Over the past several years, California’s Democratic supermajority has passed a slate of sweeping regulations seeking to legally enshrine DEI (Diversity, Equity, and Inclusion) principles within the state’s corporate sector. In 2018, then-Governor Jerry Brown signed a law requiring publicly listed corporations in California to have at least two women on their board if the board had five members or less, and at least three women if the board had six or more members. The bill was so obviously unconstitutional that the state had to resort to claiming the law was toothless in its defense, with one official saying in court, “It’s required but there’s no penalty, so it’s essentially voluntary.” The law was ruled unconstitutional in 2022.

In 2020, Governor Gavin Newsom signed a similar bill that required corporations within the state to have at least one member from an “underrepresented community” on their board, and for some corporations, at least two or three such directors by the end of 2022, depending on the size of the board. Firms that refused to comply with the mandate could face fines of up to $100,000 for the first violation, and up to $300,000 for repeated violations. Similar to the 2018 law, this bill was ruled unconstitutional on equal protection grounds earlier this year. 

Also this year, Newsom signed a bill into law requiring venture capital firms operating in California to release annual reports detailing the number of “diverse” founders they funded, specifically regarding race, disability status, and sexual orientation. Whether this law will face any legal challenges remains to be seen.

Despite consistent pushback to corporate sector DEI coercion from both California corporations and courtrooms, the Biden administration is inching closer and closer in its long march toward permanently enshrining California-style DEI regulations into all of America’s corporate sector. This effort began on Day 1 of the Biden presidency when he signed Executive Order 13985, titled Advancing Racial Equity and Support for Underserved Communities Through the Federal Government. Among other things, it mandates that all federal agencies have bureaucratic struggle sessions to assess whether or not, and to what extent, their programs and policies “perpetuate systemic barriers to opportunities and benefits for people of color and other underserved groups,” and utilizes the White House Policy Council to implement “equity principles, policies, and approaches across the Federal Government.” Since then, Biden has signed multiple other DEI-style EOs, including: 

• EO 13988: Combatting Discrimination Based on Gender and Sexual Orientation (January 20, 2021)

• EO 14020: Establishment of the White House Gender Policy Council (March 8, 2021)

• EO 14031: Advancing Equity, Justice, and Opportunity for Asian Americans, Native Hawaiians, and Pacific Islanders (May 28, 2021)

• EO 14035: Diversity, Equity, Inclusion and Accessibility in the Federal Workforce (June 25, 2021)

• EO 14041: White House Initiative on Advancing Educational Equity, Excellence, and Economic Opportunity through Historically Black Colleges and Universities (September 3, 2021)

• EO 14045: White House Initiative on Advancing Educational Equity, Excellence, and Economic Opportunity for Hispanics (September 13, 2021)

• EO 14049: White House Initiative on Advancing Educational Equity, Excellence, and Economic Opportunity for Native Americans and Strengthening Tribal Colleges and Universities (October 11, 2021)

• EO 14050: on White House Initiative on Advancing Equity, Excellence, and Economic Opportunity for Black Americans (October 19, 2021)

Biden had help from his allies in Congress as well. For example, a provision in the American Rescue Plan of 2021 created a loan forgiveness program for farmers and ranchers, but only if they were members of minority races. The provision was challenged in court, with plaintiffs arguing that the program explicitly excluded white farmers and ranchers in violation of the Constitution and long-standing federal civil rights laws. A federal judge agreed and blocked the USDA from implementing the program. Congress later repealed the provision as part of the Inflation Reduction Act.

Most recently, in February of this year, Biden signed EO 14901, “Further Advancing Racial Equity and Support for Underserved Communities Through the Federal Government.” Broadly speaking, it mandates a “full government” approach that seeks to implement DEIA principles throughout the federal bureaucracy (and yes, they added an “A” to “DEI,” — it stands for “accessibility”). Among a smorgasbord of other things, this latest EO:

• Requires AI be designed, developed, acquired, and used in a way that “advances equity”

• Requires civil rights offices within each agency be consulted on AI matters

• Compels every federal agency to create an “Agency Equity Team”

