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Environmental, social, and governance risks and opportunities

Rooney Rule Revised Provides ESG Opportunity

In 2022 businesses must strive to address inequality
ESG

Last Monday the NFL announced at the owners meeting that it had approved adjustments to the Rooney Rule, first adopted in 2003, “to enhance opportunities for people of color and women for nearly all league and team jobs.”

As companies, most that are far afield from the NFL, look to have a positive impact on the world, in increasing numbers addressing ESG governance factors, many businesses are striving to address inequality, including matters of unequal access, historical racism, gender discrimination, lack of inclusion and more.

It strikes us that the response to inequality should be as easy as “treat others the way they want to be treated” (.. yes, the Platinum Rule is the Golden Rule, where you treat people the way ‘you’ want to be treated, gone one step further).

But, we well recognize that ESG is an emergent and fast growing space where there are few laws, so in addressing matters of inequality, it is often ideal that companies seek out a good example of a race neutral measure that promotes business diversity and can be replicated. The Rooney Rule is widely suggested, and while not perfect, can be adapted for use by many organizations.

The Rooney Rule, named for Dan Rooney, the late owner of the Pittsburgh Steelers, responds to the problem within the NFL where despite that more than 70% of the league’s players are Black, with no Black owners and only two minority owners, and minority candidates do not have equal access to coaching and front office opportunities. The rule encourages “hiring best practices to foster and provide opportunity to diverse leadership” throughout the NFL, with the specific aim of increasing the number of minorities hired in head coach, general manager, and executive positions. 

The NFL has tinkered with the Rooney Rule several times since the embarrassing hiring cycle following the 2019 season when just one of five coaching vacancies was filled by a person of color.

In 2021, the NFL approved changes requiring every team to interview at least two external minority candidates for open head coaching positions and at least one external minority candidate for a coordinator job. Additionally, at least one minority and/or female candidate must be interviewed for senior level positions (e.g., club president and senior executives). Practices like this are easily emulated across business sectors looking for good ESG governance practices.

With the most recent 2022 change to the Rooney Rule, beginning this season, all 32 football teams must actually employ a female or a member of an ethnic or racial minority to serve as an offensive assistant coach.

It may be a fair criticism of the Rooney Rule that today there is one fewer Black coach than when the rule was implemented in 2003.

Another commonly cited example of a race neutral measure that responds to inequality and promotes corporate diversity is the Security and Exchange Commission’s own internal self-assessment tool, available on its website, for evaluating the diversity policies and practices of entities regulated by the agency. Some businesses, including companies not subject to SEC regulation use the agency’s tool.

We do caution that all that has come before is not good or ideal including by way of example, a company may not want to emulate California’s racial, ethnic and LGBT quotas for company boards created in AB 979 that have Equal Protection Clause problems and recently been ruled unconstitutional. Maryland’s HB 2021-1210, currently with its regulations still pending is also constitutionally challenged. So, maybe stay away from government mandates and look to good private section initiatives.

We are regularly asked if there is a checklist for ESG compliance and while there is not, good guidance is often available by emulating best practices in other industries and copying what others have done before also mitigates risk while addressing the “G” in ESG.

As companies look to repair the world, whether their immediate interest is ESG disclosure or not, in 2022 businesses must strive to address inequality, including matters of unequal access, historical racism, gender discrimination, lack of inclusion and more. And maybe we all should treat others the way they want to be treated.

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