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Mandated Quotas Won’t End Inequalities In Business Leadership

In recent years, a great deal of attention has been paid to using legally mandated quotas to bring about greater gender and racial equality in the leadership ranks of businesses and professional organizations. On their face, such quotas seem to offer an effective and quick route to equality. After all, nine European countries have successfully used gender quotas to increase the diversity of the leadership of their domestic corporations. For example, corporations based in France, Norway, Sweden, and Italy now have over 35 percent women on their boards of directors, and in France — where corporations are subject to the most rigorous quotas — almost 45 percent of board members are women. In May, the European Union proposed requiring most corporations headquartered in EU member states to have at least 40 percent women as non-executive directors, or at least 33 percent women among all directors.

In the United States, the best known effort to impose legally mandated diversity quotas on private corporations is the 2018 California law requiring all publicly held companies with their principal executive offices in California to have at least one woman director; two if the company has five board members; and three if the company has six or more board members (the “Gender Mandate”). In 2020, California went a step further and required public companies with California headquarters to have at least one board member who identifies as a racial or ethnic minority or as gay, lesbian, bisexual, or transgender (the “Diversity Mandate”).

Unlike Europe, however, in the United State, the federal constitution and the constitutions of many states make the legality of such mandated quotas highly questionable. This is because these constitutions have equal protection provisions guaranteeing that no one will be treated differently than anyone else because of their gender, race, ethnicity, or other fundamental characteristics. As the US Supreme Court ruled more than 40 years ago, “It is far too late to argue that the guarantee of equal protection to all persons permits the recognition of special wards entitled to a degree of protection greater than that accorded to others.”

In light of the guarantee of equal protection in the California constitution, it is not surprising, therefore, that the Diversity Mandate was declared invalid in April 2022 on a motion for summary judgment. And, a month later, in May of 2022, the Gender Mandate was also found to violate the California constitutional guarantee of equal protection. As I’m writing this article, a federal lawsuit challenging the Gender Mandate under the equal protection clause of the US Constitution is still pending.

In the state challenge to the Gender Mandate, a judge on the Superior Court of California ruled that any classification that affects two or more “similarly situated groups” in an unequal manner is constitutionally suspect and that “men and women are similarly situated for purposes of [the] gender-based quota. ” California, therefore, was obligated to demonstrate that it had a “compelling state interest” in adopting the Gender Mandate. The judge found, however, that the clear purpose of the law was “gender balancing — not a compelling state interest — and not remedying discrimination — which is. Indeed, the court found no evidence of “any specific, purposeful, intentional and unlawful discrimination in the process.” Therefore, the court ruled California had no compelling governmental interest justifying the state’s intervention in the board selection process. As a result, the judge declared that the Gender Mandate violates the equal protection clause of the California constitution.

Therefore, despite the success of mandated gender quotas in Europe, in the United States, the legal implementation of diversity quotas of any sort is likely to be found unconstitutional. Thus, we are forced to recognize that governmentally imposed diversity quotas cannot provide a quick or effective fix to the gender and racial inequality in the leadership of business and professional organizations. There is just no evidence that such inequality is the result of purposeful, intentional discrimination in these organizations’ decision-making practices, whether this involves hiring, promotion, compensation, or board member selection. We need to forget about government-imposed quotas and focus on changing companies’ structures, processes, and practices that consistently and predictably lead to systemic gender and racial inequality in our workplaces. It is time we get down to the hard work of making the changes in companies’ systems that will start to create more workplace equality.

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