'It's already having a massive effect,' corporate America demands Trump rescind executive order on diversity

Michelle Kim received an email last week from a corporate client who asked her to make sure her anti-racism talk would comply with the White House’s new executive order prohibiting the use of terms such as “white privilege.” She offered to cancel the agreement instead.

“Even if I could deliver a compelling talk without using the term, I could not agree with the spirit of the ask,” Kim, an author and CEO of Awaken, which provides interactive diversity, equity and Inclusion workshops, wrote on Twitter. “I understand the predicament companies are in right now – ‘Does this expose us to legal risk?’ ‘Will we get sued?’ ‘Will we lose our government contracts?’”

President Donald Trump’s decision to restrict the federal government and its contractors from engaging in what he calls “divisive” and “un-American” diversity training is sending a chilling effect throughout corporate America just as companies were stepping up efforts to address racial disparities following the death of George Floyd, a Black man, under the knee of white officer in Minneapolis in May.

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“It’s already having a massive effect and will continue to have a massive effect until it's rescinded or if it’s rescinded,” said Franklin Turner, a partner with law firm McCarter & English who represents multinational contractors and small and medium-sized companies.

The executive order’s stated goal is "to combat offensive and anti-American race and sex stereotyping and scapegoating."

A White House memo in late September suggested rooting out “ideologies that label entire groups of Americans as inherently racist or evil” in diversity training materials by searching for keywords such as “white privilege,” “systemic racism,” “intersectionality” and “unconscious bias.”

Critics say the executive order is a broadside against diversity and inclusion programs that will impair efforts by business and government to reverse decadeslong patterns of discrimination and exclusion. A USA TODAY investigation found that more than 55 years after the Civil Rights Act, less than 2% of the top executives at the nation’s largest companies are Black.

Research shows that fostering diverse and inclusive workplaces boosts financial performance and increases innovation but corporations are pulling back on diversity and inclusion training out of fear of losing out on government contracts that are critical, if not the lifeblood, of their businesses, Turner says.

Behind the scenes, civil rights leaders and industry groups are exploring legal challenges to the executive order, similar to organized opposition to the president’s Muslim travel ban. Those efforts are expected to intensify if Trump wins reelection.

“Proponents of the executive order argue that it only prohibits racist or sexist teachings, like that one race or sex is inherently superior to another. But the White House memo on how to interpret the order makes clear that the intended impact is far broader,” said Joelle Emerson, founder and chief executive officer of diversity and inclusion strategy firm Paradigm.

“The goal is clear: to limit companies from training on a wide range of well-researched themes in the diversity, equity, and inclusion space.”

Push back grows from civil rights, industry groups

Push back is growing from civil rights leaders and industry groups. Dozens of civil rights groups including the NAACP Legal Defense and Educational Fund and the Lawyers’ Committee for Civil Rights Under Law this week condemned the executive order as another sign of Trump's "support for white supremacists while demonstrating deep hostility to civil rights and racial justice."

On Thursday, a group of 11 technology, software and advertising industry groups that represent thousands of government contractors, called on the Trump administration to rescind it. The executive order “fails to acknowledge the realities of ongoing racial inequality and inequities in America and represents an unwarranted intrusion into private sector efforts to combat systemic racism,” according to the letter sent to the Office of Management and Budget and the Labor Department.

“I need every company's legal team to fasten their seat belts and be willing to go to bat for people willing to speak truth to power,” Kim said. “And I need executive leaders to signal to their teams we're no longer in ‘compliance’ mode – we're in the ‘right side of history’ mode.”

Asked about his executive order during the first presidential debate, Trump said: “They were teaching people that our country is a horrible place, it’s a racist place. And they were teaching people to hate our country. And I’m not gonna allow that to happen.”

Democratic challenger Joe Biden responded: “Nobody’s doing that.”

Trump order inspired by conservative activist

The executive order stems from appearances by conservative activist Christopher Rufo criticism of “critical race theory" on Fox News' “Tucker Carlson Tonight.” Critical race theory teaches that racism pervades government and other American institutions, giving white people an advantage.

“What I’ve discovered is that critical race theory has become, in essence, the default ideology of the federal bureaucracy and is now being weaponized against the American people,” Rufo, director of the Center on Wealth and Poverty at the Discovery Institute in Seattle said on Carlson's show.

Rufo celebrated achieving his goal – "...persuading the President of the United States to abolish critical race theory in the federal government" – posting on Facebook moments after Trump issued the order.

The Trump administration is not just pushing back against the belief that American society is inherently racist. It's also challenging corporate efforts to rebalance the scales by elevating more Black executives and executives of color into leadership ranks.

In recent weeks, the Office of Federal Contract Compliance Programs, which oversees federal contractors for the Labor Department, has questioned whether diversity initiatives at Microsoft and Wells Fargo to double the ranks of Black managers and executives over the next five years violate federal laws barring discrimination based on race. Both corporations say they believe their initiatives comply with those laws.

Corporations fear losing government contracts

Guidance issued by the Office of Federal Contract Compliance Programs outlines strict but vague requirements for complying with Trump's executive order on diversity and inclusion training that seem to cover essential and foundational concepts, Turner said.

The agency has set up a hotline so that any individual or group can file a complaint against a government agency or federal contractor for perceived violations by phone or email. Third parties can also file a complaint on behalf of an individual or a group, the guidance says.

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“They are inviting complaints, obviously, and I wouldn't be shocked if the complaints started to pour in,” Turner said.

“The worry is that folks who attend trainings who don’t like an aspect of the training can use this order, even this guidance, to cause problems because of the lack of really concrete standards here and because so much of this is so incredibly subjective.”

Corporations could face “extraordinarily harsh” penalties, Turner said. If found in violation, they could have their contracts suspended or terminated and could be “declared ineligible” for future contracts, according to the guidance.

"The message is 'watch out,'" Turner said. “Contractors don’t take those threats lightly. They could potentially put an end to their business.”

This article originally appeared on USA TODAY: Trump: Companies demand president rescind diversity executive order