Name: Impact Initiative 2024: DEI Defense: Battling The Chilling Effect
Uploaded: 2024-10-09
Duration: 17 min 37 s
Description: Elizabeth Gore, President & Co Founder, Hello Alice Neal Katyal, Partner, Hogan Lovells Moderator: Phil Wahba, Fortune

 Elizabeth Gore, President & Co Founder, Hello Alice Neal Katyal, Partner, Hogan Lovells Moderator: Phil Wahba, Fortune

Impact Initiative 2024: DEI Defense: Battling The Chilling Effect

Photography by Rebecca Greenfield/Fortune

Conferences

I, I mentioned this in a couple of other panels, like we've seen a lot of companies fall like dominoes in recent months saying, yeah, D I OK, we're done with that. Um caving to pressure or maybe using that pressure as a pretext. What do you think is behind that? And um you know, do these companies not have deeply held convictions? Like what, what do you think is or, or was there a lot more um uh backlash bubbling under the surface that we might not have seen? Um Well, how do y'all? It's good to be with you and always gray at fortune. Um So I don't know, I'm gonna flip my answer and say the ones that are staying will probably make the most money. And the reason I say that is in my world, in small business, um it is so critical that we're funding everyone in that ecosystem to ensure that they're growing, they get the capital they need and the Fortune 1000 in the room, they have the supply chain they need to be successful. And so I think when I think about it, I think of the other way those you know, like I saw today was whether it was Exxon or Delta or Whole Foods who are keeping to it. I think they're kind of come out with better stock prices, better employee retention. So I kind of think of it in the opposite way. So the naysayers are going to miss out. Yeah. Ok. And we're capitalists and I think that the naysayers they're going to lose money. Ok. Um, now you, of course, uh had your own battles with um people um on the screen is like Baltimore. Yeah. No, I mean, you can name them if you want. But um I mean, how can DN ID I initiatives uh be lost or approved a bit more or, you know, it's, it's uh um you know, with, with some of the, the uh the legal challenges to them, you know, you've seen maybe some of the weaknesses but how, how can they be lawsuit proofed in your opinion? Well, I mean, I've certainly learned a lot by amazing lawyers like Neil sitting here with me and I didn't think I would need to know any of this, but I think like any issue, um the, you know, the law is evolving and we have to evolve with it. And so any company in the room that is a good fiduciary is gonna have to keep watch on how they particularly with money and we're a credit company, we do credit loans and grants. So we have to keep evolving with the law and the interpretation of the law. And so it doesn't mean you have to stop these programs. It means you have to be smart about the language you're using, you have to great, have great counsel. Um I love that Sherman, the C hr O folks were here because I think they're a really key part of it. So I think you don't stop what you're doing. You evolved. Um And uh what about small companies with fewer resources? I mean, who might, who we are? But you know, you well then tell us maybe spend a few seconds on the the audience. Yeah, so we um hello, we serve 1.5 million small business owners with credit loans, grants, uh fiscal resources and um our largest customers are actually all of you. So we serve the fortune 1000 who have small business owners as their customers. So banks, large fintech, um everyone from Pepsico to Delta Airlines who have really critical supply chain with small business. So we help them engage transact and fund small businesses. So, but we're still a small but mighty company. Uh we're ac c venture back company and um we uh were sued a year ago for our programs for black owned small business owners, our philanthropic programs and um you know, like any company that gets hit by a Black Swan event, you know, you gotta, you gotta be careful and make sure you watch your budget your PNL hire great people and, um, fight like hell and get on the other side. We keep pointing to. Well, I mean, I have to, he's our hero in this scenario. So, um, well, what are your thoughts Neil on, on? Uh, so your first question? Well, first of all, thank you for having me here. It's a privilege to be with all of you. Um, your first question was why are companies caving? And, you know, I've been involved in every affirmative action case at the Supreme Court for the last quarter century. I think, why are companies caving because they're wimps? Um, and look, I mean, I think, I think if, if the company doesn't want to have a diversity or affirmative action program, that's fine. My view is not at all. They're constitutionally compelled or legally compelled to have such things. It's a free country, different companies can do what they want. But what really offends me is companies that stand up and say, oh, we really want to do diversity in affirmative action programs, but we can't be because of the law and that's just to use the technical legal term. Poppycock. The Supreme Court has not stopped de I programs. There's, and there are ways to do them right and ways to do them wrong and obviously you want to do them right? And what I found so troubling and I, I have the privilege of advising many of the Fortune 200 companies including, you know, some that I think in this room and some of them have thrown in the towel, even though they say in the board room with me, they want to do it, but they're just worried too much about either the litigation risk or the reputational risk and the like. And so then you have people like, you know, Elizabeth's company that's not, you know, a multibillion dollar cap company. You know, the legal expense alone is such a huge, huge percentage of their annual spend, but they're fighting to do the right thing. And, you know, if I have any message for you, it's that, that fight is important for those of you who want to have the fight. There is a fight to be had and there's a way in a path to getting affirmative action programs