Legislating diversity: Current initiatives and their impact on corporate America

Inclusivity Included: Powerful personal stories

Reed Smith attorneys Liza Craig and DJ Cespedes join co-hosts Iveliz Crespo and John Iino to discuss recent federal and state legislative initiatives that regulate organizations’ diversity, equity and inclusion efforts, the criminal justice system, and opposing litigation. They also look into new executive orders from the Biden administration, California’s mandate for board diversification, and other legislation impacting company policy and diversity initiatives. Our panel will predict outcomes for future legislation promoting diversity.

For more information, please visit Reed Smith's Diversity, Equity & Inclusion page.

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Transcript:

Intro: Hi, I'm John Iino and I'm Iveliz Crespo. Welcome to the Reed Smith podcast. Inclusivity Included: Powerful Personal Stories. In each episode of this podcast, passions and challenges, past and present, all with a goal of bringing people together and learning more about others. You might be surprised by what we all have in common, inclusivity included.

John: Hey, everyone. Welcome back to the podcast. We've got a really interesting topic today specifically looking at legislating diversity, what we're seeing in terms of legal trends around diversity and inclusion in initiatives and how they're impacting corporate America. I'm really pleased to welcome back. Well, of course, as with every episode, we have our co-host Iveliz Crespo. Hey, Iveliz.

Iveliz: Hey, John, how are you?

John: Great. And another recurring guest, the core key member of our DE&I team, Liza Craig, who you've heard on a recent podcast, Liza, as I like to say is a podcast superstar. Has her own podcast, Government Contracts Coffee Break probably pumps out more, more episodes and we do have uh Inclusivity Included. But Liza also is our deputy for the US DE&I efforts as well as a counsel in our Washington DC office specializing in government contracts. Hey Liza.

Liza: Hey John. Thank you so much for having me. It's a pleasure to be back. Any time. And finally we have a, a new guest for us today. It's uh DJ Cespedes. DJ is an associate in our Silicon Valley office and DJ specializes in IP transactions and litigation. Welcome DJ.

DJ: Thanks John. Good to be here.

John: Awesome. Really great to have you on. So let's start, why don't we start at least at the federal level, what's going on more recently? So we're about just over a month into the Biden Harris administration and we've already seen a lot of action, not, not, you know, all across the board, but specifically with respect to diversity inclusion initiatives. So I know that Liza, the Biden administration has already enacted over 30 executive orders. Can you give us a quick overview of maybe the top three or four most significant executive orders that have been enacted to date that kind of address diversity programs or diversity issues?

Liza: Yeah, absolutely, John, thank you for asking. So this is a really exciting time to be active in the diversity equity and inclusion space, you know, on the heels of the Trump administration where we saw quite a few executive orders that really had the effect to chill the conversation about DE&I at the federal level. With President Biden coming on board, January 20th was a big day. He took his pen to paper almost immediately and went to work with issuing a number of executive orders that really supported what he promised would be a push and a focus for diversity equity and in and inclusion within his administration. So, you're absolutely right. I mean, he's pinned a ton. There's been a flurry. I mean, our attorneys here at Reed Smith have spent quite a bit of time tracking and, and reporting out on them. But, you know, I think it's important for people to realize that President Biden can, came into office, talking about racial equity and gender equity were going to be his priorities. And so some of the executive orders that we saw signed right away, undid some of the previous executive orders that President Trump had issued, basically put back in place, agencies and federal contractors ability to talk about diversity issues in the workplace. To talk about concepts that President Trump had considered divisive and concepts that he felt were not uh appropriate for discussion can talk now again about white privilege, we can talk now again about different racial barriers to equity and to inclusion, different barriers that may be facing folks that are, are of different genders or different ethnicities or, or different sexual orientations or this, that and the other. So, so we've got, we've got that back in place. And as a matter of fact, with that first executive order that um, President Biden signed, not only did he remove those restrictions on having certain diversity and inclusion training take place. He actually ordered federal agencies to do a review of their own internal policies to make sure that there were no barriers to equity. So really important, really important stuff. We also saw another executive order issued in the very first days of the administration that basically removed discrimination against folks based on gender identity. So a huge deal um under title seven racial discrimination, age discrimination, a lot of other types of discrimination were illegal. But for, for a long time discrimination based on folks, sexual orientation and gender identity wasn't necessarily prohibited by statute. And so we saw an executive order that was put in place that really is going to stop at the federal level discrimination based on that protected class. So really, really important, we saw an executive order again, a long awaited and, and, and very much celebrated that allowed individuals that are transgender to openly serve within the military. So again, another great stride for inclusiveness. Um We've got folks serving in our armed forces that are now going to be able to serve um fully and completely and authentically and bring their authentic self to the front lines of battle. And as well, we've also seen some, some executive orders signed, talking about prison reform and taking a look at whether or not there are policies in place at the federal level that actually may, you know, drive inequities in areas like our federal prison. So all in all, quite a few, we did a webinar. Um And so our listeners can certainly tune in to hear us talk a little bit more in depth, but we should expect to see the trend continue. Uh, equity is a focus of President Biden and these executive orders are definitely making sweeping and in my opinion, much needed change at the federal level with how federal agencies and federal contractors are, are going to be able to navigate these discussions going forward over the next four years.

