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Affirmative action opponents aren’t just targeting colleges in the battle against race and gender preferences in the law.
Corporations are emerging as another front in the battle when a federal appeals court on Monday hears a challenge to the tech-heavy NASDAQ’s mandate that the largest listed companies must meet diversity standards on their corporate boards.
The difficulty progresses as it progresses Supreme Court prepare to hear the arguments in this decline over the role of race in admission decisions for Harvard and the University of North Carolina, one of the most anticipated cases of the coming period.
The “Board Diversity Proposal” requires large NASDAQ-listed companies to maintain and disclose a certain number of minority members or be delisted as a result. Companies listed on the exchange include corporate giants such as Apple, Meta and Tesla.
The rule, proposed in February 2021, requires NASDAQ-traded companies to have or disclose why they do not have at least one director and one minority director identified as female, with exceptions for small or foreign firms. race or part of the LGBTQ community.
The National Center for Public Policy Research, a conservative think tank, challenged the rule, arguing that it’s unconstitutional because it encourages discrimination and compels companies to “speak” in violation of the First Amendment by disclosing the personal information of board members.
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“Board diversity rules force conversation in violation of the First Amendment,” Margaret Little, an attorney representing the National Center for Public Policy, told the US 5th Circuit Court of Appeals during oral debates on Monday.
“It threatens to delist people who don’t speak,” he added.
The U.S. Securities and Exchange Commission approved the NASDAQ diversity rule in August 2021, and an attorney representing the government told the three-judge panel Monday that the NASDAQ is a private entity and can create its own membership rules based on demand from its investors.
Tracy Hardin, representing the SEC, stressed that the government did not act illegally on race, gender or speech.
“NASDAQ is a private for-profit industry,” he said. “It’s not the same as a government agency.”
“This is a private initiative initiated by NASDAQ,” he added.
But opponents of authorization say the NASDAQ has no business imposing them, and the SEC has no legal authority to approve them.
“It’s unreasonable to see discrimination displayed so blatantly by requiring these companies to hire employees solely on the basis of race, gender and sexuality,” Texas Republican Attorney General Ken Paxton said in an amicus briefing to the Fifth Circuit Court of Appeals. “The SEC’s quotas violate the Constitution and federal civil rights laws by requiring companies to overlook a person’s relevant qualifications under the guise of promoting diversity.”
A spokesperson for NASDAQ, which ranks second only to the New York Stock Exchange in terms of companies’ market capitalization on the trade board, declined to comment on the lawsuit.
The case is the National Center for Public Policy Research – SEC case and is pending before three District 5 judges, all appointed by the Democratic presidents.
This isn’t the only legal battle in the business sector this year involving race and gender quotas in front of the courts. California courts have recently repealed two similar state laws, one mandating representation of women and the other for minorities on company boards.
2018 state law mandated that all publicly traded companies headquartered in the state — roughly one-eighth of all U.S. firms — must have at least one female director by the end of 2019. to have at least two women and at least three women on boards of directors with six or more directors.
Supporters of the missions say they support the argument that boards with greater racial and gender diversity bring greater value to shareholders than those without such diversity, citing scientific studies in the US and Europe. The average share of women on the boards of California corporations increased from 12.9% in 2016 to 23.2% in 2020 after the legislation passed.
The NASDAQ challenge was discussed as a race-defying factor in evaluating a student’s admissions application nearly two months before the Supreme Court heard arguments against affirmative action policies at Harvard and the University of North Carolina.
These are scheduled for October 31 and the high court is expected to issue a decision by June 2023.
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