Trump DEI crackdown exposes hidden policies across federal contractors

OPINION:

When President Trump took office in January 2025, he signaled clearly that the federal government was finished with diversity, equity and inclusion policies.

In response, many federal contractors have taken steps to scale back DEI, but a closer look indicates that those changes are more limited than they appear.

On March 26, Mr. Trump signed an executive order addressing DEI discrimination by federal contractors. The executive order acknowledges some progress but states, “Despite this progress, some entities continue to engage in DEI activities and often attempt to conceal their efforts to do so.”

Last week, 1792 Exchange updated its federal contractors database, which evaluates the top 100 companies doing business with the U.S. government for their DEI commitments. Together, these firms account for more than $424 billion in federal contract awards and nearly 69 million procurement transactions.

We found that many federal contractors have taken some affirmative steps to scale back their DEI policies, but most have addressed only the most outwardly visible elements while leaving more embedded practices in place.

DEI is often deeply ingrained in companies through executive compensation metrics, supplier diversity requirements and external partnerships with activist organizations pushing DEI ideologies.

Among the continuing, serious concerns raised by the data:

• Seven of the top 100 contractors appear to be sponsors of the Minority Corporate Counsel Association, which focuses on race-based recruitment, retention and promotion.
• Eight scored a verified 100 on the Human Rights Campaign’s 2026 Corporate Equality Index, indicating the company is committed to recruiting employees based on sexual orientation and gender identity and to vetting vendors for LGBTQ policies.
• Ten have CEOs who appear to be “catalyst champions for change,” supporting gender and racial targets in leadership composition.
• Twenty-three have CEOs who signed the CEO Action for Diversity & Inclusion pledge, committing to “bias training,” collaboration on DEI initiatives and board engagement in DEI strategy.

Advertisement Advertisement

In most cases, these DEI frameworks were adopted without a full understanding of how they would evolve. Consider the Human Rights Campaign’s Corporate Equality Index, which has been a primary instrument to promote identity-based policies.

Every year, companies are asked to fill out this survey and document their commitment to the Human Rights Campaign’s agenda. Over time, the Corporate Equality Index criteria have expanded and required more and more from companies to achieve a “perfect score.”

In its more recent iterations, the CEI pushes companies to provide transgender “medical benefits” to minors and to publicly support LGBTQ legislation.

At the same time, these companies are restricted from making charitable contributions to organizations that oppose the Human Rights Campaign’s priorities.

What began perhaps as a reputational signal has now resulted in a deeply pervasive operational framework.

Advertisement Advertisement

Mr. Trump’s executive order stresses that “DEI activities are not only unethical and often illegal, but also cause inefficiencies, waste, and abuse within entities that engage in such practices.” Policies that incorporate identity-based criteria in recruitment, employment, contracting, programs or use of an entity’s resources now carry legal and contractual risk.

This is a stunning new reality for federal contractors.

The challenge is that these risks are not always obvious. They are often embedded in internal policies and external partnerships.

Even companies that have revisited their policies have often done so quietly, leaving regulators and investors without transparency and clarity regarding the company’s decisions, reasoning and future direction.

Advertisement Advertisement

Firms that ensure comprehensive policy neutrality will be better positioned to reduce legal and regulatory risk, secure future contracts and build trust with shareholders.

1792 Exchange’s Back to Business Tracker highlights a growing number of companies, including AT&T and IBM, that have publicly taken concrete steps away from DEI to refocus on core business priorities. Their examples suggest that progress is not only possible but also significantly underway.

Many companies may have acted in good faith based on the information and incentives available at the time, but the landscape has shifted dramatically since then. More than $424 billion in taxpayer funds flow to federal contractors each year.

That scale carries opportunity and responsibility.

Advertisement Advertisement

Federal contractors must look beyond surface-level positioning and address the deeply embedded policies and partnerships that shape decision-making beneath the surface.

The companies that take this seriously and make real changes will not only be compliant with the law but also will lead in the golden era of corporate America.

• Douglas H. Napier is executive chairman and CEO of 1792 Exchange.