John: That's fantastic. And thank you for the summary. You know, I I'm interested Liza, Iveliz, DJ actually, what are your personal uh uh feelings in terms of saying these, these executive orders, saying the land, new landscape of the, of the new administration, what are some of these things mean to you personally? And maybe Iveliz, you and I even haven't really talked about that even though we talk every day, you know, what if some of these, these executive orders meant to you personally?

Iveliz: Yeah, I mean, I think, I think those are two separate questions, right? What has it meant for me? Professionally as a DEI practitioner, it certainly has made my job easier, right? Removing that barrier. But I think on a personal level as a queer person of color, you know, with a disability, it certainly feels really affirming and it feels like we're moving the needle forward and creating the type of culture and the type of society that accepts people, people for who they are intrinsically and internally. But also is is looking at it from an equity piece, right? And recognizing that we want to treat people fairly, we want to make, make sure people can thrive. But also let's look at those barriers, right? Let's look at those barriers that are preventing some of us from thriving in the way that we could be thriving. So for me, I think it certainly is very affirming and it makes in my opinion, for a bright future. And Liza is a woman of color and what are, what are some of your reactions?

Liza: Yeah, I, I, you know, I'm right with Iveliz. I mean, I, you know, I wanna share with you a quote and, and I, I'll be very brief but Biden's equity platform, what he, what he came out with the saying is that, you know, equal opportunity is at America's Foundation. However, systemic racism laws, policies and institutions prevent many Americans from reaching this ideal. And so, you know, for me, on a personal level, I've lived my entire life as a woman, as a woman of color. And the realities of being in this amazing country are very real to me what these executive orders mean, and what President Biden's platform really means to me is now we're going to talk about it as a country, we are going to collaboratively communicate allies, those of us that are subjected to these barriers that are holding us back or preventing us from realizing the dream that all of us as Americans are promised, we're going to, we're going to have a dialogue about that in an effort to move the needle. So for me, that is so profound, I've got two young daughters that are moving into this space. My daughters have friends that have disabilities that identify themselves differently in terms of their own gender and their, their own space in, in this world, they have friends of all races and ethnicities and to know that we are moving towards a nation where we can talk about the barriers that prevent us from being our best in an effort to, to be our best is, is, is very profound and, and very encouraging and inspiring for me.

Iveliz: So Liza given these efforts and looking at the road ahead on the federal level, at least I'd like you to, you know, look into your crystal ball and tell me, you know, walk me through, what do you believe the future landscape in terms of federal policies that drive the principles of diversity, equity and inclusion, what does that look like?

Liza: Yeah. No, absolutely. I, a great question and like I said, I, I, you know, I'm, I'm hoping that, that I've got the crystal ball, right? And I hope that I'm seeing it correctly. But, you know, I mean, we, we're going to see a more robust discussion about equity just generally, I mean, President Biden has said that he wants to really define his presidency by an emphasis on equity. And so he is going to continue to work with Congress to continue to work with his cabinet and, and with his organization to continue to create policies that are also not only designed to support equity in all of these different ways, but also to fund these policies. So it's one thing to talk about change. It's one thing to say that we support change. But when you're talking about the federal government, uh and I'm saying this as a procurement attorney as well, putting those federal dollars behind those policies is, is huge. So really, I believe that, you know, President Biden has pledged to focus on embedding equity across federal policy making and rooting out systemic racism and other barriers to opportunity from all federal programs and institutions. So I think that we're going to see a lot more programs coming online programs that are going to be funded that are going to really have a goal of seeking to change how we interact with one another within this country to make this a more inclusive environment for us all.

