On November 22nd, 2021, Boyden Gray & Associates filed an opening brief challenging SEC’s order approving a new rule requiring almost every Nasdaq-listed company to impose “diversity” quotas for certain minimum numbers of women, racial minorities, and sexual minorities on those companies’ boards of directors. Any company that does not meet these quotas must file an “explanation” for why it failed to meet them.

As the brief explains,

The SEC’s order violates the constitutional right to equal protection, as it encourages discrimination against potential board members and also by current board members and shareholders; and it stigmatizes board members who identify as one of the preferred demographics. The order also violates the First Amendment by demanding disclosure of “controversial” information, which the Supreme Court has prohibited absent compelling justifications and narrow tailoring. Finally, the SEC lacked statutory authority to issue the order, which seeks to regulate demographics through the guise of “financial disclosures.

Nasdaq’s minority director rules, by requiring a quota of racial or sexual minorities to be board members—or else a public explanation—requires companies to discriminate based on race. The Supreme Court has always looked on such distinctions with extreme suspicion because, as the brief explains,

“Distinctions between citizens solely because of their ancestry are by their very nature odious to a free people.” Rice v. Cayetano (2000). There are no “benign” racial classifications; sorting people by race always “stimulates our society’s latent race consciousness,’ “delays the time when race will become … truly irrelevant,” and “perpetuates the very racial divisions the polity seeks to transcend.” Shaw v. Reno (1993).

Alliance for Fair Board Recruitment is a non-profit membership corporation whose mission is to promote the recruitment of corporate board members without regard to race, ethnicity, sex and sexual identity.

Boyden Gray & Associates is a boutique litigation and public policy firm, continuing C. Boyden Gray’s decades of service as counselor to presidents, business leaders, legislators, and regulators on matters of constitutional law, regulatory policy, and international affairs.