NFL’s Rooney Rule Runs Amok in the Corporate Boardroom

Supreme Court Chief Justice John Roberts once wrote that the “way to stop discrimination on the basis of race is to stop discriminating on the basis of race.” He wrote those words in a 2007 opinion that turned back Seattle’s race-based efforts to implement affirmative action-type policies to its local school district. While that case garnered a race-neutral result, his broader message seems to have fallen on deaf ears.

Justin Danhof

Justin Danhof, Esq.

In America, race-based policies are expanding not contracting.

Rather than reaching down to lower-level schools, affirmative action policies are now exponentially expanding into corporate America.

In recent weeks, Amazon (AMZN), Alphabet(GOOGL), and Facebook (FB) have announced updated diversity policies for selecting new directors. Rather than simply selecting the best candidate, each company will interview a female and an under-represented minority for each open board spot. These policies resemble the National Football League’s so-called Rooney Rule which requires that each team interview a minority candidate for open coaching slots.

Amazon, Facebook, and Alphabet were founded by, and still run by, white men. They have created tremendous wealth and many millions of jobs for women and men of all races and ethnicities. But in light of its new procedure, it’s fair to ask: would Amazon reject Jeff Bezos from its board because he’s a white male? That would be a disaster for Amazon’s investors.

It’s also fair to ask if the race-hustlers and far-left unions that are pushing these racial and gender diversity initiatives care about corporate profits or return on investment. Liberal policies that their ilk promote, such as high taxation and regulation, diminish corporate profits.

Alphabet announced its new procedure at its annual shareholder meeting a week after Facebook and Amazon did the same. Facebook COO Sheryl Sandberg proudly publicized its new policy after a question from Jesse Jackson in which he attacked the company because its “top 15 employees are white.” Jackson lauded Sandberg’s proclamation in which she also revealed that Facebook formulated the new board principles in conjunction with the Service Employees International Union (SEIU).

Likewise, Amazon’s announcement came in response to an SEIU shareholder proposal pushing board diversity. Jackson was also in attendance to laud that racial initiative. Amazon has since claimed that it’s not a new policy but just an affirmation of its practices already in place.

There is reason to doubt Amazon’s veracity.

Companies may ask the U.S. Securities and Exchange Commission (SEC) for permission to exclude any shareholder proposal from their proxy statement. One of the easiest ways to do so is to show that the company already has practices in place that align with the proposal’s request. If Amazon is telling the truth now, why didn’t it make this basic appeal to the SEC?

Amazon certainly avails itself of this option. In 2018, it petitioned the SEC for the right to remove nine proposals from its proxy statement — far more than most corporations do in a given year. Many of these requests involved more complex SEC provisions and legal reasoning than would have been needed to dispatch the SEIU’s proposal, that is, if Amazon is telling the truth.

ISS Role

What is true is that once the SEIU’s proposal was on Amazon’s proxy statement, it received support from Institutional Shareholder Services (ISS).

ISS is one of only two major proxy advisory services. Operating with almost zero scrutiny, these firms increasingly exert outsized influence on environmental, governmental, and social issues. That’s because, according to research from the American Council for Capital Formation, “when proxy advisors recommend voting in favor of a proposal, large institutional holders support the resolution 80% of the time. And some funds automatically vote with the proxy advisors nearly 100% of the time.”

ISS has become little more than a rubber stamp for liberal activist investors. From climate change to gender pay issues, to board racial and gender composition, ISS supports a full slate of far-left shareholder proposals.

It’s entirely possible that Amazon caved to the SEIU’s proposal under pressure from ISS. If ISS can exert that much power over Bezos and Amazon — the richest person in the world and one of the world’s largest publicly-traded companies — what choice do other companies have but to bend to ISS’s liberal will?

Remedies Available

The outsized role of proxy advisors has received congressional attention. A bipartisan bill working its way through the House, co-sponsored by Congressmen Sean Duffy, R-Wisc., and Gregory Meeks, D-N.Y., seeks to curb these firms’ unchecked power.

There are also non-governmental remedies.

First, companies need to steel their collective spines and speak up. If ISS supports a shareholder proposal, the vote is essentially rigged. ISS clients often “rubber stamp” votes for its recommendations without any deliberative process. Since shareholder resolutions are non-binding, and these votes are all-but rigged, companies should give them little deference.

Second, fund managers must take a more active role in evaluating ISS recommendations.

Finally, the conservative investment community should work toward creating a proxy advisory service that reflects pro-growth and long-term return on investment metrics.

Otherwise, conservatives may as well cede this entire space to liberal firms and watch corporate America drift further to the left. This year, with ISS backing, it’s the Rooney Rule run amok. Next year, it may be something even more insidious.


Justin Danhof, Esq., is general counsel and director of the Free Enterprise Project at the National Center for Public Policy Research. This was originally published by Investor’s Business Daily.

The National Center for Public Policy Research is a communications and research foundation supportive of a strong national defense and dedicated to providing free market solutions to today’s public policy problems. We believe that the principles of a free market, individual liberty and personal responsibility provide the greatest hope for meeting the challenges facing America in the 21st century.