Depending on the action taken, some companies experienced significant backlash from their stakeholders, includingemployees and the public. As we begin to round the corner into 2026, how do organizations navigate the ever-changingintersection of law and culture and position themselves for positive impact?

When the current administration issued two key executive orders (EOs) related to diversity, equity,and inclusion (DEI) in the beginning of 2025, a firestorm of fear, panic, and confusion ensued.While the EOs clearly eliminated DEI in the federal government, federal contractors, grantees, andprivate companies were left scrambling, with some eliminating DEI completely, others re-branding,and still others staying the course both publicly and privately. Depending on the action taken,some companies experienced significant backlash from their stakeholders, including employeesand the public. As we begin to round the corner into 2026, how do organizations navigate the ever-changing intersection of law and culture and position themselves for positive impact?

Unpacking DEI and the Executive Orders: The Legal Landscape

In evaluating the current state of DEI, a clear understanding of what DEI is, and is not, is necessary.Mischaracterizations and common myths have fueled villainization of DEI, overshadowing its lawful, strategic role in creating equity, mitigating risk and advancing organizational performance.

Diversity is the presence of differences across individuals and groups, including race, age, gender,sexual orientation, socioeconomic status, religion, education, and diversity of thought. Equitymeans fairness in access, opportunity, and resources, recognizing that different individuals mayneed different support to achieve equal outcomes, unlike equality, which treats everyone the same. Inclusion fosters an environment where everyone feels valued, respected, and heard. This sense of belonging is essential to building a healthy culture and driving success.

Despite clear definitions, DEI is often misunderstood. Common myths include that DEI prioritizes quotas over merit, lowers standards, creates “reverse discrimination,” and harms financial performance. In reality, DEI strengthens merit-based practices by reducing bias, expanding access, and preventing discrimination. Further, data consistently shows that organizations investing in people, culture, and DEI are more innovative, sustainable, and profitable than those that do not.

The EOs that were issued trade squarely on these myths and misconceptions. EO 14151, Ending Radical And Wasteful Government DEI Programs And Preferencing, ended all DEI-related programs, policies, preferences, grants, initiatives, activities and offices across the federal government. EO 14173, Ending Illegal Discrimination and Restoring Merit-Based Opportunity, revoked affirmative action requirements for federal contractors and removed the requirement prohibiting discrimination by federal contractors. It also required federal contractors and grantees to certify that they do not operate any “illegal” DEI programs. For private companies, this EO empowered the Attorney General to investigate large organizations suspected of violating anti-discrimination laws through their DEI programs.

One of the biggest problems with the EOs, and the myriad of litigation that ensued from them, was that the definition of “illegal DEI” was not clear, making compliance difficult. On March 19, 2025, the EEOC and DOJ issued guidance in an attempt to define “illegal DEI,” explaining that DEI initiatives, policies, programs, or practices may be unlawful if they “involve taking an employment action motivated—in whole or in part—by an employee’s race, sex, or another protected characteristic.” Cited as specific examples of illegal DEI were quotas or workforce balancing, programs that limit, segregate or classify people based on protected characteristics, and any kind of disparate treatment involved in hiring, firing, compensation, job assignments, mentoring or like opportunities.

This definition, however, is nothing new—it mirrors what Title VII of the Civil Rights Act of 1964 has always required: that employers may not discriminate in any term or condition of employment based on a protected characteristic. In other words, what some now call “illegal DEI” is the same unlawful conduct that has always been prohibited under federal law. In contrast, properly designed DEI initiatives are legal—then and now. As Kwame Raoul, co-chair of the Democratic Attorneys General Association, stated: “Employment policies incorporating DEIA best practices are not only compliant with state and federal civil rights laws, they also help reduce litigation risk by affirmatively protecting against retaliation, harassment, and other discriminatory conduct.”

The law has not changed, but the narrative has. For companies, especially those in the private sector, the real question is not whether DEI can be pursued legally (it can), but how to do so meaningfully, strategically, and in a way that strengthens culture, while simultaneously mitigating risk.

