On Monday Bloomberg published a commentary by liberal columnist Beth Kowitt (pictured above) that misunderstood and misrepresented NLPC’s shareholder initiatives, especially as they pertain to rolling back diversity, equity and inclusion policies at major U.S. corporations. What specifically caught her attention were our successful negotiations with American Express, Deere & Company, and Goldman Sachs, to eliminate DEI criteria when they consider candidates for their boards of directors.
Anyone who might want to check out Kowitt’s views will likely hit a pay wall, so following are some of her characterizations and my rebuttal:
Even as the great DEI rollback sweeps across corporate America, one policy had managed to survive: the boardroom version of the Rooney Rule.
Adapted from the NFL, the voluntary policy commits boards to consider a diverse pool of candidates when filling open seats.
Just because you call something the “Rooney Rule,” or say it’s a “version” of the Rooney Rule, or say it’s “adapted” from the Rooney Rule, doesn’t make it anything like what the NFL’s Rooney Rule really is.
You might be able to cram some Rooney Rule concepts into some of how Corporate America operates, but in the context of our current argument — boards of directors — it is inapplicable. The rule was originally created in 2002 for minorities (mainly blacks, who constitute the majority of NFL players) to receive increased opportunities to get head coaching jobs, by requiring teams with openings to interview at least one minority candidate. Over time the rule was extended to include other coaching positions (like offensive and defensive coordinators) and top front-office management roles, with some positions requiring interviews with two minority candidates.
Therefore, the Rooney Rule sought to address perceived inequities in access to upper management and key on-field positions of responsibility. But the Rooney Rule cannot apply to boards of directors. If it did, in the NFL context, then it would require its Board of Governors (which is the 32 principal team owners) to “interview” a certain number of would-be minority (principal?) owners before approving the sale of any team (the Super Bowl champ Seattle Seahawks just became available, by the way). That would mean a minority-led ownership group would need to step up with several billion dollars in order to be considered.
Speaking of the Rooney Rule that Kowitt speaks so highly about (she says it’s flawed in “practice”), the NFL has been tinkering with it for almost two dozen years now. This offseason the league had 10 head coach openings, and there were exactly zero black hires. One minority of Lebanese descent, Robert Saleh, was hired by Tennessee.
It’s also interesting to look at how the Rooney Rule played out (sort of) in reverse with the New England Patriots last year. When Bill Belichick left the team, owner Robert Kraft years prior had reached a contractual agreement that defensive coach Jerod Mayo, a black man, would succeed the legendary head coach. Under that sort of arrangement, the Rooney Rule does not require interviews with additional outside minority candidates and considers the hire compliant.
Belichick’s departure coincided with the sudden availability of another desirable head coach candidate, Mike Vrabel, who is white. However, because Kraft had already promised the job to Mayo, he could not consider Vrabel (and he may not have wanted to). The team under Mayo was terrible, going 4-13 for the second year in a row. Kraft acknowledged making a mistake with the Mayo decision, fired him, hired Vrabel, and the Patriots accomplished an amazing turnaround and reached the Super Bowl this year. The point is, the Rooney Rule’s compliance in the Patriots’ case prevented — or at least would have made more difficult — the possibility that Kraft could have interviewed Vrabel, whose credentials and (as we see now) results were far superior to Mayo’s. Perhaps Kraft might have hired Vrabel a year earlier and accomplished a turnaround sooner, had the Rooney Rule not been prioritized.
As for all this year’s other white male hires, Roger Goodell said last month (like he seems to say every year), that “we still have more work to do.” Shouldn’t the NFL have perfected the Rooney Rule by now? They haven’t got it right, because it can’t be perfected — every year it’s just a box-checking exercise for teams. The NFL’s DEI virtue-signaling “rules” are as effective as their “End Racism” messaging in their end zones.
In recent months, American Express Co., Deere & Co. and Johnson & Johnson have all removed diversity factors used to identify board candidates, Bloomberg News has reported. Goldman Sachs Group Inc. plans to follow suit (the company already did).
