Diversity and the Boardroom

Abstract

strategic strength that can enhance competitiveness. 2 Simply stated, the American business community is discovering that pursuing the opportunities inherent in American diversity enhances workforce productivity and thus increases profitability. 3 While the empirical evidence in support of this intuitive conclusion is mounting, successful business leaders, having little patience for theoretical proof, are taking the initiative in seizing opportunities posed by diversity. 4 This article addresses why and how business is beginning to embrace diversity with enthusiasm.The article demonstrates the benefits that business is starting to reap from appropriate diversity policies.The ultimate benefit is increased productivity and profitability arising from the insights and other meritorious contributions offered by a properly managed diverse workforce.Finally, this article will suggest three improvements to the law governing the diversity initiatives undertaken in the business community.First, this article posits that the Securities and Exchange Commission should issue interpretive guidance to clarify the obligation of publicly held companies to disclose material information regarding the business impact of increasing diversity.Second, this article argues in favor of heightening management and board responsibility for diversity management under existing common law duty of loyalty principles, as well as through legislative action restricting director insulation from duty of care liability.Third, this article 2 As one commentator has stated: "Without total acceptance of diversity and a business plan that completely integrates it into corporate strategic plans, a corporation cannot succeed in the global market."See JOHN P. FERNANDEZ, THE DIVERSITY ADVANTAGE 14-15 (Lexington Books 1993).Compare the compelling nature of these observations with the rejection of the value of diversity by the Fifth Circuit in Hopwood v. Texas, 78 F.3d 932, 944 (1996) (holding that the University of Texas Law School may not consider race in admissions process).For reasons that are not clear, there has been a failure of the legal academy to comprehend the import of merit-based and profit-driven diversity initiatives in the world of business.Thus far, no legal scholarship has focused upon these developments or the implications of these developments from a legal point of view.See, e.g., Jennifer L. Hochschild, The Strange Career of Affirmative Action, 59 OHIO ST.L.J. 997, 1016-18 (1998) (discussing business community's desire to embrace diversity and lack of desire to assist politically in abolishing affirmative action); Bill Ong Hing, Beyond the Rhetoric of Assimilation and Cultural Pluralism: Addressing the Tension of Separatism and Conflict in an Immigration-Driven Multiracial Society, 81 CAL.L. REV.863, 882-886 (1993) (discussing economic benefits of diversity in the context of arguing that a Euro-centric vision of America must give way to a new vision of pluralism).3 "Diversity in our company is itself a business imperative vital to our ongoing renewal and our competitiveness into the 21st century," states John A.