To DEI or Not to DEI: Shifting the Cultural Landscape

While the media often focuses on those companies that have abandoned DEI (and those decisions have come with their own share of risk and repercussions), shareholder votes at major companies tell a different story. According to a compilation article by journalist Nancy Levine Stearns, “Boards of directors of companies collectively valued at more than $13 trillion dollars … unanimously urged their shareholders to vote against anti-DEI proposals … with shareholders from companies including Costco, Apple, Levi Strauss, among others … unanimously handing resounding defeats to all anti-DEI proposals that were presented during this year’s proxy season.”

It is not surprising that shareholders of the most prominent companies are voting overwhelmingly in favor of DEI; they understand the undeniable business benefits of investing in culture and the risks of abandoning a culture-driven strategy. For most private organizations (other than high-profile or specifically targeted entities like Harvard or Perkins Coie), the greatest risks are driven by internal factors, not from external government action. These internal risks manifest in many ways, including increased discrimination complaints, EEOC actions, and other litigation (both traditional claims and those brought by majority group members); difficulties in attracting and retaining talent; reputational damage leading to boycotts or loss of customers and clients; and, ultimately, organizational performance risk, because culture failure inevitably results in business failure.

In this current climate, how do companies ensure they are continuing intentional culture work while remaining compliant and minimizing risk? There are several considerations:

• A focus on access and opportunity for all is paramount. Employee resource groups must be open to everyone (not just those who hold the identity of the group). Similarly, special events, mentorship and engagement programs must be available to all.
• Talent management processes and policies like hiring, firing, promotion, compensation, etc. must be audited to ensure there is no inadvertent discrimination, disparate treatment, or adverse employment action in both language, implementation, and consequence. Inclusion and bias training opportunities for leaders and managers that is rooted in behavior, not blame, helps to minimize the risk inherent in these processes and policies and proactively builds a healthier culture. As a note, companies must be aware of guidance from the Office of the Attorney General of the United States issued in late July related to the use of “proxies” or “neutral criteria” that are deemed substitutes for unlawful considerations based on protected characteristics. While the guidance technically only applies to recipients of federal funds, it could be used as guidance for all employers by the EEOC under Title VII.
• Engaging in “culture checks” to assess employee experience around issues such as psychological safety, trust, voice, belonging, and communication is critical to identifying hot spot issues that could lead to legal exposure or loss of talent.

The current state of DEI in the United States provides an opportunity for all organizations to approach this work with more intentionally, breadth and strategy. At its core, DEI is about culture—creating workplaces where every employee feels valued, respected, and safe. When DEI is anchored in core values and embedded into the fabric of organizational operations, not only is backlash and risk mitigated, but a path to long-term sustainability and stability, growth and performance is unlocked. This work goes far beyond compliance. It is about building cultures that drive organizational success.

Robyn Forman Pollack is workplace culture strategist and co-founder of Loutel, an employment law and business strategy firm that optimizes people and culture for organizational performance while minimizing legal risk. A business strategist with a focus on talent, she takes an integrated and comprehensive approach to developing data-driven, strategic solutions to optimize people and culture for organizational performance. Utilizing her extensive background as a restructuring attorney, Pollack uniquely understands the alignment between talent performance and enterprise performance, and the importance of addressing systems and processes to maximize employee experience. She has also been an adjunct professor of law at Temple University’s Beasley School of Law for almost 25 years and is a member of the Board of Directors of the Forum of Executive Women, where she serves as Chair of the Diversity, Equity, and Inclusion Committee. Pollack can be reached at rpollack@loutel.com.

Christina M. Reger is law and compliance counsel and co-founder of Loutel. Reger leads the firm’s legal team which provides litigation and compliance services related to labor and employment for corporate, entrepreneurial and start-up enterprises. She regularly counsels businesses on how to comply with the barrage of new employment laws, regulations, opinions and guidance from federal and state agencies. Reger also handles a variety of employment law litigation matters including business divorces, breach of employment contract disputes, unfair competition, discrimination and harassment, enforcement of restrictive covenants, and a wide variety of other general commercial litigation matters from complaint through appeal. Contact her at creger@loutel.com.