The case will head to an administrative judicial hearing in March.

Xerox will cut thousands of jobs. The company will lay off 15 percent of its global work force and name a new leadership team, as it pivots toward business services and away from its core line of selling photocopiers. Shares in Xerox fell more than 12 percent on Wednesday on the news.

Nikki Haley raises $24 million last quarter. The cash haul is the largest yet by the aspiring Republican presidential candidate, who reportedly will hold fund-raising events on Wall Street and in Silicon Valley in the coming weeks. In New York, the potential organizers include the investors Stan Druckenmiller and Henry Kravis, and venture capitalist Tim Draper in California, according to Puck. Meanwhile, Trump on Wednesday petitioned the Supreme Court to reverse a decision by Colorado judges to remove his name from the state’s primary ballot.

The Fed’s “for some time” message divides the markets

The S&P 500 is in a three-day slump. The dip is modest but it’s rekindling concerns about the Fed’s next move amid signs of a slowing global economy and rising geopolitical tensions in the Middle East that could disrupt trade.

The latest Fed minutes have renewed the debate on rate cuts. Stocks rallied at the end of the year after Jay Powell, the Fed chair, signaled that more progress on inflation could open the door to lower borrowing costs in 2024. However the minutes from the December meeting, released on Wednesday, gave few clues on a timetable for easing rates.

Market watchers focused on a more hawkish message in the minutes that the prime lending rate would remain high “for some time,” lowering hopes for a first-quarter cut. This morning, the odds traders were placing on a March rate cut fell to 76 percent, down from 96 percent at the start of the week.

“The minutes reveal the tension within the Federal Open Market Committee,” Jeffrey Roach, the chief economist for LPL Financial, wrote in an investor note. “Participants realize the incredible amount of uncertainty surrounding the macro landscape and they want to keep their options open.”

The Fed is probably “preparing the markets for a cut later in the year should growth falter,” he added. Goldman Sachs, in contrast, is sticking with its forecast of five reductions this year, starting in March.

What to watch: Friday’s jobs data and next week’s Consumer Price Index report. Inflation has fallen from its heights of Summer 2022, but price increases remain above the Fed’s 2 percent target. Wednesday’s minutes made clear that the central bank wasn’t closing the door to further rate increases until inflation was under control.

The Fed is likely to watch Friday’s wage data closely. There are signs that the once red-hot labor market is cooling, returning to pre-pandemic levels, but gains in workers’ pay are still too high for the Fed’s liking.

Economists at Nomura are among those who see warning signs in the U.S. labor market. In a research note, the bankwrote that wage growth was “likely to remain elevated, raising the risk of an eventual inflation reacceleration or ‘last mile’ inflation persistence.”

“They’re trying to become like the Gap, everything to everybody. And I think the definition of a brand is that you’re not everything to everybody. … You’ve got to be clear that you don’t want certain customers coming in.”

— Chip Wilson, the founder of Lululemon, on the athleisure brand’s diversity and inclusion efforts. He also criticized the choice of models used in the company’s advertising as “sickly” and “uninspirational.” Wilson resigned as C.E.O. in 2013 for suggesting that some women’s bodies weren’t appropriate for Lululemon’s yoga pants, and left the board two years later. (A Lululemon representative said that Wilson’s comments “do not reflect our company views or beliefs.”)

The new deal road map

After a series of setbacks, the F.T.C. ended 2023 on a winning streak. The regulator led by Lina Khan scored a series of legal victories just as it finalized new merger guidelines with the Justice Department. The latest: A judge upheld a temporary block on the health-tech company Iqvia buying DeepIntent, an advertising firm, agreeing that the deal could hinder competition.

The F.T.C. can point to recent wins as vindication of its approach. “To close out 2023, the FTC secured another significant victory that temporarily blocks an anticompetitive merger that would raise health care prices for consumers,” Henry Liu, the agency’s competition director, said in a statement on Wednesday.

Last month alone, after F.T.C. legal challenges, the gene sequencing company Illumina said it would sell Grail, a cancer test maker, and the pharma giant Sanofi dropped plans to acquire an exclusive license for a drug from Maze Therapeutics.

But the agency also suffered big losses in 2023. Manycompanieshave criticized the F.T.C.’s approach to mergers as overly aggressive, and some won their legal challenges. The F.T.C. dropped an attempt to block Meta’s acquisition of Within, a virtual reality fitness company, after losing a legal challenge. And Microsoft closed its $69 billion acquisition of the gaming company Activision Blizzard, after the regulator went to court to try to block it.

The new merger guidelines signal that regulators will maintain a tough approach. The revised guidelines are designed to give them more power to block deals that could consolidate corporate power. The new directions are not law, but even the agencies’ fiercest critics concede that the changes could shift the legal landscape.

The U.S. Chamber of Commerce has accused agencies of citing outdated cases and economic theories, arguing that “the courts will view these guidelines skeptically.” But the F.T.C. spokesman Doug Farrar rejected that view, telling DealBook that the guidelines are “firmly rooted in the law.”

THE SPEED READ

Deals

• Firms including Goldman Sachs and JPMorgan Chase are said to be in talks to play significant roles in Grayscale’s proposed Bitcoin exchange-traded fund. (Bloomberg)

• Cigna is reportedly near a deal to sell its Medicare business to Health Care Service Corporation for up to $4 billion. (WSJ)

• Entain, an embattled British gambling company, named Ricky Sandler of the activist hedge fund Eminence Capital as a director. (FT)

Policy

• The Biden administration announced a $162 million grant to Microchip Technology to expand its production capacity in the United States to ensure American companies have adequate access to semiconductors. (NYT)

• A California lawmaker introduced legislation that would prohibit the state from working with providers of artificial intelligence tools unless the providers met new safety and ethics standards. (The Verge)

Best of the rest

• The board of The Messenger is said to have weighed shutting down the beleaguered digital news start-up because of a cash shortfall. (Semafor)

• “Welcome to the Neighborhood! Wall Street Designed It” (WSJ)

• Microsoft is introducing its first new key for Windows keyboards in 20 years — and it’s A.I. related. (Bloomberg)

We’d like your feedback! Please email thoughts and suggestions to [email protected].