Nobody wants to be the second company to rebrand DEI

That's not what's driving most of these decisions, according to Catharine Montgomery, founder of Better Together Agency, a communications firm that works with organizations navigating politically charged environments. "Companies are not renaming DEI because their lawyers said to. They are doing it because they are waiting to see who else moves first."

But Tishayla Williams, a workplace psychologist whose work focuses on workforce infrastructure and organizational fairness, sees a different pressure driving the changes. "I think much of this shift is happening because employees and applicants are increasingly calling companies out publicly over inequity, advancement barriers, workplace inconsistency, return-to-office expectations, and trust," she says. "Organizations are realizing they cannot simply rely on branding or broad statements anymore because workers, especially younger workers, are paying closer attention to how companies actually operate internally."

The question both experts are wrestling with from different angles: are companies making substantive operational changes, or just changing terminology?

The enforcement threat is real, but the legal line isn't clear

Executive Order 14398, signed in March 2026, directs federal agencies to include anti-discrimination clauses in federal contracts requiring contractors to certify they don't engage in "racially discriminatory DEI activities." The order makes compliance with that clause material to payment decisions – a necessary element for False Claims Act cases.

The theoretical question about FCA enforcement ended in April. IBM agreed to pay over $17 million to resolve allegations that it violated the False Claims Act by failing to comply with anti-discrimination requirements in its federal contracts. The Department of Justice's first resolution under its Civil Rights Fraud Initiative proved the enforcement mechanism works.

The settlement did three things federal contractors needed to understand, Montgomery explains. It proved that DOJ would use the FCA to pursue companies that certified compliance while maintaining practices that tied bonus compensation to demographic targets, limited training access by race or sex, and used diverse interview slates. It established that DOJ will look backward – IBM's conduct dates to 2019, meaning no grandfather clause protects pre-executive-order practices. And it confirmed early cooperation matters, as IBM received credit for cooperating, resulting in a reduced settlement.

However, the settlement didn't answer where the actual line sits for programs that are less explicit about race-based criteria. IBM denied liability, and the settlement includes no admission of wrongdoing. No court has tested the DOJ's legal theory. "IBM answered whether this enforcement threat was real," Montgomery says. "What it did not answer is where the legal line actually sits for less explicit programs. That ambiguity is where most organizations are operating right now."

What's actually changing operationally, and what isn't

Williams sees companies moving from DEI-branded leadership programs to broader "talent infrastructure" or "leadership access" initiatives, but the distinction matters. Previously, programs focused heavily on representation goals. Now, companies are reframing work around transparent promotion criteria, pay transparency, parental leave accessibility, and documented advancement decisions.

"Where companies get this wrong is when the changes are purely cosmetic or reactionary," Williams says. "Some organizations remove DEI language without addressing the underlying workplace systems, while others overcorrect out of fear of legal or political scrutiny."

The operational changes she's seeing include structured interviews, standardized evaluation criteria, skills-based hiring, manager calibration sessions, and leadership development programs tied to role readiness rather than identity categories. Companies are also placing greater attention on pay transparency, parental leave accessibility, mentorship access, and consistency in advancement opportunities. Williams describes this as a shift from demographic targets toward whether workplace systems are fair, measurable, accountable, and defensible. "I would defer to employment attorneys on the technical legal interpretation here," Williams says, "but from my research and understanding, many federal contractors are trying to navigate the difference between identity-based preferences and broader process fairness."

EO 14398 appears focused on disparate treatment tied to race or ethnicity in hiring, promotions, and program participation. The FCA concerns arise when organizations certify compliance while maintaining programs that could be viewed as preferential treatment tied to protected identity categories.

Most organizations are getting the legal read roughly right, Montgomery says. What they're getting wrong is the communications strategy. "EO 14398 does not prohibit diversity work. It prohibits race-based differential treatment in specific employment decisions. Those are not the same thing, and organizations that treat them as interchangeable are making a communications mistake."

Substantive change versus cosmetic rebrand

When an org chart goes from "DEI team" to "talent sustainability," what changes first is the language and what appears on the website. The people running the work, the frameworks they use, and the internal metrics they watch often stay exactly the same.

