Senate debating corporate board diversity bill

Senate committee chair says more changes needed

Illinois State Representative Steve Reick (R-McHenry County) addresses area residents at a town hall meeting concerning the proposed Illinois graduated income tax Saturday, April 27, 2019 at the Lake in the Hills village hall.
Illinois State Representative Steve Reick (R-McHenry County) addresses area residents at a town hall meeting concerning the proposed Illinois graduated income tax Saturday, April 27, 2019 at the Lake in the Hills village hall.

SPRINGFIELD – A bill that would require Illinois-headquartered corporations to include women and minorities on their boards of directors is now being considered in the Senate, where a committee chairwoman Thursday suggested changes could be applied.

House Bill 3394 stirred heated debate when it passed out of the House last month. State Rep. Steve Reick, R-Woodstock, later apologized for rancorous comments he made during debate at the time.

In its original form, it would have required every publicly traded corporation that has its main executive headquarters in Illinois to have at least one African American and one woman on its board of directors, and it would impose financial penalties on corporations that fail to comply.

So far in the Senate, it has been expanded to include Latino representation as well, and it now provides that one person can serve to fill two or more categories.

Speaking to the Senate Commerce and Economic Development Committee, Rep. Emanuel “Chris” Welch, D-Hillside, the bill’s chief sponsor in the House, said it is not intended to be punitive.

“The intent of it is to look at the disparities on these boards,” he said. “Women, who make up 50% of the population nationally, and I think 32% on corporate boards; African Americans, who make up 13.4% nationally and only make up 6.3% on boards; and Latinos, who are 18.1% of the population nationally but they only make up 2% on boards.”

Welch cited studies showing that corporations with diverse boards of directors tend to outperform those that don’t.

“The studies that I’ve read, that I’ve been reading, it really underscores the fact that diversity does well for businesses. The corporations that have diversity do well, they do better profit-wise,” he said.

Also testifying Thursday was Larry Ivory, president and CEO of the Illinois Black Chamber of Commerce, who said the bill would strengthen black communities, which in turn would help strengthen the entire state.

“For our members, we have a saying. ‘If you’re not at the table, then guess what. You’re on the menu,’ ” Ivory said. “If we’re not sitting at corporate boards and having input, we’re on the menu.”

The bill is modeled after a law California enacted last year that requires all corporations headquartered there to have at least one woman on their boards. Welch said in a separate interview that he expanded on that concept by including ethnic minorities.

If enacted into law, it would apply to any publicly traded corporation that is headquartered in Illinois, regardless of the state in which the original articles of incorporation were filed. It would also apply to any entity incorporated in Illinois, even if the business is headquartered elsewhere.

But some legal scholars have said that raises a number of legal issues, including a principle known as the “internal affairs doctrine,” which generally holds that only one state can have authority to regulate the internal affairs of a corporation.

Sen. John Mulroe, D-Chicago, raised the latter issue when he asked the question about corporations that might be organized in one state but have their corporate headquarters in another.

“That subject has come up and we’ve tried to address it in this bill,” Welch said. “If they file in Illinois, we would consider them also subject to the legislation that we’re pushing.”

Several members of the committee, including Chairwoman Laura Murphy, D-Des Plaines, said she agreed with the principle and the intent of the bill.

“But we have a lot of people that have expressed some concerns here that this bill really is not as inclusive as some would like it to be,” Murphy said, “because there are various groups that are left out of the discussion.”

Murphy suggested the bill might need further revision before it could gain enough support to pass the full Senate.

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