Corporate quotas lose in court, a hit to bad diversity rules

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At work, whites are being told to check their privilege at the door. But a significant court ruling last week indicates there’s still hope for fair treatment in the corporate world, even if you’re not a minority.

On Friday, a California court struck down a state law mandating that corporate board seats be reserved for minorities. The court said quotas violate the state’s constitutional guarantee that everyone is treated equally under the law.

Equal protection isn’t just for minorities. It’s everyone’s right.

Justice Thurgood Marshall, the first African-American on the US Supreme Court, wrote in the majority opinion in 1976’s McDonald v. Santa Fe Trail Transportation Co. that discriminating against white employees in favor of nonwhites is just as wrong, and contrary to the Constitution, as the reverse. That’s still the law today.

California in 2020 passed legislation requiring public companies headquartered in the state to have at least one board member who is a racial minority or LGBTQ+ by the end of 2021 and increase that to two or more “diverse” board members by the end of 2022.

Judicial Watch, a nonprofit constitutional advocacy group, challenged the law. It also sued to halt a 2018 law mandating that all public companies reserve nearly half their board seats for women. That trial is going on now.

Both lawsuits have attracted national attention because several other states are considering quotas. New York enacted a law in 2020 to study gender diversity on corporate boards, a first step.

In August, the Securities and Exchange Commission approved a rule stating Nasdaq-listed companies must have at least one female board member and another who identifies as an “underrepresented minority” or LGBTQ+ or explain in writing why they have failed to meet that goal. Judicial Watch and other advocacy groups are challenging the Nasdaq rule in federal court.

People walk past the Nasdaq Marketsite in Times Square on March 25, 2022 in New York.
Nasdaq’s diversity initiative forced companies to have at least one female and one “minority” corporate board member – a clear target against white men.
Erik Pendzich/Shutterstock

The diversity warriors are willing to trample constitutional rights and ignore the effect on non-minorities — especially white men. As if a worthy goal justifies any means.

When California lawmakers debated the minority-quota bill in 2020, state Senate staff warned them of its unconstitutionality, but they rammed it through anyway. Legal rights of whites be damned.

Gov. Gavin Newsom defended the bill on signing it, saying, “When we talk about racial justice, we talk about empowerment, we talk about power, and we need to talk about seats at the table.” 

That’s a rationale for ensuring city councils, state legislatures and other such bodies reflect the population. But a corporate board’s primary job isn’t to divvy up the spoils. It’s to run a company on behalf of shareholders — ensuring cash is managed, the balance sheet remains strong and products are marketed effectively. True, a company has some responsibility to the community, but not as a representative body.

Corporate boards need diversity of skills and experience. The average board chooses one new member a year, at most. Quotas will force them to prioritize race, gender and sexual preference ahead of merit.

California Gov. Gavin Newsom delivers his annual State of the State address in Sacramento, Calif., Tuesday, March 8, 2022.
Gov. Gavin Newsom claimed California’s corporate minority-quota law was about “racial justice.”
AP Photo/Rich Pedroncelli, File

The California ruling is consequential beyond corporate-board selection. In the aftermath of George Floyd’s death, major corporations pledged specific increases in the hiring and promotion of black executives. Deliberately discriminating against whites to meet those targets violates federal civil-rights law and the US Constitution. It’s odious and divisive.

Diversity quotas are even roiling professional sports. On March 28, the National Football League announced that every team must hire an offensive assistant coach who’s female or a minority. No white guys need apply. What hypocrisy is that? The players are 70% black, but off the field, merit gives way to diversity.

In the locker room and the boardroom, quotas are a mistake. The boardroom door is swinging open without them. An impressive 72% of all new corporate directors at S&P 500 companies in 2021 were from underrepresented groups. Now 11% of directors are black, and 30% are women.

We can achieve inclusion without discriminatory quotas like the one slapped down by the court Friday.

Betsy McCaughey is a former lieutenant governor of New York.

Twitter: @Betsy_McCaughey

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