It is easy to understand how the rapidly evolving and increasingly controversial DEI paradigm could divert directors from their obligation to provide strategic oversight to the businesses they serve. The way forward for directors to navigate the DEI divide does not, however, need to be contentious. Rather, if the board follows its customary fact-gathering process and deliberates in the same way it considers other board agenda items, it can minimize the risk that comes with decisions concerning DEI in the corporations they serve.
The starting point for the board in considering DEI's role in the corporate mission is to first seek professional advice about the legal framework applicable to these issues. Typically, this advice should come from the general counsel or chief legal officer, the chief human resources officer, outside counsel or a combination of individuals whose job it is to keep the board informed about legal developments impacting the workforce. DEI, like many politically charged issues, is the subject of often incorrect and misleading information. Strident voices – from both sides of the political spectrum – make bold, but sometimes incorrect, statements about DEI's purpose and its importance or potential harm to the corporate mission. Solid professional advice regarding the legal contours of DEI is the foundation upon which the board should advise and guide management.
An understanding of the legal paradigm applicable to the business should include information concerning the corporation's existing DEI-focused recruiting and retention programs, workplace training and compliance with workplace legal obligations. Title VII (the key federal antidiscrimination law) governs all employers of 15 employees or more, and, at its core, prohibits workplace discrimination based on certain personal characteristics. The obligation to eradicate discrimination from the workplace includes the development and implementation of anti-discrimination workplace policies. Similarly, every state has its own legal framework relating to discrimination, and multi-jurisdictional employers are obligated to comply with the local laws applicable to any workplaces where employees perform services for the business. Notably, some states mandate workplace training, which is becoming a frequent target of DEI critics.
Legal advice alone should not drive DEI decision-making. The board should also seek, in tandem with legal advice, data that supports the need for continuing corporate DEI programs or the imperative to modify those programs to comply with existing law or alter DEI programs to meet a business's changing needs. Management should drive data-gathering, which should include, for most large employers, information concerning the company's EEO and other reports, as well as any legally mandated affirmative action programs (to the extent such programs survive President Trump's recent Executive Order). That data should also include an analysis of the company's present and future workforce needs, both from external recruiting and internal pipeline perspectives. The board cannot begin to assess whether to institute, cease or modify DEI programs in the absence of that data. Indeed, who will be doing the company's work (and how that work gets done) is among the most important questions boards should be asking in order to fulfill the obligation to provide strategic advice.
No human capital analysis is complete until the board has fully reviewed the corporation's future recruiting and retention needs. Preparing for worker succession requires a skills analysis as well as a cultural understanding of the demands of the next generation of workers. The current anti-DEI trend may not outlast the current administration and is likely to shift in the future. Workforce planning should always include reflection about how next-generation workers think about opportunity in the workplace. The new population of techno-savants has very different notions of workplace fairness, equity and working conditions than the generation that is managing America's corporations now. Understanding how those demands will impact each business should be among the highest priorities for the board's agenda.
A solid legal and data-driven foundation is fact-based and not label-focused. Activists may attempt to provoke boards to react rather than to plan. Toward this end, social media purveyors and others who have no actual legal interest in the corporation's performance can easily distract boards with controversial tags that are designed to appeal to their followers. Indulging in outside pressures can easily lead to inadvertent legal liability. Board members should resist taking the social media bait and instead should revert to the legal framework and data that supports DEI. A program's title may differ from its aims. But names and labels may not answer the most important question: What is the purpose of the program and how does it support the corporation's mission? Policies based on external pressures are unproductive if they are not tethered to data or the company's mission. Reactive policies could be just as harmful to the corporate interests as proactive ones.
Lastly, but no less importantly, boards are clearly already keenly aware of the public relations impact that DEI decisions can generate. But it is important to consider the impact of wavering between pro- and anti-DEI policies (especially in response to social media pressure). Seesawing between policies can be seen as equivocating and inauthentic. That type of public thinking can and does impact corporate brands. If the policies and commitment were wrong in the past, then why should stakeholders believe the new course a corporation is now taking is the correct one?
Boards should conduct DEI tabletop exercises and DEI data read-outs and dive deeply into questions about how DEI programs align with the corporate mission and goals. No board will get it completely right — in fact, given the fluidity of these legal and political issues, most boards should assume they will make errors around the edges. But each director must discharge their obligation to participate in the right process to understand the legal framework and data regarding DEI programs in order to give management sound and impactful strategic direction and guidance.
Originally published by Directors & Boards.
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