to be upheld by the Supreme Court. Yes, the Supreme Court in the Harvard case has restricted them in the educational setting that doesn't apply in the corporate setting directly. And so all you have is some innuendo that says the justices when they get these cases are going to strike down program after program. And I just don't think that's right. And I certainly don't think it's for pre for ordained and that you should throw in the towel and unilaterally disarm now because one day you might face an adverse result, should we, um, well, should we worry about three weeks from now? Um, if one person gets elected. We should worry about three weeks from now for many reasons. Yeah. But, um, uh, but, you know, just, do you see a scenario under which, uh, um, we would have more judges and put on courts who would then be favorable, um, to, to, uh, to affirmative action, uh, type cases? Sure. I think that Donald Trump would try and put additional judges like that on. But, you know, the justices he put on the Supreme court, for example, are ones that I am very convinced that were Elizabeth's case, for example, to go to the Supreme Court, we could win it in front of all three of those appointees. So I do not think, I think that there's a knee jerk reaction that's happened among some on the left to say this court is so out of step and will do so much to mess us over that. We might as well get ahead of it and throw in the towel now. And I just think that's wrong. And we've seen that in example, after example, of companies, if they do the right thing and do it in a responsible way, those programs can be upheld by the Supreme Court. So just out of curiosity, the company that you're speaking to and they say, oh, we're afraid of litigation. The does activist investor come up? Um Sure it comes up and there have been some letters and also state s come up too and then of course, the possibility that if there's a Trump administration, there'll be government investigations as well of affirmative action programs. So all of those are things that come up. But on the other side, I think you have to weigh what Elizabeth is talking about, which is how important diversity is to the bottom line of companies to better performance. Uh You know, so just from a purely instrumental internal perspective and, you know, someone like me and I think most of the companies that I'm privileged to represent in the board room care, not just about shareholder value, but they care about their impact on the world. Ok. Um We'll open it up to questions in a few minutes. I just wanna backtrack a little bit. I guess I have my own little stereotypes about the scotus. And um what's the case for thinking that a case like Elizabeth could be won if it went all the way up there? I mean, there, there's this idea that they're pretty set in their views or, or are we being a bit unfair? Yeah, I think it's unfair. I mean, there's certainly more set than when I started arguing at the court. My first case in 2006, justice Kennedy was on the court. You know, it was definitely much more of a swing justice feel to it than there is today. You know, sometimes today I do think it's pretty clear what's going to happen before argument and the question is, can I engineer a soft landing, a soft loss for my client or something like that? But I would say like for those who think like, oh, the Supreme Court's always striking down liberal things. Remember they voted against Donald Trump, you know, time after time in 2020 in the election, they called his citizenship question on the census. They said that his cabinet officials lied and struck it down. They saved Obamacare. Of course, you know, twice notably in Moore versus Harper, a huge election case that the Republicans thought they would, if they won, would entrench Republican rule for decades. They lost that 6 to 3. They just upheld Mifepristone the abortion drug last year. So, you know, example, after example of the court doing the right thing with Elizabeth's case in particular and I don't think it's going to go to the Supreme Court because it's just so obviously right that I think she'll win this and I don't think that the other side would want to try and take it to the Supreme Court. But um but basically, you know, they've got uh they, they, in the, in the case, there's a program that Hello, Alice administers with an insurance company where they give 10 grants to African American owned businesses. And the claim is that it's, you know, discriminatory and so on. Well, the guy who they found as their plaintiff to file the lawsuit couldn't even allege that he met the criteria for getting a grant in the first place like the capital thresholds and things like that. So, you know, it's conservatives who generally wanted to restrict access to the federal courts and say a plaintiff has to jump through a series of hoops first. So, were the case to go to the Supreme Court? I think it would appeal to the left and right of the court equally. So, what kind of programs do we think? Um, the opponents of all this could go after? I mean, I'm thinking, you know, the, the federal, all the different government levels have set aside for women and minority owned businesses, et cetera. And they're a pretty big part of it. So, are programs like that, um, eventually potentially threatened uh by this, you know, the, this, uh, well, I mean, the there is certainly, I think I, I can't speak on the of those who sued us, but there's certainly a movement and I wouldn't even say by conservatives. I mean, we're based in Houston, Texas. We had a lot of centrist republicans very much supporting our case. Um Our small business owners are about 5050 they were all very supportive of this. So, um, I think there is this alt, right, you know, extreme groups that, um, are just trying to stamp out anything that they don't recognize. And, and where the reason I brought up supply chain earlier is when I was an entrepreneur, residents at Dell we did 4 billion a year in supp diversity contracting. It was critical to our P and L. So that is an area where I, I just wanna encourage everyone to keep going. It's