The Death of Merit: How America’s Best Companies Lost Their Way

Over the last four years, a quiet revolution has swept through corporate America, dismantling the meritocratic ideals that once ensured the nation’s best and brightest could rise to the top. With diversity, equity, and inclusion (DEI) mandates dictating hiring practices, the numbers tell a stunning tale: 94% of new hires at leading public companies were so-called “people of color,” with black women taking the lion’s share of these roles. This figure, derived from corporate diversity reports, reflects an overwhelming prioritization of identity in hiring practices. Given that black women constitute only a small fraction of the population and that just 38% hold college degrees, this disproportionate focus raises questions about the impact on fairness and the sidelining of more qualified candidates. The implications are stark: many highly skilled individuals have been systematically overlooked in favor of fulfilling demographic quotas, challenging the meritocratic foundations of corporate success. Yet this demographic represents only 2.28% of the U.S. population—a statistical manipulation that sacrifices fairness and merit. The real victims of this social engineering are white men, systematically excluded from opportunities they would have earned on their qualifications, and the companies themselves, which have sidelined talent and innovation in favor of identity politics. The consequences are already manifesting in plummeting stock returns and organizational inefficiencies, a harbinger of long-term damage to American competitiveness.

Imagine, for a moment, the absurdity of a policy that freezes out 60% of Americans based solely on their skin color or gender. This is no dystopian fantasy—it is the new corporate normal. As James Fishback, founder of the investment firm Azoria, notes, “Exceptional companies are run by exceptional people.” Yet, under the tyranny of DEI hiring quotas, talent and merit have become secondary considerations. Firms like Best Buy have gone so far as to codify these practices, committing to filling “one in three corporate salaried positions” with BIPOC (Black, Indigenous, People of Color) candidates. Similarly, Wells Fargo recently faced scrutiny for limiting interviews for jobs paying over $100,000, where white men could represent only 25% of those interviewed. Although this practice was revised after public backlash, it exemplifies the widespread adoption of such policies among America’s biggest companies. These initiatives not only perpetuate divisive assumptions about minority capabilities but also systematically exclude highly qualified candidates, eroding the principles of meritocracy and innovation.

The numbers bear this out. Of the new hires filling these identity-based quotas, only 38% of black women—the demographic disproportionately targeted by these policies—hold college degrees. By contrast, highly qualified candidates from other racial groups, particularly white men, are systematically excluded. When 94% of jobs are allocated to 2.28% of the population, it becomes mathematically impossible for these positions to consistently go to the most qualified individuals.

The fallout from these practices is hitting where it hurts most: the bottom line. Fishback’s Azoria has launched a Meritocracy ETF, boldly excluding companies like Best Buy, which prioritize identity politics over ability. As Fishback puts it, “Companies that hire on skill and ability will outperform those that hire on race and gender.” And the early results are staggering. Over the past year, a portfolio of S&P 500 companies employing racial and gender hiring targets has returned just 12%, compared to the broader index’s 30% gain. Over two years, the gap widens to a dismal 17% versus 60%.

These results are not anomalies. Firms that abandon meritocracy in favor of identity quotas are less innovative, less productive, and ultimately less profitable. Exceptional employees—regardless of race or gender—build exceptional companies. But the ripple effects of these practices are just beginning. Over the next decade, the pressure to promote individuals hired under identity-based quotas will mount, regardless of their qualifications or performance. Companies, bowing to the same DEI mandates that drove these hiring decisions, will promote these individuals, further compounding the inefficiencies. The pain will inevitably be felt in declining profits, slower growth, and diminished stock prices. The free market is already taking notice, with investors abandoning underperforming firms in favor of businesses that prioritize skill and merit over identity.

History offers no shortage of warnings against abandoning meritocratic principles. Cicero’s admonition that “salvation is found in the counsel of the capable” resonates here. America’s meteoric rise—its innovation, wealth, and power—is the direct result of fostering the talents of its most capable individuals. From Carnegie’s steel mills to Ford’s assembly lines, the country’s great leaps forward were driven not by identity but by ingenuity, grit, and hard work. These industries prioritized the brightest minds and the most skilled hands, irrespective of race or background. By focusing on competence and excellence, America outpaced its global competitors in nearly every domain, from manufacturing to technology.

Contrast this with societies that have rejected meritocracy. The decline of Rome, plagued by nepotism and identity-driven appointments, serves as a cautionary tale. As Rome shifted its priorities from competence to loyalty, its military leadership was increasingly filled with unqualified individuals chosen for their connections rather than their strategic acumen. Civil administrators, likewise, were selected based on familial ties or political favoritism, leading to widespread corruption and inefficiency. Over time, these practices eroded trust in institutions, weakened Rome’s ability to respond to external threats, and drained its economic vitality. The empire’s inability to innovate or adapt stemmed directly from this abandonment of merit, leaving it vulnerable to collapse under the weight of its own dysfunction. Today’s corporate leaders should heed this lesson: hiring based on identity quotas weakens the very foundations upon which success and resilience are built.

Beyond financial ramifications, these policies tread on perilous legal ground. The Equal Employment Opportunity Commission (EEOC) mandates that hiring decisions cannot discriminate based on race, gender, or ethnicity. By openly advertising racial and gender quotas, companies are inviting lawsuits and undermining public trust. This issue was brought into sharp focus by the recent decision of the U.S. Court of Appeals for the Fifth Circuit. In a 9-8 ruling on December 11, 2024, the court invalidated Nasdaq's board diversity rules, which had mandated that listed companies either appoint directors from specified demographic groups—namely women, underrepresented minorities, or LGBTQ+ individuals—or provide an explanation for non-compliance. The court determined that the Securities and Exchange Commission (SEC) exceeded its statutory authority under the Securities Exchange Act of 1934 by approving these rules. The majority opinion emphasized that the SEC's endorsement of Nasdaq's requirements did not align with the Act's primary objectives, which focus on preventing fraud, manipulation, and promoting fair competition in securities markets. This ruling underscores the judiciary's stance on the limitations of regulatory bodies in enforcing corporate diversity mandates, highlighting the ongoing debate over the extent to which such initiatives should influence corporate governance. These practices perpetuate the divisive narrative that success is unattainable for minorities without intervention, diminishing individual dignity and fostering resentment among employees.

The cultural costs are equally dire. Identity-based hiring fosters workplace conflict, reduces morale, and stifles innovation. Employees, aware of these quotas, question whether their colleagues were hired for their talents or their identity. This breeds division, diminishes teamwork, and ultimately hurts organizational performance. Moreover, the fear of appearing “insensitive” silences dissent, stifling the creative friction that drives innovation.

The path to restoring meritocracy is clear. Companies must prioritize skills-based hiring, blind applications, and diversity sourcing that expands talent pipelines without sacrificing standards. These methods promote inclusivity while ensuring that the most capable individuals—regardless of identity—rise to the top.

Azoria’s strategy underscores this principle. By excluding underperforming DEI-driven firms from its portfolio, the Meritocracy ETF sends a powerful message: excellence, not identity, drives success. And the invitation remains open. Companies willing to abandon identity quotas and recommit to merit will be welcomed back, ensuring their investors and employees reap the rewards of competence and innovation.

Corporate America stands at a crossroads. It can continue down the path of identity-based hiring, sacrificing innovation, productivity, and shareholder value, or it can reclaim the principles that made it great. The choice is clear. By embracing meritocracy, America’s companies can rebuild their reputations, deliver superior returns, and restore the dignity of every employee. As Azoria’s Fishback aptly observes, “We’re betting on merit.” It’s time for the rest of corporate America to do the same.

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