DEI DOA? Does IBM’s $17m Trump 2.0 settlement signify the death of Diversity, Equity, and Inclusion?

IBM’s decision last week to settle a US Government probe into its Diversity, Equity, and Inclusion (DEI) practices has drawn mixed reactions as to what the move could signify going forward. To re-cap, the tech giant has agreed to pay $17 million for alleged breaches of the False Claims Act (FCA), although it has not admitted liability. As a major federal contractor that has historically been viewed as a DEI pioneer, IBM is a high-profile scalp for the Trump 2.0 administration to secure as part of its policy of casting DEI as discriminatory practice. 

In a bid to undermine DEI initiatives across corporate America and beyond, the President signed various Executive Orders (EOs) on coming to power for a second time in January last year. These EOs required, among other things, that federal contractors and sub-contractors certify they “do not operate any programs promoting DEI that violate any applicable Federal anti-discrimination laws”. During the period covered by the Department of Justice’s (DoJ’s) lawsuit, IBM was working on almost $9 billion in government prime and sub-contracts.

The case is the first resolution under the FCA secured by the DoJ’s Civil Rights Fraud Initiative, which was launched in May last year. It is also the first time the DoJ has publicly identified a company subject to an FCA investigation into DEI practices. So it's safe assume that the outcome is precedent setting, although both sides have emphasized  in the announcement that it is "neither an admission of liability by IBM nor a concession by the United States that its claims are not well-founded". 

For its part, IBM states only that it is pleased to have reached a resolution, adding: 

Our workforce strategy is driven by a single principle: having the right people with the right skills that our clients depend on.

As to what the situation is likely to mean moving forward, Christine Edwards Pitkin, Founder of community engagement consultancy Civility Localized, is clear that:

This is a cultural inflection point, not just a legal one. The use of the False Claims Act as a weapon against DEI programs in federally-funded organizations reframes diversity work from a compliance asset into a compliance liability almost overnight. For a company like IBM, which wrote its first non-discriminatory policy a decade before the Civil Rights Act, the symbolism is hard to overstate.

When the authorities keep on coming

But it is not the first time IBM has faced legal challenges for its approach to DEI. For example, the IT services and solutions provider was sued by former Missouri Attorney General Andrew Bailey in summer 2024. He alleged IBM had violated the state’s Human Rights Act by using unlawful racial and gender hiring quotas. The case was finally dismissed with prejudice in February this year.

In another instance that same year, Randall Dill likewise sued the vendor for reverse-discrimination, represented by America First Legal. He contended he was fired to help fulfil racial and gender quotas and was discriminated against because he was a white male. The case was settled with prejudice in July 2025.

By May of that year though, IBM had already made major changes to its DEI practices in a bid to ensure legal compliance. These changes included disbanding its DEI department and dissolving its Diversity Council, which had been in existence since the 1990s. It also terminated its allyship program and no longer encourages employees to recognize preferred pronouns.

Despite taking such action though, the supplier still found itself hit by the DoJ’s lawsuit earlier this year. As a result, Edwards Pitkin says she is not surprised that IBM would not want the authorities to “keep coming after it as it’s damaging to the business”. But she adds:

My fear is that if IBM has caved, others will too, and other corporations, large and small, will start removing their DEI practices. Although it’s been happening for a while, it’ll be more noticeable now because it’s clear that the consequences of not doing so are real. You can’t just change the name of something if there’s a government investigation. You have to get rid of the practices altogether. So, I do think it sends a signal to other businesses that diversity practices are going away. DEI and affirmative action are done.

To make matters worse, Edwards Pitkin is also concerned that pressure at the national level will negatively impact programs at the state level too. This includes initiatives aimed at creating a level playing field, particularly for small minority-owned businesses, in accessing potential contracts.

DEI as contractual risk

Senior independent DEI Advisor Birgit Neu, on the other hand, is more optimistic. In her view:

IBM’s decision to settle without admitting wrongdoing looks less like a retreat from DEI and more like a tactical re-set to protect what works in a much tougher legal climate. The real story isn’t the $17 million. It’s the legal mechanism. DEI is now being tested as a contractual risk, not just a cultural priority. DEI doesn’t disappear after this. Organizations like IBM have had business cases around why DEI matters to them and know how it’s benefitted them for many years already – and much of that will not have changed. There are still plenty of business leaders in the US supporting DEI too, even if more of that is happening behind closed doors in the current environment.