not new money, it's really important. Um Both to the small business ecosystem as well as the companies themselves. Those are the types of things that I don't wanna see next on the list. Um particularly I, I live in a US veteran household Air Force. And, um, if you look at the intersectionality of a lot of these issues, it does affect all of us. So my case, for example, it is not just Black and African American small business owners, the vast majority of us veterans now are people of color that are starting businesses. So if you say this doesn't impact veterans, it doesn't impact women, it doesn't fix, you know, your coffee shop, your dry cleaner, it's just not the case. So I want to make sure that it's not just Phil philanthropy and grants. I want us to think of this as supply chain as jobs. It is a lot bigger than that concept and just to pick up on something Elizabeth said about the politics, which I think she's absolutely right. I mean, it was an old line conservative principle when I was growing up that if you're running a business, you should generally be able to run it free government regulation. And if you think about what these lawsuits are that Stephen Miller and all these people are filing, I don't think they expect to win. I think they expect to just force companies to unilaterally disarm and throw in the towel. But what's the basis of the lawsuit? They're saying, look, you know, you shouldn't have this diversity program and look, if you want to have a debate about whether to have a diversity program or not, the company should have that debate but lost. Steven Miller has lost that debate. Companies want to have these programs. And so he then runs to the court to say, oh, you can't have this program even if you want to, he's trying to get the courts to do the work he was unable to do in persuading them to abandon their DE I programs. And so, you know, that, that, to me is the antithesis of the Conservative Party that I grew up with. So, is it unfair to surmise that the companies that dropped D I, um, a few months ago they didn't really want it to start with and just had, maybe jumped on. There's a lot of peer pressure and I think there's, you know, a range of different views from companies as there should be. I, I do not, I'm not someone who thinks you, you know, you know, you're immoral if you don't have a program or something like that. But I think, you know, Elizabeth's right, the numbers are in the studies on diversity contributing to shareholder value are really powerful, but I'm sure there are people in every company that don't want to have it or who want to have an extreme version of the program. Um, you know, in the other direction. Um You know, so it's all out there. But I do think, you know, that's where the debate should be, it should be in the boardrooms, not in the courtrooms. Ok. Are there any questions? Don't be shy? Ok. Can somebody bring our friend from R BC and Mike? There we go. Hi, thanks. First of all, congratulations for taking up this site. Thank you. Thank you. I never thought I'd be congratulated for that. But thank you or, or condolences, either work. Um, uh, you made a point about, uh, it's ok for companies to do what they like and they can still run or DNI programs, they just have to do it right? Can you say more about what you mean about that? And if we're practitioners who are looking to do it, right? What would that look like? Yeah, I mean, it's going to depend on the, on the various company and, you know, you'd want to articulate the reasons for doing it and, uh, and document them and, you know, and the like, um, you know, obviously things like quotas are impermissible. Um, but things that are goals and outreach are absolutely permissible. I think it's important often times depending on the nature of the company to do, like what Elizabeth's company does, which is not just a grant program for racial minorities, it's for women, it's for veterans, it's for the disabled. Um, and it's about what, what he calls building an inclusive economy. So for that company that I think program is structured really, really nice and is a wonderful example to look to, but it will depend obviously on the company. Another example I'll just give is I was really, I thought it was very thoughtful, the argument for ESD from Delta this morning on they, they want, you know, fuel emissions to lower because it saves them money, right? So I look at our, our business. So we're in, in credit and there's a $40 billion gap for bipoc community who applied for credit and got declined in the small business area that is terrible for business, for our banks, for everybody. So to me, some of these programs are very relevant to our P and L our bottom line. So that makes a lot of sense to me to run a program that's gonna benefit the business, right? So I also think it's very relevant to Neil's point to what is your core mission and then what fits in that and hopefully that is an inclusive economy. So in the, in our final moments together, um do you think we're going to see more of these kinds of losses as the one we saw that went after? Hello, Alice or um, you know, um, yeah, I think that that's the business model of some of these organizations that want to do it. I don't think we'll see successful ones because I think, you know, we've already won, you know, Elizabeth's case in the trial court. We're going to the Court of Appeals. Now, I suspect that when we win that, that will be at least something of a chilling effect on this, these lawsuits. And, and again, I think we should have this debate. It should just be a debate that's not as much legal policy and what we think is right for the future direction of the company final thought. Um I think again, if we can all look at the bottom line, you know, the, the new majority of the small business owners, we serve, they want to make money, they want to create jobs. And I think America is a capitalist society and if we concentrate on that fact, we're, we're all gonna move forward. Ok. Thank you very much. Thank you. So please join me, thanking uh Neil and Elizabeth for joining us today.