CAROL PLATT LIEBAU And FRANK RICCI: Should Businesses Be Forced To Prioritize Social Engineering Over Bottom Lines?

Nasdaq’s board diversity rule has sparked litigation and a robust policy debate about compelled speech, the equal protection clause, and the intrusion of social agendas into corporate governance. At the heart of this debate lies a fundamental question: Should profit-driven free market enterprises be forced to prioritize social engineering over their bottom lines?

That’s the issue in a case pending before the Fifth Circuit, Alliance for Fair Board Recruitment v. SEC. It will have national implications that could impact profits and returns, ranging from public pension funds to Americans’ IRAs or 401(k)s.

Nasdaq’s diversity rule mandates that listed companies disclose the diversity statistics of their boards. Every company is required to have at least one woman and one underrepresented minority or LGBTQ+ individual on its board, or else explain why it has failed to do so.

The rule’s obvious intent is to pressure boards to diversify by sex, race, or sexuality, based on specific targeted numeric outcomes. It’s a thinly veiled quota system.

Achievement is neither limited nor determined by one’s race or sex but rather by skills, knowledge, and abilities — along with demonstrated dedication, pure grit, and character. If anyone puts his (or her) hand on the scale in the form of intentional discrimination, it should be routed out and punished.

But it’s likewise obvious that equal opportunity cannot always yield equal outcomes. Imposing quotas undermines the achievements of women and minorities who have risen to board positions based merit and achievement, rather than because of their immutable characteristics. Mandating set-asides for them perpetuates harmful stereotypes that certain races or sexes are incapable of securing certain positions without special help.