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Verizon Ends DEI Programs in Strategic Move for Regulatory Approval

Prime Highlights

  • Verizon cuts back on Diversity, Equity, and Inclusion (DEI) initiatives to secure FCC approval for its $20 billion Frontier Communications buy.
  • The action is standard FCC procedure under Chairman Brendan Carr, who considers some DEI initiatives discriminatory.

Key Facts

  • Verizon will drop DEI terms from its website, employee training, and management performance goals.
  • The transaction will extend Verizon’s fiber-optic service to 25 million households in 31 U.S. states and D.C.

Key Background

Verizon Communications has opted to shed its Diversity, Equity, and Inclusion (DEI) initiatives as part of the deal to gain regulatory approval for a $20 billion purchase of Frontier Communications. The decision comes amid increasing alarm from the Federal Communications Commission (FCC) about including DEI-based corporate initiatives, with Commissioner Brendan Carr earlier warning companies they would delay merger approvals if they were discriminatory.

In a letter to the FCC, Verizon Chief Legal Officer Vandana Venkatesh laid out immediate action items. These include eliminating all mentions of DEI on Verizon’s corporate website, stopping employee training in DEI topics, and stopping inside diversity hiring objectives. The management pay-for-performance program also no longer will use diversity objectives as one of the measures used to determine compensation. The procedures are intended to satisfy FCC standards that the transaction be in “public interest.”.

Frontier purchase by Verizon is a strategic step to expand its fiber-optic network. Under the deal, Verizon agreed to bring high-speed internet to more than one million more homes annually. This will enable Verizon to bring broadband to 25 million homes in 31 states and Washington, D.C., greatly enhancing its national competitor standing in the telecom industry.

The Verizon DEI reversal is not an isolated occurrence. Other large telecom firms, including T-Mobile, have reversed comparable programs when they have been considering buying. The most recent action by the FCC is evidence of larger shifts in how federal regulators are balancing corporate governance and compliance with public policy when making large mergers. Though eliminating DEI programs will very likely be controversial, Verizon seemed to weigh the requirement to follow regulatory opinion against going along with its growth strategy.

This realignment is a watershed moment in the corporate America function of DEI, particularly where gigantic mergers and public interest norms intersect. To the extent that more firms try to wheel and deal with regulatory systems, DEI could become subjected to more pointed legal and political controversy.

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