John: Thanks Liza. I, I can't think of any anyone that's better positioned really to have both the forecast and, and really being at the center of all everything that's going to happen given your role as a government contracts procurement specialist. That's just fantastic. Hey, let's turn over to DJ. You know, both DJ and I are residents of the state of California and lots going on coming out of California in the um DE&I space. So DJ, maybe you can give us some examples of some recent legislation here in California that impact diversity, equity and inclusion?

DJ: So sure there, there is actually a few recent legislation you have Assembly Bill 3070 which prohibits peremptory challenges on discriminatory basis in the jury selection process. So typically in a criminal trial during the jury selection process, each side gets a certain number of peremptory challenges, which is an objection to a prospective juror without the need to show cause the court has to accept it. So now this bill acknowledges implicit and unconscious bias as an improper basis for exclusion. So in the past, you had methods of challenging peremptory challenges in the form of what's called a Bat and Wheeler challenge and that came out of case law. So now this bill codifies that and allows the party or the court the opportunity to challenge opposing counsel's use of peremptory challenges. So that's one. Then you have Assembly Bill 2542 which prohibits discrimination in the criminal trial process. Specifically, it prohibits the state from seeking or upholding a conviction or a sentence that is discriminatory based on race, ethnicity or national origin. You have Assembly Bill 3121 which actually creates a task force to study and develop reparation proposals for African Americans and then you have Assembly Bill 979, which actually places requirements on publicly held companies headquartered here in California to diversify their board of directors with those from underrepresented communities. And that's faced some, some challenges. So those are some pretty big pieces of legislation here in California as it relates to diversity.

John: Absolutely. And, and living in here in California, very, feel, very proud that California leads the way in some of these efforts. I guess a question to you just along the lines that we uh asked Iveliz and Liza, you know, as a person of color living here in California, you know, how, how is this impacting you? What are, what are your personal thoughts around some of the developments in the, in this field?

DJ: Yeah, sure. So I think, you know, as a black man is someone who has benefited from diversity initiatives and also someone who's been impacted, you know, by inequities, you know, I'm, I'm inspired to California is now, you know, we're taking this turn, we're trying to go in the right direction and particularly by, you know, assembly Bill 3121 that actually creates a task force to discuss reparation proposals. I think that's huge and I think that shows that we really are moving in the right direction trying to, as Liza mentioned, have these discussions about inequities and, and what we can do to really redress it. So it, it, it makes me hopeful. You know, I know we still have a lot of hurdles we have to overcome, but this is definitely a move in the right direction and I'm hopeful that this can, you know, continue and, and um, and turn into something much larger.

John: Absolutely. Thank you.

Iveliz: So John, in addition to the California Senate Bill 826 I know you're also on the National board of 5050 women on boards, one of the leading organizations that's advocating for more women on public company boards. Can you provide an update on how California Senate Bill 826 is impacting women on boards?

John: Thanks Iveliz. Yeah. So for, for a way of background, SB 826 was passed a little bit more than a year ago and it mandates that public companies who are headquartered in California have women on their boards. Really proud to have served on the national board for 2020 women on boards, which is now 5050 women on boards. Uh, the CEO of that organization was, was uh Betsy Beer. Corda was one of the leading proponents for getting SB 826 passed and, you know, five years ago, it was a pipe dream, but it really came into fruition in reality and the impact has been pretty profound. The law requires by the end of this year of 2021 that boards in California Public Company boards. If there's more than six members, they have to have at least three women on the, on the boards. And the Secretary of State is authorized to file penalties of $100,000 for companies that aren't complying $300,000 for subsequent violations. But probably more importantly, you know, the disclosure of those fines to the public could certainly be damaging to those companies and their reputation stock price and the like. And what we've seen is since, um, June of last year, as a result of the law, you're going to see over 600 women that are going to be appointed to public company boards in California, going back to, you know, a couple of years ago, there were, you know, number of public company boards that didn't have any women. And now by the end of this year, you'll see at least three women on a number of the many of the public company boards as well as result of the new law. So really, really impactful when Governor Jerry Brown signed the law, he actually was anticipating, there'd be legal challenges but said it doesn't matter. We're still going to mandate, you know, this diversity. So I know, you know, DJ, you might be able to comment on some of the legal challenges that we've seen to date to SB 826. And, uh, and then the, the next bill, which is AB 979 mandating diversity people of color on, on boards.

