Embracing Equality

Ian Ayres and Louis Thomas

On this day celebrating labor, it is fitting to acknowledge an important sea change in corporate America with regard to the rights of workers:

As little as 5 years ago, only about half of Fortune 500 companies included sexual orientation in their formal corporate non-discrimination policies. Today, a record 90% of the Fortune 500 now voluntarily include sexual orientation in their non-discrimination policies; all but one (Exxon) of the Fortune 50 have seen the light.

This embrace of equality is particularly important because it exceeds the demands of federal civil right laws. The United States in 2005 is one of the only western democracies that still allows sexual orientation discrimination in the workplace. To date only 16 states have seen fit to ban the practice.

But corporate America by its own deeds has revealed a strong preference for sexual orientation equality.

So what caused the vast majority of large companies to cover gay and lesbian workers? The answer is simple: It’s good business.

According to national polls, over 85% of the public opposes employer discrimination against gay and lesbian workers. Consumers aren’t put off by employers who stand up for equality. Research from Wharton shows that firms with an inclusive workplace have lower recruiting costs and higher employee productivity that ultimately benefit corporate shareholders.

The shift toward equality is also due to the sustained efforts of a number of civil rights organizations as well as employees inside the affected corporations.

For the last two years, the Fortune 500 Project of Equality Forum has been particularly important. The Equality Forum supplied information and assistance to the CEOs and Human Resources directors of each Fortune 500 company urging each to amend their non-discrimination policies.

Asking is important. Several CEOs told us that until they got our letter, no one had ever directly asked them about their policy.

Corporate leaders have reached a tipping point on this issue. Executives don’t like to hear that they’re the only big firm in their industry or state that hasn’t adopted a policy. In just the last two months, 35 corporations have amended their policies.

You can see a full list of both the good and the bad at www.equalityforum.com/Fortune500

Which corporate dinosaurs still refuse to renounce sexual orientation discrimination? Think Texas oil companies – Haliburton, Anadarko, Tesoro, and behemoth Exxon Mobil (whose revenues are 13 times larger than the next largest non-compliant company). Corporations headquartered in “red” states are more likely to have unamended policies. But even in Bush country, over 80% of Fortune 500 firms have chosen to cover their gay and lesbian employees.

There are still a number of firms that are ripe for the picking. Wendy’s, for example, is the only restaurant chain on the list. Liberty Mutual is the only retail insurance company. Kerr McGee bizarrely prohibits sexual orientation discrimination in the selection of its board of directors, but not with respect to any of its employees. There is no reason in the world why these firms are so assiduously trying to maximize their legal rights to discriminate against homosexual employees.

We advised all the non-compliant firms that shortly after Labor Day we would file shareholder proposals against selected firms seeking the inclusion of sexual orientation in non-discrimination policies.

These proxy-like shareholder votes are not idle threats. Shareholder proposals of this kind have already garnered substantial support. Last year, 29% of Exxon shares voted in favor of a shareholder proposal to include sexual orientation in its non-discrimination clause. [This might not sound like much, but boards almost always adopt shareholder proposals that garner 30 or 40 percent of the vote.]

The prospects for success are even greater now because of a little known 2004 SEC regulation that requires mutual funds and investment managers to develop policies on how they will vote on proposals and to disclose their actual votes.

The Fortune 500 Project is taking advantage of this new rule. Last month we contacted the nation’s 25 largest mutual funds, investment managers, university endowments, philanthropic foundations, and pension funds to ask for their support on shareholder proposals requesting sexual orientation protection.

Many of these large shareholders – including CALPERS, Citigroup, Harvard University and the Rockefeller Foundation – have quickly responded and indicated that they will be voting the shares for workplace equality. In the shadow of the new disclosure requirements, many investment managers are sure to follow suit.

It is time for a grassroots campaign of workers, shareholders and consumers to role up their collective sleeves and work to convince the last 10% of 500 to stop dragging their feet. Protections against workplace discrimination are not a “special right” it is now the norm. It is the firms that refuse to provide the protection that are deviant. Gone are the days when it was official corporate policy of corporations like Cracker Barrel to dismiss gay employees.

The broad show of corporate support also suggests that it is now time for Congress to step up to the plate and pass federal legislation prohibiting workplace discrimination based on sexual orientation. Ninety percent of the Fortune 500 know that nondiscrimination makes good business sense. It’s time for Congress to catch up with the civil rights preferences of corporate America.

Ayres is the coauthor of Straightforward: How to Mobilize Heterosexual Support for Gay Rights. Thomas is a Professor of Economics and Business Strategy at the University of Pennsylvania’s Wharton School. They have both been active participants in the Equality Forum’s Fortune 500 Project.