Diversity-Related Lawsuits Take Aim at Board Composition (August 1, 2020)

Diversity-Related Lawsuits Take Aim at Board Composition (August 1, 2020)

Board Lens

Diversity-Related Lawsuits Take Aim at Board Composition (August 1, 2020)

Three separate shareholder lawsuits have been filed alleging a lack of diversity at large technology companies headquarters in California. The nearly identical complaints, which name both the company and individual directors, were filed in California courts last month on behalf of individual shareholders against Qualcomm, Facebook, and Oracle alleging that each of their boards failed to uphold their fiduciary duties with respect to diversity, according to copies of the complaints.

The Qualcomm filing charges that despite corporate policies that promote diversity and inclusion, there is a lack of diversity on the board and senior management, constituting a failure of loyalty and good faith that damages the company. The Oracle lawsuit similarly alleges that despite numerous policies, internal controls, and processes meant to increase diversity, the board failed in its fiduciary duties to shareholders. Facebook's lawsuit differs slightly: It alleges the board failed to stop hate speech against Blacks and other members of communities of color. 

The potential for legal action against other companies and their boards exists. In June, Newsweek "The 20 Largest Public U.S. Companies Without a Black Person On Their Board," an article that highlights the fact that, "Overall, technology companies dominate, comprising more than half the names that appear on the list." 

Implications for Boards: 

While gender diversity at all levels of a corporation, including the boardroom, has been increasing, recent events have highlighted the absence of Black leadership in both the boardroom and executive leadership. As these recent suits suggest, boards need to look holistically at their own composition and processes and consider whether the corporation is upholding its own policies to foster more diverse and inclusive cultures.

Key Questions Directors Should Ask:

NACD Resources:

For a more extensive list of key questions, directors should be considering see Key Questions to Advance Racial Equity in Business Practices. Directors seeking immediate steps for boards to consider as they lay the foundation for meaningful, sustained changes to address racial injustice can find more information in the current issue of NACD Directorship, "Board Perspectives on Race," and the blog post How Boards Can Help Address Systemic Racism in America. Finally, attend the first virtual NACD Summit 2020 to hear expert insights on the board's role in overseeing diversity, equity, and inclusion in the boardroom and the broader workforce.