Businesses are finding it harder to do business when the government, specifically the legislative and judicial branches of the government, either pass laws or implement new policy. Laws and policies that are a good idea and in theory, but are being challenged in the courts and practice. In California, a new law requires corporate boards registered in the state to diversify themselves in order to be in compliant or suffer financial consequences. More recently, the 3rd Circuit Court of Appeals (Delaware, New Jersey, Pennsylvania, and the U.S. Virgin Islands), issued a decision that forces previously loosened rules on broadcast and radio television ownership through changing digital distribution business models under the Telecommunications Act will now potentially include rules on ownership groups and leaders having to include more people of color and women.
The Federal Communications Commission (FCC) is fighting the 3rd Circuit’s ruling and argues that policy and legislation are two different things. Surmising that policy is something that is reserved and implemented and enforced by the Executive Branch of American government, which includes the FCC (appointments by the President and confirmations by the United States Senate). The FCC has been successful in getting the U.S. Supreme Court to take up the 3rd Circuit case and hopes that a full court of nine justices will find in their favor. Mainly, hoping that the highest court in America will find that Congress (the Legislative Branch) make the laws, the Judicial Branch interprets them, and the Executive Branch enforces those same laws. Furthermore, that the 3rd Circuit overstepped its constitutional bounds when it created new diversification rules not passed by Congress and signed by the President.
In California, the diversity board law was passed by the state legislature and was signed by the Governor, but is being challenged in the courts for its constitutionality. The argument being that businesses should be free to choose their board membership versus government directives. The battle between liberty and legislating good behavior is an age-old dilemma. On the one hand, having a diverse board is a good thing for business where differing insights and opinions are the goal. However, should and maybe more importantly, can governments and laws force implementation in free enterprise and business? Down the road, the California courts and potentially the U.S. Supreme Court might decide the aforementioned issue as well.
Most American’s, including this author, agree that racism and biases should end, yesterday; that such actions are bad and everyone should be treated with dignity and respect. What happens in practical application though? In the upcoming election, for example, Proposition 22 on the ballot challenges the existence of Assembly Bill 5 that was passed and got rid of many of the independent contractor exceptions in the state of California. That was arguably bad law with good intentions as it eliminated many businesses and disrupted gig economy business models. The purpose was to create more financial benefits for independent contractors in a gig economy, but ended up eliminating those jobs and the independence workers may have wanted.
Will laws and policies meant to force something good have the effect of changing hearts and minds? At this point it may only encourage businesses to leave the state. Not because people are racist, but because practical application often differs from legislative intentions. Either way, the courts will have a say in the future of entertainment, media, and sports business structure.