How GCs Should Prepare the Board to Decide DEI’s Next Phase

As general counsel, you may not be the decision maker on how your company’s diversity, equity, and inclusion plan evolves over the next year. But as DEI has morphed into a significant risk issue for your company, your voice will be at the center of the debate. Given the prominence of this issue, boards will want to be involved in charting the company’s course in this area.

As you are talking each quarter with the CEO and board chair about agenda items, raise this one as a potential topic for a board discussion, and get ready for the meeting when it makes the agenda.

Get the lay of the land. I never like surprises at board meetings. When a potentially contentious issue got on the agenda in the past, I worked with my CEO and CFO to understand where the various board members stood on the issue going into the meeting.

Where possible, I tried to have informal conversations with individual board members to understand their thinking about the issue, and get them up to date on DEI litigation and any communications the company may have already received from shareholders and third parties on this issue. I often got questions that helped me prepare more comprehensive board materials and picked up insights that helped better frame the discussion.

Expect a range of viewpoints and life experience to be represented from your board on this issue. Try to anticipate how the meeting might go and what questions are likely to be raised.

The moral arc. It’s important to remind the board of the historical context for the current DEI climate. Ten years ago, civil rights groups were pointing to data at major companies demonstrating how women and minorities were underrepresented in the workforce, underrepresented in leadership and board roles, and underpaid compared to their male peers. Pressure from the groups, in the form of legal action and boycotts, pushed companies to promise concrete steps to correct the inequities.

The murder of George Floyd brought the issue of persistent racial inequality to the cultural forefront, and corporate America moved quickly to demonstrate concern, doubling down largely through investment in DEI initiatives that promised to bring more underrepresented minorities into the workplace and raise awareness around issues relating to inclusiveness.

In 2022-23, however, tech layoffs hit DEI-related positions hard, and on June 29, 2023, the Supreme Court’s decision in Students for Fair Admissions v. President and Fellows of Harvard College invalidating the use of race in college admissions processes ignited a full scale backlash against DEI programs.

High profile “reverse discrimination” lawsuits now have companies stepping back to take a hard look at benefits, risks, and legality of their current diversity-related efforts. The current climate, though, is likely not the last word on the issues of inclusiveness and inequality. The moral arc may be long, and it may bend toward justice, but it is often jagged, as the world grapples with exactly what “moral” should look like in this important area.

There is likely no easy safe harbor solution. Underrepresented groups and employees will likely continue to press companies to demonstrate progress on DEI, and conservative groups will pressure companies who (at least overtly) pledge to make progress.

Will you choose a side, or grab a long balancing pole and try to navigate the highwire? Either way, your internal communications team will have to manage the right way to frame the discussion with employees about DEI.

What’s the law? A board discussion on DEI likely needs a brief overview of the law as its foundation. You can deliver the update in writing, up front, and it’s almost certainly privileged, but given the potential for litigation you may want to supplement your written summary with oral remarks. Fundamentally, the SFFA case didn’t change the law around private employer hiring—it changed the climate. Discrimination on the basis of race, sex, religion, national origin, and a number of other protected characteristics was unlawful prior to SFFA and remains unlawful.

Some companies’ DEI efforts may have crossed that line, and a pullback in language and hiring practices might be the right course for those companies. But DEI is not synonymous with discrimination, and good DEI programs may be consistent with company values, effectively serve important company objectives, and align with shareholder interests—and withstand legal scrutiny.

While the law is in flux and there are few absolutes, the board will look to you to provide concrete examples of what’s allowed and not allowed. For example, policies that instruct hiring managers to give “bonus points” to candidates based on race, or setting specific numbers or percentages of roles for any specific protected group are highly risky strategies.

While race- or gender-based employee resource groups are likely permissible, specific rules limiting participation in such groups to that race or gender may court legal problems. Collecting internal data using race may also be permissible, if used for a valid legal purpose such as to understand adverse impact of internal practices on protected classes, or disparities in attrition.

Finally, a board will likely want to know what other companies are doing in the aftermath of SFFA. Each organization is unique and DEI won’t look the same across the board. Still, if your company is planning to adopt policies on this emotional issue, boards should be aware that their path may “stand out” to groups on either side of this issue, and invite attention.

The right DEI for your organization. There’s no one size fits all DEI program—each company has a unique mission, values, customers, and employees. Where you do business and how you do business will shape the role that diversity will play. GCs need to partner with other executives to help the board understand where DEI fits into the company’s big picture.

What do you spend on DEI today? Consider how DEI supports your company’s mission—does it attract and retain current workers, and how will it play a role as your workforce evolves in the decade? Does it play a role in attracting business from customers and potential business partners? Does it support your brand? Does it drive short- or long-term shareholder value, and are there other corporate stakeholders who may take a side?

Setting DEI policy is probably a board decision, but helping the board understand all the ways that DEI impacts your business is your job as general counsel.

Rob Chesnut consults on legal and ethical issues and was formerly general counsel and chief ethics officer at Airbnb. He spent more than a decade as a Justice Department prosecutor.

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