John Jenkins at CorporateCounsel.net recently observed that "companies may want start thinking about including a diversity question on their annual D&Q questionnaires". Constructing such a questionnaire would not seem to be too difficult. Companies can simply list various racial, ethnic, gender and sexual orientation categories and ask director candidates to check the appropriate boxes. Indeed, John's blog provides an example of such an approach. There are several problems with this approach, however.
First, is the problem of categories. John's sample questionnaire, for example, includes a box for "Hispanic, Latinx or Spanish Origin". These categories, however, do not align with the categories set forth in California's AB 979 which uses the terms "Hispanic and Latino" but not "Latinx or Spanish Origin". Nasdaq's proposed listing rule omits "Latino", referring to Hispanic an Latinx. None uses the term "Latina".
Second, is the problem of definitions. For example, does "Asian" include anyone with ancestral or cultural links to areas east of the Bosphorus, such as Armenia? Does someone from Portugal qualify as Hispanic? Even if the geographic space is clearly identified, what does it mean for someone to be within that category? Is it where an individual was born, where his or her parents, or their parents were born? Can someone become a member of an ethnic community simply by adopting that community's culture? As noted yesterday, at least one California statute (unrelated to AB 979) defines "Hispanic" as "a person of Mexican, Puerto Rican, Cuban, Central or South American, or other Spanish or Portuguese culture or origin regardless of race". Cal. Pub. Cont. Code § 2051(c). The statute, however, fails to elucidate what makes someone "of" a culture.
Finally, there is the problem of what standard should be applied to the determination. AB 979 requires only self-identification as a member of a specified community. However, directors and the companies on whose boards they sit may face public criticism and litigation if self-identification is not backed up by some objective evidence of membership within the claimed community.