In May, the Illinois legislature passed S.B. 2930, a bill that requires nonprofits who grant $1 million or more to other nonprofits to annually report the demographic make-up of their board of directors. According to the bill’s language, demographic information to be collected from board members includes race, ethnicity, gender, disability status, veteran status, sexual orientation and gender identity. The information would remain available to the public for a minimum of three years.
On June 30, Gov. J.B. Pritzker (D) signed this legislation into law, with Illinois setting a dangerous precedent by becoming the first state in the nation to require these draconian and invasive disclosures. Nonprofit organizations should not be mandated by the government to disclose board demographics. They should be free to choose those with the right skills, backgrounds, perspectives and personal experiences to help advance their missions without fear of running afoul of arbitrary mandates. Further, forcing the disclosure of board demographics may violate the privacy of board members who may not wish their personal identifying information to be made public.
While Illinois is the first legislature in the nation to mandate the disclosure of nonprofit board makeup, there have been instances of DEI policies being implemented which impact corporate boards. In 2020, California Gov. Gavin Newsom (D) signed a bill mandating that corporations headquartered in California must retain a minimum number of women, minority and LGBTQ+ board members. This comes after a California bill was passed in 2018 mandating corporations have at least one woman on the board, with the number increasing based on the size of the board.
Since the passage of both bills, state and federal courts have ruled that diversity mandates are unconstitutional. Similarly, in 2021, Nasdaq issued a rule which ordered companies to publicly disclose statistics on their board makeup annually and put a statement on their websites if the company was unable to comply. Given that state and federal courts ruled California’s law unconstitutional, an Appeals Court may also find the Nasdaq rule is unconstitutional.
Not only are demographic mandates unconstitutional they are antithetical to America’s founding principles. The philanthropic community seeks to foster and celebrate diversity but forced reporting of board demographic makeup promotes the exact opposite. Nonprofits thrive and support their local communities best when they have the freedom and flexibility to pursue the most effective ideas and strategies to solve problems and provide opportunities without worrying about checking a box or meeting arbitrary requirements. Legislation such as S.B. 2930 impedes charitable work and does more harm than good.
To learn more about the efficacy of demographic quotas and mandates, read the Roundtable’s True Diversity Toolkit on this topic. To learn more about our True Diversity initiative, visit TrueDiversity.org.