Driving much of this campaign is the National Legal and Policy Center (NLPC), a conservative nonprofit group that’s threatening companies with shareholder proposals demanding that they eliminate diversity considerations when filling vacant board seats. Its argument is that the Rooney Rule-like policies risk being discriminatory.
See above our Rooney Rule debunking. As far as NLPC “threatening” companies with “shareholder proposals” and “demanding” companies eliminate DEI considerations for board nominees, Kowitt reveals her ignorance about: our views of DEI; how our negotiations with American Express and others went; and how the shareholder proposal process works.
In order to qualify to present shareholder proposals at public company annual meetings, investors in a corporation must own at least $25,000 of stock for at least one year, $15,000 of stock for at least two years, or $2,000 worth of stock for at least three years. Readers can guess which category NLPC fits in for most companies.
The point is, to say NLPC is going to “threaten” and “demand” anything from multi-billion-dollar, multinational corporations, which have massive legal teams (internal and external) at their disposal with nearly infinite resources, is a joke. And that any shareholder proposal represents a “threat” is probably only true if you are concerned about the bruised egos and thin skins of corporate directors and their top executives, because they might have to endure a two- or three-minute speech by a proponent at the poorly-attended annual meeting that criticizes them for one thing or another. Those are really the only reasons corporations and their lawyers can feel “threatened,” because nearly all proposals are non-binding on management, and those that reach a shareholder vote almost always fail — usually by large margins.
Further, the Securities and Exchange Commission under Trump-appointed Chairman Paul Atkins has shifted the agency’s governance and oversight role firmly in support of companies against shareholder proponents, with Atkins more-or-less begging companies to omit proposals under a Delaware law-related exclusionary rule. We explain the SEC changes here, here, and here, and you can find the long archival history of companies’ exclusion of shareholder proposals from their proxy statements here.
Everybody can feel free to shed a tear now for Corporate America and their beleaguered lawyers.
Back to Kowitt — skipping over her extended dissections about the irrelevant Rooney Rule and lengthy arguments that race- and gender-oriented DEI improves boards. She states about NLPC:
Requiring that boards consider a wider set of candidates is not the same as mandating an outcome. The policy doesn’t impose a quota; it simply broadens the pool.
Had Kowitt bothered to contact us at NLPC (she/her didn’t), we could have pointed out the text of our shareholder proposals that addressed DEI criteria for considering board nominees, and she would have seen they say nothing about “mandating an outcome” or quotas — either implied or literally. Further, we could have pointed her to our views that it is foolish for companies to avoid events like job fairs sponsored by minority organizations in order to recruit new talent, as American Express, Disney, and Meta did last year.
Kowitt also could have learned from us that our discussions with all the companies on our DEI proposals were amicable and not “threatening” or “demanding” — not even with Colgate-Palmolive, which decided not to remove its DEI board criteria language. And what remains in these companies’ diversity policies pertaining to board candidates is much like what American Express’s policy still says: “The Board seeks to achieve over time a mix of directors with diverse skills, backgrounds, experience and viewpoints.” That is the kind of diversity NLPC fully supports and is sufficient to populate boards with highly competent, well experienced individuals from all demographics, nations, and walks of life. That perspective held by NLPC is missing from Kowitt’s column.
She concludes by noting Colgate-Palmolive’s decision:
Not every company has caved to pressure from the NLPC. Colgate-Palmolive Co. has urged shareholders to reject the group’s proposal. With two-thirds of its sales outside the US, the toothpaste maker argues that “integrating a range of experiences, perspectives and backgrounds is crucial” to innovation and growth. Its criteria, it says, are both legally sound and strategically important.
How many sales (or how much revenue) generated outside the U.S. is a straw man argument that goes up in flames as support for DEI policies. Plenty of U.S. corporations — including American Express, Deere, and Goldman Sachs — derive significant percentages of their revenues from other parts of the world. Maybe not two-thirds, but not insignificant either. Yet those companies erased diversity standards grounded in race and gender — but not their diversity aspirations.
And as you can see from our above explanation of our views on diversity — the right kinds of diversity, not grounded in immutable characteristics like skin color or genitalia — Kowitt, as well as Colgate-Palmolive’s board, totally miss the point when it comes to NLPC’s DEI proposals.