• Compels every federal agency to devise “Equity Action Plans,” which a) identify barriers minorities might face accessing programs or getting government contracts, grant money, etc., b) devise strategies to address these newly discovered barriers, and c) describe how the agency intends to engage with underserved communities more

Now, this EO, as well as the one Biden signed on his first day in office (EO 13985), are the stated rationale for the Commerce Department’s new “Business Diversity Principles” initiative, which was announced in November and is currently open for public comment on the Federal Register. As currently proposed, the initiative seeks to develop “best practices” for “business diversity” in the private sector based on the following six principles, summarized here:

• Organizational Strategy: C-suites and corporate boards should be more diverse. Leaders should model “equitable and inclusive behavior,” and have access to DEI professionals. Enforce this through performance evaluations and compensation.

• Workforce Development: Diversity metrics should be tracked through surveys and demographic data about the workforce. Businesses should develop and maintain “DEIA councils.” 

• Human Resources: Minorities should have mentors, and ”employee resource groups” should be established for them. There should be work-life balance through “flexible working arrangements,” which I assume means letting people work from home. 

• Business Opportunities: Preference should be given to minority-owned businesses throughout a company’s supply chain. 

• Community Investment: Companies should create scholarships and incubator programs for minorities. 

In effect, the Commerce Department is going to create a standard for DEI in business that mimics the “whole government” approach — a term the Biden admin frequently uses to signify an initiative that should pervade the entire federal system — to DEI that Biden enacted: massive bureaucracy, make-work jobs, and diversity hires (but no explicit quotas, for constitutional reasons). While, as currently proposed, the standard will be one that companies can adopt “voluntarily,” it recalls California’s DEI law for venture capital firms. In California, VCs are not required to give a specific number of “diverse” founders money, but they are required to collect demographic data on who they fund, creating a mechanism by which firms may feel compelled to fund certain projects and reject others based on race, sexual orientation, and so forth, or so risk hostile treatment from their industry, the media and the state. Similarly, with the Commerce Department's proposed program, companies who do not adopt “Diverse Business Practices,” as defined by the Commerce Department, can be truthfully said by their competitors and the media to be out of compliance with “best practices” for a diverse work environment, as defined by the government, essentially adding credibility to future smear campaigns.

Moreover, given that Biden’s “whole government” approach forces departments to consider DEI principles when making decisions, it would be reasonable to suspect that companies would feel pressured to adopt the government’s “best practices” when seeking procurement contracts, grants, or other types of funds. As I wrote in The Industry this September, DEI has already invaded the grant sphere as a result of Biden’s EOs. Recently, applicants to the Economic Development Agency’s “Tech Hubs” program were judged on the extent to which they partnered with majority-minority colleges and universities. Additionally, they were required to demonstrate how their planned projects would help “Underserved Communities.” This is the new normal for all federal agencies under Biden’s leadership. The cumulative effect of the President’s growing list of DEI EOs is that DEI now pervades nearly everything the federal government does. It is only slightly hyperbolic to say that the modern-day bureaucrat cannot scratch his ass without first organizing a committee and commissioning three different studies to determine how his actions might affect gay black cripples. 

The American state’s seemingly endless capacity for debt, combined with long-lowered expectations from the public, might allow for such frivolous inefficiencies within the federal bureaucracy. However, the private sector is in the business of making money, not resolving the elite overproduction problem (a few tech monopolies with more money than God notwithstanding). They’ll sue if necessary, and probably win, as they have in California multiple times within the past several years. But Biden isn't making the same early mistakes as California: that is, writing DEI laws that say exactly what they mean. Instead, Biden’s issued no explicit quotas, just a series of dictates that force federal agencies to incorporate DEI principles into almost everything they do, every decision they make, and every interaction they have. It’s a far more subtle coercion. Biden knows well what a Supreme Court that overturned affirmative action would do if his administration cut to the chase and just said what all of the EOs mean: “Anyone but a straight white man.” Biden hasn’t yet gotten to where California is now, demanding demographic information but not technically installing quotas. But the march to Sacramento is long and sneaky. As he walks it, going from town to town giving ethnic studies majors something to do for good green American cash, who knows what he’ll pull out of his sleeve? Keep an eye out.

– River Page