DJ: Sure. So there's, um, there's actually been a few legal challenges. Senate Bill 826 which you know, as you mentioned, require publicly held corporations to include at least one woman on their board of directors. There's a few of these are actually ongoing litigations right now. This is challenging this bill on equal protection grounds. So a few of note, one is uh Maland vs Padilla and that's the case that's brought by shareholders alleging that the statute harms shareholder voting rights. So in other words, it prevents shareholders from voting, how they want. It impairs them from voting and you know, to be able to vote on their own board members. So that one is currently being challenged on equal protection grounds. And then you have Crest versus Padilla, which I believe they, they've also challenged not just Senate Bill 826 but also 979 and Crest vs Padilla, the they're alleging that the Senate Bill increased a quota like system and it's un it's an unlawful expenditure of taxpayer funds and resources. So they're challenging on equal protection grounds as well.

John: I said it was to be expected, those cases are obviously still in litigation. So we'll see how they end up. But I think the, you know, if you ask what the impact of increasing diversity on boards, maybe it's fairly obvious. But if you have diverse leadership at the top of the organization, certainly that creates a different culture. It creates as we've seen, study after study better performance for those companies. But as I say, I, I really believe that diversifying the boards at the very top of public companies really could have a dramatic impact on corporate America, the policies procedures, cultures of all these organizations by seeing a more diverse board, so pretty impactful, we'll see where the legislation, I mean, where the litigation ends up, but, you know, very positive step in terms of seeing change.

DJ: Definitely.

Iveliz: So DJ, what should public companies in California do to comply with AB 979?

DJ: There's a few things that, that corporations can do. You know, one is they can confer with the council legal counsel to develop a process for gathering and disclosing relevant self identification and corporations can even consider hiring a director of diversity to assist with this. Another option is to consider plus factors during recruitment and create a plan to, to consciously consider traditional diversity factors. So an example of this would be working with, you know, reputable diversity focused recruiters and specifying as well to those recruiters that the candidate pool has to include candidates from historically underrepresented groups. Another thing that companies can do is be ready to discuss these plans, you know, including making these plans public and discussing it with investors or or as part of stockholder engagement discussions. And finally, and this is a big one I would say given these unexpected legal challenges that we were just discussing and the uncertainty as it relates to these legislations and where they'll end up, don't rely on the statute or don't state specific intent to comply with that statute. But instead companies should consider broader, more generalized statements. So for example, that a company is complying with all legal requirements and or that the company seeks the best qualified candidates and takes many considerations into account including diversity. Using language like this would also be a would be beneficial to companies.

Iveliz: Thank you. So, Liza, what are we seeing other states do here?

Liza: Yeah, thank you. At least. I mean, obviously California is, you know, has really led the charge but, but I'll, I'll tell you, you know, when you look back at, at the States, they've been grappling with this since 2020. I think we talked about, you know, 2019, 2020 these discussions have been taken, taking place. So it quite a few states have enacted laws at the state level that are really requiring business entities to just close what their boards look like they are requiring business entities to, to become a little bit more transparent. We were seeing a little bit of a lag is, is in, in some of the corporations and the companies and whether or not they're in compliance and, and how they're dealing with that. But I can, I can tell you, you know, you've got states like Maryland, uh Maryland back in 2019. So it's been on the books for a while. Um required certain business entities to, to really start to disclose in their annual report, the number of directors and, and female directors and, and what their boards are looking like. You've got states like Massachusetts looking enacting laws to, to sort of do the same thing. Hawaii, Michigan, New Jersey, Washington. So all over, what I would say is that we're in a, in a phase where we're watching state legislatures, you know, really grab with how to put policies and, and, and laws in place that will balance the need to sort of drive diversity in a certain area with the need to sort of protect the way corporations sort of run their business and conduct their business and, and of course, you know, looking out for some of those challenges that DJ has talked about that are being played out in the, in the courts right now as well, but more, more to come, I'm sure.

