The July 13 letter (“Letter”) from a group of Republican state attorneys general to Fortune 100 CEOs opens a new, and decidedly challenging, chapter in the evolving relationship between state government and corporate workforce initiatives.
The Letter was signed by 13 attorneys general from mostly southern, western and border states. Its main thrust is a “request” that, in their employment and contracting practices, corporate CEOs comply with what the state attorney generals interpret as the “race-neutral-principles” of the June 29 Supreme Court decision on affirmative action. But its underlying target appears to be corporate DEI initiatives, especially those that apply racial quotas and race-based preferences. These, the attorneys general claim, are now illegal in the corporate setting.
This Letter is not to be confused with a warm and welcoming request for a campaign contribution or a “photo op.” It certainly reflects what the attorneys general perceive as a principled interpretation of the recent Supreme Court decision. But it reads like a legal brief, demanding companies “to immediately” cease any race-based quotas or preferences.
And the underlying threat is not subtle. Companies that continue with what the AGs view as problematic employment and contracting practices “will be held accountable—sooner rather than later—for your decision to continue treating people differently because of the color of their skin.”
For Fortune 100 companies doing business in any one of the 13 states, the Letter is serious business, and will require the close coordination of corporate leadership and legal counsel. For other companies, regardless of size and location, the Letter should prompt thoughtful leadership reflection on its broader implications, not only on the future of DEI initiatives, but also on larger concerns regarding more aggressive government interference with workforce culture matters.
So what should that leadership reflection entail?
First and foremost, leadership must consider the meaning and intent of both the Supreme Court’s groundbreaking June 29 ruling, and of the Letter. What is the essence of the attorneys generals’ arguments? What are the legal, social and organizational issues they raise? The threat implicit in the Letter essentially requires leadership awareness of these issues.
Part and parcel of this diligence would be a briefing from the general counsel on the extent of the company’s DEI initiatives-both in the workforce, and in the C-Suite and boardroom. This would include advice on whether any of the company’s employment and contracting practices, and/or director nomination processes, include elements that in light of the Letter might now be considered problematic.
The next step in the process would be the evaluation of whether any change in the company’s existing DEI policies are merited by the Letter. For many companies, this evaluation was already commenced with the recent Supreme Court ruling, but it would now be accelerated, and refined, by the Letter-particularly for companies operating in any of the 13 implicated states.
Then there’s the possible reorientation of the company’s DEI approach to one that operates with a more direct awareness of the legal and reputational concerns arising in this new environment. It may also include more direct involvement by the company’s chief legal officer, and a new level of supervision by its corporate compliance group.
This may be initially jarring to the company’s DEI managers, who may struggle to accept the legitimate application of the Letter and even of the Supreme Court’s ruling. But the attorneys generals’ view-that all racial discrimination, no matter the motivation, is invidious and unlawful-should be respected at a basic level. Whether corporate DEI managers disagree with that view should not be allowed to overly influence leadership’s ultimate response.
The final step-which would certainly be discretionary-is to discuss at the leadership level whether to exercise the corporate social voice on the question of the future of DEI initiatives, especially as it relates to the company’s relationship with its workforce, and to the benefits of diversity across the spectrum in its executive and board composition.
The ultimate impact of the Letter is a confirmation that government-whether at the local, state or federal level-is increasingly willing to scrutinize corporate programs and policies that guide the workplace. The executive suite and the boardroom may unfortunately become new battlefields in the blue state/red state social divide.
It’s also clear from the plain language of the Letter that CEOs may become direct targets in these battles, thereby injecting a new and unexpected level of individual accountability that their boards must anticipate and address.
To some, the Letter reflects an accurate and appropriate interpretation of the law. To others, the Letter pours salt into a gaping wound created by Supreme Court’s landmark decision on affirmative action. But corporate leaders must be apolitical in their response. The Letter is ultimately a new legal concern to which companies are well advised to address.
The organization may be best served by its continuing support of DEI principles, but within the reality of the prevailing legal and political landscapes. While this may limit the horizon of possible diversity initiatives, it may also limit the scope of the organization’s legal exposure-and that of its CEO.
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