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E-MailMartin Lipton is a founding partner of Wachtell, Lipton, Rosen & Katz, specializing in mergers and acquisitions and matters affecting corporate policy and strategy. This post is based on a Wachtell Lipton memorandum by Mr. Lipton, John F. Savarese, and Noah B. Yavitz. Related research from the Program on Corporate Governance includes The Illusory Promise of Stakeholder Governance (discussed on the Forum here) by Lucian A. Bebchuk and Roberto Tallarita; Stakeholder Capitalism in the Time of COVID (discussed on the Forum here) by Lucian Bebchuk, Kobi Kastiel, Roberto Tallarita; and Lifting Labor’s Voice: A Principled Path Toward Greater Worker Voice And Power Within American Corporate Governance by Leo E. Strine, Jr., Aneil Kovvali, and Oluwatomi O. Williams.
Late last week, the Supreme Court held that the Constitution does not permit universities to consider race as a “plus” factor in admissions. The principal effect of the decision is to more closely align anti-discrimination protections in academia with those in the workplace — where courts have long permitted “reverse-discrimination” lawsuits against race-conscious hiring practices, subject to affirmative defenses. However, the decision’s broad language and cultural prominence will likely embolden opponents of workplace diversity initiatives.
In a majority opinion authored by the Chief Justice, the Court sharply criticized the practice of “affirmative action” in higher education as inconsistent with the constitutional imperative of equality established in the Fourteenth Amendment’s Equal Protection Clause. Although the Court acknowledged that such programs serve the “commendable goal[]” of achieving the social and educational benefits flowing from greater diversity in education, it held that these objectives were insufficiently compelling to justify outright racial preferences.
In a separate concurrence, Justice Gorsuch emphasized an overlap between the majority’s constitutional analysis and Title VII’s workplace protections, which, in his view, “codify a categorical rule of individual equality, without regard to race.” Several amicus briefs, filed by major U.S. corporations, had advanced the view that preserving affirmative action in higher education was important to preserving employers’ ability to recruit the kind of diverse and well-credentialed workforces that many American companies believe are necessary to effectively run their business. While the majority opinion did not address the broader debate over diversity, equity, and inclusion (DEI) initiatives raised by those amici and in oral argument, it is likely that critics of such initiatives will seek to take advantage of the Court’s decision to support further challenges to DEI programs.
In responding to the Court’s analysis of racial preferences, corporations and their boards should carefully review both the design and presentation of their existing DEI initiatives to ensure they are well grounded in the company’s business strategy and mission. Although a program that was lawful last week remains lawful today, the decision can be expected to present new challenges and criticism, necessitating careful, deliberate, and well-counseled analysis.
