Board Diversity in the Golden State: What about MENA?
Author: Musa Faidi | UC Berkeley School of Law | J.D. Candidate 2022 | Posted: November 24, 2020
California has, in recent years, emerged as a trail-blazer on many issues – one of which is diversity in corporate governance. Despite the positive changes associated with California laws that aim to increase representation for women and minorities on corporate boards, these laws fail to recognize Middle Eastern and North African (MENA) populations as an underrepresented group. As a result, laws such as California’s AB 979 systematically deny MENA Americans the opportunity to contribute their diverse perspectives in the decision-making processes that happen inside California-based public company boardrooms. Simply put, diversity is a key ESG issue, and MENA groups have been left out of this analysis.
In the United States, MENA populations consist of individuals who have ancestral roots to countries in what is now known as the modern Middle East and North Africa.  Americans who consider themselves MENA populations are from a list of nineteen countries, including Egypt, Iran, Iraq, Palestine, Afghanistan, Syria, and Libya, among others.  Nationally, the State of California has the largest number of MENA Americans of any state, with Los Angeles, San Diego, and the San Francisco-Bay Area constituting the largest clusters. 
In 2018, during his final year in office, Governor Jerry Brown signed into law Senate Bill 826, which requires all publicly traded companies with California headquarters to have at least one woman on their corporate boards by the end of 2019.  In application, this bill means that by the end of 2021, companies with five-member boards must have at least two female directors, and companies with six or more member boards must have at least three. 
Despite opposition to the new law, research has shown that nearly 96% of California public companies have satisfied this requirement.  This implementation of ESG into the American legal system has propelled the increase of diversity on corporate boards and provides an accountability mechanism for those who lack it. Even Goldman Sachs CEO David Solomon has reiterated that, to avoid bias in decision making, he will not take a company public unless there is at least one “diverse” candidate on its board. 
Last month—two years after the passage of SB 826—Governor Gavin Newsom signed into law AB 979, requiring all public companies headquartered in California to have at least one board member from an underrepresented community by 2021, and, depending on the size of the board, a minimum of three by the end of 2022.  Under this new mandate, the California Secretary of State is required to write annual diversity reports and to fine companies that are in violation or otherwise fail to report data with the state. 
In addition to those who identify as gay, lesbian, bisexual, or transgender, “underrepresented communities” under the umbrella of AB 979 are comprised of those who self-identify as Black, African American, Hispanic, Latino, Asian, Pacific Islander, Native American, Native Hawaiian, or Alaska Native.  Although California is taking a step in the right direction with this diversity initiative, AB 979 fails to categorize MENA populations as an underrepresented group, and thus does not ensure that they are adequately represented on corporate boards.
The lack of research regarding the presence of MENA populations in corporate governance may well be attributed to the fact that they are defined as “white” in the census, synonymous with European ethnicity-based populations.  Despite this categorization, there is well-documented statistical research indicating that since September 11, 2001, MENA populations have too often been the targets of hate crimes, as well as employment discrimination, bullying, and harassment. 
However, it is important to note that 9/11 constituted a turning point – rather than a starting point – for anti-MENA discrimination in the United States.  For years before September 11, 2001, MENA-American identity was constructed through a lens of inferiority, suspicion, otherness, and foreignness.  With this perspective in mind, it is clear that the omission of a MENA category in AB 979 results in the continued underrepresentation of MENA identifying individuals on corporate boards in California – a state that is home to a population that repeatedly faces the struggle of racial profiling both in the employment context and in society at large. 
For decades, millions of MENA Americans have had no choice but to self-identify as white.  A 2015 Census Bureau study found that, when given a survey with a MENA option, individuals from MENA regions who selected the “white” category dropped from 85.5 percent to 20 percent. 
Moreover, MENA Americans are marginalized in ways that European white Americans are not – especially considering the perpetual spike in anti-Middle Eastern sentiments after September 11, 2001.  Nearly two decades after the 9/11 attacks, anti-MENA hate crimes have grown exponentially – according to the FBI, from 2015-2018, the yearly number of anti-Arab hate crimes more than doubled from 37 to 82. 
Despite the rise in hate crimes against MENA Americans in the United States, there is extremely little research on the role of MENA in corporate governance – because MENA is categorized as white on the census. Aside from the equity perspective discussed above, there is also a business case for board diversity. According to a 2010 study, MENA immigrants have the highest rate of self-employment – a proxy for entrepreneurship – when compared with other groups.  This form of self-employment is manifested mostly through the formation of small-scale businesses, which MENA immigrants often start because of the racial stereotypes that taint other’s perspectives of them and limit their ability to climb the American corporate ladder. 
Though there are no statistics about the percentage of MENA Americans who work in American corporations, it is clear that MENA consumers and employees are a very important constituency in the United States. The repeated success of MENA small-business owners has shown that MENA Americans have the skills and experiences needed to be successful board members of a corporation, but they lack one thing – representation.  Diverse boards reflect the composition of society – business growth and heightened representation for MENA consumers is a way through which corporations can retain talent from MENA Americans.
California is home to many of America’s largest companies such as Facebook, Apple, Chevron, and Wells-Fargo, although there is no mechanism for ensuring MENA representation on those corporate boards under AB 979.  The disparities in the relationship between large MENA populations and concentrated corporation headquarters in California is exacerbated by the fact that three out of the six largest companies by market capitalization in the United States – Apple, Alphabet, and Facebook – are also headquartered in California.  Given that California has the largest number of MENA Americans of any state, it is imperative that investors push for an accountability mechanism that provides shareholders with transparency on the role of MENA in the governance of corporations. 
MENA groups should be designated as an underrepresented community, which would grant them heightened representation on corporate boards. In designating MENA populations as “white” for purposes of corporate governance, policy-makers are hindering the potential of MENA Americans to make real differences in the corporations that play a significant role in their communities.
Further, it is imperative that standard setters like SASB and GRI explicitly designate a MENA option for employees in companies like BlackRock, who identify as MENA, rather than white. These new, updated diversity standards will drive corporate behavior forward, and fill in the gap that has left MENA populations underrepresented in the corporate sphere.
Beyond investor engagement, corporations must pressure the California legislature to amend AB 979 to designate MENA as an underrepresented group – this will carve a legal space for the unique experiences of MENA Americans, a forgotten people – thereby no longer cornering them into dissolution. Though MENA Americans are considered white on paper, they do not have the privilege that comes along with it – the discrimination, harassment, and racial othering they face make it clear that they are marginalized in ways that European white-Americans are not.
Corporations must harness the strength and potential of MENA communities by requiring their inclusion on corporate boards through investor engagement. Without a doubt, the diversity of MENA experiences will provide an invaluable perspective to both shareholders and boards in corporate decision-making.
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