Montgomery worked directly with an alumni organization that lost $50,000 in a single funding cycle, which was 40% of its annual operating budget. That money supported mentorship pipelines, scholarships, and community engagement programs built for Black students and alumni. The organization rebuilt its communications strategy around community investment and workforce development. The mentorship program was still the mentorship program. The scholarships were still the scholarships. Nothing about the work changed. What changed was how they described the return on investment and who they were describing it to.

Within seven days, the full $50,000 was raised. Donor participation was up 127% over previous emergency campaigns, and average gift size grew 85%. "We were not hiding what the organization stood for," Montgomery says. "We were making it easier for more people to say yes to it."

But cosmetic changes without substance create different problems. Montgomery ended an engagement with a global coaching consultancy after watching how a rebrand failed internally. When a large client's legal team requested that all DEI references be removed, the company quickly renamed its framework "Connection." The problem was that the decision was made at the top without explaining why internally. Employees found themselves executing messaging that felt like a retreat without understanding whether leadership still believed what it said publicly.

From the outside, three things reveal whether substance survived the rebrand, according to Montgomery: the reporting structure (who the leader reports to), headcount (whether the team stayed intact), and whether metrics are still being tracked internally even if removed from public disclosure.

Williams focuses on a different accountability mechanism. "Promotion transparency and leadership access are operational issues, not just cultural ones," she says. "Companies are standardizing promotion criteria, reviewing promotion rates, tracking mentorship and sponsorship access, and examining whether advancement systems are applied consistently across teams." Whether those systems actually work is something employees can observe directly.

Employees are conducting informal audits

The consequences of getting the rebrand wrong show up in employee response. And Williams sees this as the more powerful enforcement mechanism than legal threats.

"The real difference is accountability," Williams says. "Many employees and applicants are now conducting their own informal audits by paying attention to promotion patterns, leadership access, compensation transparency, parental leave experiences, and who advances within organizations. If companies only change the language while the underlying patterns remain the same, employees will recognize the rebrand as cosmetic."

Target discovered this when it pulled back on DEI commitments. The company had spent years building brand equity around inclusive products and communities. When it scaled back, foot traffic fell 4% year-over-year in the week following the announcement, then dropped 8.6% and 3.9% in subsequent weeks. Customer trust scores, which had been at 70 in January, fell to 65 by June.

Organizations that went dark on DEI disclosure didn't become invisible to stakeholders, Montgomery observes. They became suspects. Institutional investors still want workforce metrics. Global regulators outside the United States still require diversity reporting. Employees who were inside those programs know exactly what changed and what didn't.

One in seven companies that rolled back DEI policies has since acknowledged it was a mistake, and 20% are quietly reintroducing initiatives they removed. That quiet reversal tells employees and stakeholders that stated values move with external pressure rather than internal conviction.

Two enforcement mechanisms

Montgomery describes a tech company that was ready to move forward with communications around its sustainability work. When the current administration was elected, the engagement stopped. Not because the work changed or because legal counsel identified specific regulatory exposure. The decision was about avoiding association with any language the administration had targeted.

The company was waiting for another organization to demonstrate that visibility was financially survivable. They wanted to be the fifth or sixth when the pattern was established, and risk felt distributed. Montgomery's assessment: "This company was not afraid of its employees or its customers. It was afraid of a contract it had not lost yet. What I push back on is calling it a strategy. Strategy requires a position. Waiting for someone else to absorb the exposure is not a position."

This dynamic, repeated across organizations, creates what Montgomery sees as a worsening environment. Every company waiting for cover makes it harder for companies willing to go first to get the coverage that would permit others to follow.

Williams is pointing to an entirely different enforcement pressure. While companies worry about DOJ and herd behavior, employees are watching whether systems actually change. "The focus is shifting away from demographic targets and toward whether workplace systems are fair, measurable, accountable, and defensible," Williams says. Companies that ignore workforce expectations around transparency and fairness will face challenges with trust, talent retention, and reputation.

Organizations that only renamed programs without auditing how their internal operations actually function haven't made themselves safe from exposure, Montgomery says. They've made themselves harder to evaluate from the outside, which is different from being safe.

Williams sees the employee accountability mechanism as more permanent than the legal one. "Legal and political scrutiny may shift with election cycles, but employees and applicants are keeping score, and workforce expectations around transparency, fairness, and accountability are becoming more permanent business realities."