September 1, 2009
To: Securities & Exchange Commission
From: Roger Clegg, President and General Counsel, Center for Equal Opportunity
Re: July 13, 2009 proposed rule / “diversity”
We are commenting in particular about this part of the above-referenced matter (footnote omitted) :
Currently, Item 407(c)(2)(v) of Regulation S-K requires disclosure of any specific minimum qualifications that a nominating committee believes must be met by a nominee for a position on the board. We are interested in understanding whether investors and other market participants believe that diversity in the boardroom is a significant issue. As indicated below, we are requesting comment on whether additional disclosure in this area should be required.
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Should we amend Item 407(c)(2)(v) to require disclosure of any additional factors that a nominating committee considers when selecting someone for a position on the board, such as diversity? Should we amend our rules to require additional or different disclosure related to board diversity?
Usually “diversity” is understood to include racial and ethnic diversity. We strongly oppose any consideration of race or ethnicity in selecting individuals for a position on a corporate board. Such discrimination is wrong. It is also illegal. For a company to engage in racial or ethnic discrimination would violate 42 U.S.C. section 1981, which forbids such discrimination in any contractual relationship, which would include the relationship between a board member and a corporation. If board members are considered company employees, then it would also violate Title VII of the 1964 Civil Rights Act, 42 U.S.C. section 2000e et seq.
In addition, for the United States government to use—or to require, encourage, or facilitate the use of—such classification would violate the Constitution. In Adarand Constructors, Inc. v. Pena, 515 U.S. 200, 227 (1995), the Supreme Court ruled, in a case involving another federal agency’s rules and regulations, that “all racial classifications … must be analyzed by a reviewing court under strict scrutiny.” Accordingly, such classifications are “presumptively invalid.” See Personnel Administrator v. Feeney, 442 U.S. 256 (1979). There is no compelling interest in considering race or ethnicity in the business context. See generally our February 2007/May 2006 testimony before the Equal Employment Opportunity Commission:
http://www.ceousa.org/content/blogcategory/56/85/ To the extent that Commissioner Aguilar—as suggested in his July 1 remarks regarding the proposal and in an interview with BoardIQ (“SEC Seeks Comment on Disclosing Board Diversity,” by Julie Goodman, August 18, 2009)—believes that “demographic background, including race,” ought to be considered, we respectfully but strongly disagree.
Accordingly, we respectfully request that, if the SEC decides to require disclosure related to “diversity,” it makes clear that the Commission is not requiring or encouraging corporations to consider race or ethnicity in the selection of board members, and that, to the contrary, such consideration is illegal—or, at least, raises serious legal issues.