Nothing Ordinary About Sexual Orientation Discrimination

ford-logo.jpgOn Monday, the Securities and Exchange Commission ruled that Ford Motor Company must allow a shareholder vote on a resolution altering the company’s anti-discrimination policy. The resolution eliminates sexual orientation from the policy, implicitly suggesting that discrimination against gay people is OK. This is yet another volley in the ongoing culture wars playing out at Ford. A few months back, social conservatives pressed the company to withdraw ads from magazines targeted at gay people. The company decided to pull ads from gay-oriented publicatioins, explaining that the decision was purely financial. The American Family Association withdrew its threat to boycott the company. Then, after meeting with members of the gay community, the company backed off and re-committed to advertise in these publications. Now, a shareholder named Robert Hurley of Alton, Illinois, is taking a new approach: turning Ford “gay-unfriendly” from the inside.

Ford sought to have the resolution excluded from a vote under SEC Rule 14a-8(i)(7), which provides that a company need not submit an issue to shareholders if it involves “ordinary business operations.” The question, then, is whether anti-discrimination policies are part of ordinary business operations. Let me say, first, that I have not dealt with SEC matters since I was a young associate in New York. But I would have guessed that an anti-discrimination employment provision would be part of ordinary business operations. Some might contend that mundane employment policies cease to be “ordinary” when they touch on hot-button social issues – and sexual orientation anti-discrimination policies, arguably, fit this category. But from my cursory research of SEC no-action letters, it appears that the SEC often allows companies to kill shareholder votes on employment polciies and does so even when the issues involve socially controversial matters.

On one hand, I tend to agree with those who believe in shareholder democracy. I am suspicious when a company seeks to shelter its policies from shareholder scrutiny and input. But I would be troubled if the SEC’s new decision reflects a changed attitude about sexual orientation discrimination, rather than corporate governance. That is, is the SEC now forcing companies to put all manner of employment policy resolutions to a vote? Or did it only choose to do so when sexual orientation was at issue? I simply don’t have the expertise to know.

Whatever the motives of the SEC, I’m not sure that the result is bad. Many progressives have come to believe that civil rights won through debate and democratic choice are more stable than those obtained through the decisions of small groups of elites. When change happens by majority choice, the remaining objectors can’t play the “anti-majoritarian” card. There is no denying that, sometimes, elites – Presidents, judges, or corporate boards – spur positive change through anti-democratic actions. But on the issue of gay rights, I think that the public has already become pretty well engaged.

As for Ford, I say let Mr. Hurley have his vote. There are good business and social reasons for Ford to take a stand against discrimination. I agree with KipEsquire: those who seek to discriminate and diminish will be forced to the margins. And if they lose by acclamation, rather than declaration, perhaps they will find other things to be grumpy about.

UPDATE: I have not been able to find a free copy of this SEC letter, which was released on March 6, 2006. It is available on Westlaw at 2006 WL 739897.

FURTHER UPDATE: Thanks to Marty Lederman, a PDF copy of the letter is now available gratis.

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4 Responses

  1. Marty Lederman says:

    Could someone please post a link to the SEC decision? Thanks

  2. Dan Filler says:

    Marty – A citation is now in the update.

  3. Marty Lederman says:

    Thanks. I’ve created a PDF to which you might want to link:

    http://balkin.blogspot.com/sec.ford.pdf

  4. An important thing to note here is that the proposal is precatory, i.e., it requests but does not require Ford to make the change. The proposal is likely phrased this way because otherwise it would be bounced under 14a-8(i)(1) (improper under state law). Hence, even if the proposal is approved by a majority of Ford shareholders, the Ford board, in the exercise of its business judgment, can choose to ignore it.