As a result, Neu believes, it is less about the death of affirmative action, and more:

The end of a particular way of talking about, and implementing, it. The underlying need to broaden opportunity and address the structural barriers that some people face hasn’t gone away. If anything, it matters more in an AI-driven labour market that risks widening gaps. But there has been a shift from identity-led narratives to outcome-led design, with fairness, access, and measurable impact at the heart of that. Organisations in the US are already adapting to carry on with elements of the work, but they’re doing so in ways that are more legally robust and more clearly tied to performance and impact.

This means, Neu says, that the future of DEI will be less about targets. Instead, it will be more about employers using structured evidence to show how they came to their decisions, and how they documented and defended their choices.

In fact, Neu indicates, she is already seeing a move from “narrative-led DEI” to “systems- and process-led DEI”, particularly in relation to hiring, promotions, and incentives. As a result, she points out:

A key lesson [from the IBM case] is that good intent around DEI isn’t enough. Design really matters. Organisations need to be able to explain exactly how their DEI initiatives work, who they apply to, and why they’re fair. They should be stress-testing them against legal and other risks, while also ensuring that the effort going into initiatives is genuinely delivering better outcomes. We’re getting into a phase where DEI has to be treated much more like any other core business system, with credible measurement, robust governance, and clear accountability. The organizations that get ahead on this will be far more resilient in what’s becoming a much more scrutinized environment.

Less room to manoeuvre

But there will be other implications too. Shane Lucado is Founder and Chief Executive of legal marketplace InPerSuit. He indicates that “if we are to believe comments from DoJ officials that this was meant to ‘send a message’”, the approach will largely succeed in encouraging other organizations to settle too - not least due to the sheer expense of federal employment litigation. In fact, Lucado says:

There’ll be three to five more settlements of this nature coming from tech, defense, and consulting firms before this DoJ administration leaves office.

IBM’s $17 million payout will also likely become a benchmark that others use for comparison, Lucado says:

It’s expensive enough to hurt a quarter’s earnings, but not so big that [larger] companies won’t prefer to settle than fight. That’s how the federal government wants to price-resolve cases when they want to change corporate behavior rapidly.

But he also believes that employers have will now less room for manoeuvre in areas, such as fending off reverse discrimination lawsuits, than they once did – although all is not lost:

There is plenty companies can do without crossing that line into legal exposure. Internal mentoring programs, unconscious bias training, targeted outreach efforts – those kinds of things will not face federal enforcement actions. Corporate DEI programs aren’t dead. They’ll just be less blatant about certain aspects of ‘diversity’.

In IBM’s case, this will mean removing any quotas or goals tied to specific demographics. It could also see a change in language to focus on “outreach and skills-based hiring”, he says.

What the future holds

As for what multi-national companies, particularly if they operate in DEI-friendly markets like the UK and the European Union (EU) will need to bear in mind here going forward, Neu reckons little is likely to change. This is because national legal, cultural and market differences have always meant they were unable to operate a single, global DEI model anyway. 

Moreover, she says, most international companies started reviewing their US DEI activity very quickly after the 2024 election results came in. This meant the “hard yards” were largely complete by mid-2025, with “watching briefs” on the administration’s stance having been in place ever since. But Neu does acknowledge:

The challenge for multi-nationals operating in the US has been the speed with which they have had to adapt from the US being one of the most DEI-friendly markets with commensurate levels of DEI activity to the US now being legally and more culturally adversarial…That said, the mood music from the US has not stayed within its borders.

In fact, Neu says, some multi-nationals have simply applied some of the changes being made in the US more widely to other markets, whether mandated locally or not. This situation has led to a general reduction in DEI appetite, resourcing, and attention in large international companies overall. It is also:

Being accelerated by the economic and geo-political environment as well as the all-consuming corporate focus on AI, where - in spite of bias in AI long being known as one of its most significant challenges, with extensive risk implications - the DEI agenda has yet to be truly connected up with strategic AI plans.

As a result, Neu points out, the biggest question for her right now is:

Whether organizations will remember to factor DEI considerations in as they re-design their workflows and workplaces towards an AI-driven future. Given the lack of connection between corporate AI strategies and DEI strategies that we’re seeing so far, there may be more significant issues ahead than just legal challenges for DEI-related impacts on employees and customers if organisations aren’t taking an inclusive approach to how they design and implement what’s next.

My take

While the IBM settlement may not signal the end of DEI right now, it appears to be subject to death by a thousand cuts. While some employers are quietly re-working their programs behind the scenes, others are cutting them back to the bone – at a time when the growing deployment of AI means that they are more necessary than they have ever been.