NLPC Challenges Proposed SEC Rule Mandating Corporate ‘Diversity’

Diversity report coverThe Securities & Exchange Commission this past July has proposed amending Item 407(c)(2)(v) of Regulation S-K to require disclosure of racial and ethnic diversity on corporate and related nonprofit fund boards. We have submitted a comment of opposition because we believe this rule change to be a highly misguided intrusion into corporate governance.

Even assuming benign intent – and that is a stretch of an assumption – the outcome would be anything but benign. Anyone with sound instincts knows that any submitted information would be fair game for organizations seeking to tie executive compensation to the creation of a rigorously-monitored affirmative action spoils system.

The SEC was established 75 years ago for the purpose of protecting investors in publicly-traded securities against fraud and incompetence. Now more than ever this mission must be paramount. Whether the proportion of blacks, Hispanic, Asians and other minority groups in a given company adds up to 10 percent, 40 percent or 70 percent ought to be no concern. Companies should have the right to hire, retain and promote without outside interference. The proposed rule change, published in the July 17, 2009 Federal Register, would link executive and director compensation with SEC-determined goals for achieving an appropriate demographic composition. Such action would be out of line with the agency’s mission.

The concept of diversity all too often has served as a means by which radical activists can institute mandatory racial preferences. Corporations generally have complied. They hire employees and/or consultants to train, monitor, evaluate, and where necessary, punish employees who fail to “sensitize” themselves to racial, ethnic and gender injustices they presumably have committed or ignored. A little over two years ago, I authored a monograph that summarized the often abusive tactics that diversity specialists use to intimidate and shame white employees, especially males among them. Click here or on the Special Report cover above to download a 16-page pdf of “The Authoritarian Roots of Corporate Diversity Training.”

Diversity training in particular has its origins in a malicious exercise developed more than 40 years ago by a white Iowa third-grade teacher, Jane Elliott, on her students who often has been frank in her loathing of her fellow whites. Starting in the Eighties, she has “trained” employees of many corporations using the same kind of thought control. The idea that employee morale improves following such training is not borne out by the evidence. To the contrary, morale often deteriorates. But employers, ever concerned over insulating themselves from spurious civil rights lawsuits, play along anyway.

The notion that the SEC will limit itself to gathering data, and won’t use the information to punish companies not in compliance with diversity goals, is naïve. The ulterior motive behind this revised regulation is the creation of enforceable goals and timetables – in other words, quotas. Information is only the first step. Knowledge is power. And the knowledge that a given company may be “discriminating” will be the basis for boycotts, civil suits and consent decrees. In other words, self-styled civil-rights activists will use the federal regulatory apparatus in the same way they’ve been using (or threatening to use) the courts. Texaco, Toyota, Coca-Cola, Anheuser-Busch and Viacom are but several companies in recent years to have fallen prey to affirmative action politicians such as Jesse Jackson. To such activists, the modern corporation is less a business enterprise than an arena for racial and ethnic power-seeking.

What is ultimately demeaning about the SEC proposal is its assumption of the existence of a single viewpoint corresponding to blacks, Hispanics, Asians, women, the disabled and other groups presumed to be underrepresented. It ought to be evident that points of view do differ within groups, and not just between them. There is no one “black” viewpoint in the workplace any more than there is a “white” or an “Asian” viewpoint. If the Securities & Exchange Commission wants to promote corporate diversity, it should promote a diversity of opinion instead.