Why do people say Disney's animated movies lack diversity?

Regarding ethnicity, I have no problems with Disney, but I have to admit that I'm not keen on the way they alter and change the original fairy tales and stories. I grew up with H.C. Andersen's "The Little Mermaid" and the Disney version just feels wrong and in my opinion misrepresents the original fairy tale. Why even base the movie on the original story? Why not just write a new mermaid story with a happy end?