John: Yeah, absolutely. Well, speaking of more to come, I guess I'd throw it out to all of you, you know, with all that we've discussed, what do you think the future is for continue to see legislation around diversity? I'm reminded of back in law school just or even as we've seen over the last couple of years in the constitutional crisis we've gone through in terms of the balance between the judiciary branch and the legislative branch. But, you know, what is your outlook for the future, especially over the next couple of years in terms of legislating more diversity? DJ, you wanna take that?

DJ: Sure. You know, I think overall, as far as California goes, as I, as I mentioned before, I think we have made some strides in the right direction, especially with recent legislation, that said, you know, evidence from the many challenges we discussed and the pushback against these legislations, we still have a long way to go and we have hurdles to overcome. For example, in November 2020 you know, after a year, they should have highlighted a need for these initiatives more than ever. California still voted to maintain the ban on affirmative action on the federal level. You know, you have cases like student for fair admissions versus Harvard that challenges the overall constitutionality of affirmative action and threatens the long term future of it on a national level. You know, I really think that we all need to get on the same page as a state and as a country and realizing that there is discrimination that there is systemic racism and there is bias both, you know, unconscious and conscious that exist in both these educational and employment sectors. And then once, if we can get on the same page there, then we need to get on the same page that there is a need for mechanisms like affirmative action to redress these inequities and increase minority representation in these areas. If we can get on the same page there, I, we definitely, you know, we have a long way to go.

Liza: Yeah. And I'll, I'll add to that. I think DJ is, is spot on, I think, kind of like I pointed out with the, the federal government, you know, that we expect to see with President Biden's administration, more executive orders, more funding put in place to really help, push the needle in terms of equity. I expect to sort of see that at the state level too. I mean, I think it's very clear that our nation needs a little bit of help in this area. And so I think that we're at a place in our history where we're going to see the federal government, you know, taking some really proactive steps to try to reshape our nation and make it a little bit better. But I think we're going to continue to see that at the state level. I mean, definitely corporations and businesses and, and individuals that are operating under the state laws need to expect to see that we're going to, there's going to be pressure from these states to, to be more transparent, to make sure equity is baked into their business practices and to make sure that fairness and inclusiveness is really a part of the way they are conducting business. And so II, I expect to see, uh even though the challenges will be there to some of these laws that are going to be put in place. I expect to see the state legislatures really leaning forward in this area. And I look forward to the change that leaning forward in this area is going to drive. Great observations. Yeah, I was on a recent panel of Chief Diversity Officers and the question posed, the panel was what do we see the impact of the, you know, the new administration that the changing of the guard, so to speak on our programming, the DE&I programming. And one of the comments back was that there really has been a focus, a change over the last year or so that we're just not talking about diversity and inclusion as we had been before, we're really focusing on the e on the equity. And what is, what does the E mean in terms of equity, affirmative action, all these type of things. And so there's so many programs now, you, you, you do see that they're leading with the E the equity portion of these programming. So I think there's going to be a change, there's going to be whether it flows through, through all the legislation. And you know, the states as, as we've been talking about it definitely is we, we are seeing a shift in the tide. So it's for us in the DE&I field. Certainly it's a welcome, welcome change to everyone. Thanks for, for joining a very intriguing discussion today full of hope and, and the like uh really appreciate you coming in.

Iveliz: Thanks everyone.

DJ: Thanks for having us. See you next time.

Outro: Inclusivity Included is a Reed Smith production. Our producer is AlI McCardell. This podcast is available on Apple Podcasts, Spotify, Google Play, Stitcher, PodBean, and reedsmith.com.

Disclaimer: This podcast is provided for educational purposes. It does not constitute legal advice and is not intended to establish an attorney-client relationship, nor is it intended to suggest or establish standards of care applicable to particular lawyers in any given situation. Prior results do not guarantee a similar outcome.

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