Since the passage of Proposition 209 in 1996, consideration of ethnicity in the areas of public education, employment and public contracting has been banned. This has had a chilling effect on minority business enterprises. According to a 2006 study, only one-third of the minority businesses certified to contract with the California Department of Transportation were still in business, and surviving women-owned businesses still struggle to win contracts and overcome gender bias in the transportation construction industry.
Earlier this year, I introduced legislation that I believe will promote corporate diversity and open pathways for minorities, disabled veterans and women. The goal of Assembly Bill 366 is to build upon the Public Utilities - Supplier Diversity Program and encourage companies to open up their boardrooms and executive management teams to minority business leaders.
It is my intention to broaden and include more minority businesses in the PUC Supplier Diversity Program for financial and legal services only. The original legislation that created the program authorized publicly-owned businesses (corporations) to participate if 51% of the stock was owned by minorities, disabled-veterans or women. AB 366 does not change this requirement. As amended May 1, 2013, this bill – and only for corporations offering financial and legal services – would permit corporations to participate if their board of directors and executive management team is diverse; that means 51% of their board and managers must be minorities.
The California Black Chamber of Commerce has signaled its support and the Black Economic Council, while recently critical, has renewed its optimism in the ability of Assembly Bill 366 to usher in a new era of opportunity for African American businesses.
Historically, utility companies have struggled to contract with minority-owned companies that offer financial and legal services. AB 366 is designed to provide more opportunity for minority-owned businesses by adding ‘teeth’ to the language to expand the definition for which publicly traded companies can qualify for these contracts.
In 1986, the Public Utility Commission adopted General Order 156 to promote competition among utility suppliers and encourage greater economic opportunity for minority-owned businesses. Existing law directs PUC to require every electrical, gas, water, wireless telecommunications service provider, and Telephone Corporation with annual gross revenues exceeding $25 million to encourage, recruit, and utilize minority, women and disabled veteran-owned business enterprises in the procurement of contracts.
The intention of AB 366 is not to force smaller businesses to compete with publicly-owned businesses. AB 366 is narrowly tailored to financial and legal services where smaller businesses have been unable to compete.
To prevent fraud and manipulation, the composition of the board of directors must consist of a diverse majority for at least five years prior to the certification of a publicly owned business as a minority business enterprise.
AB 366 also includes a sunset date of five years, in order to provide the opportunity for the legislature to carefully examine the efficiency of the expanded definition. Diversity opens pathways to ownership as corporate board members and executive officers associate in corporate circles of power that offer opportunities for minorities, women, and disabled veterans that are clearly and currently underrepresented in these areas.
As President Obama said in his State of the Union Address, an economy built to last is one where if we all play by the same rules and everyone is given a fair chance, America can succeed. This bill supports the President's vision by seeking to promote diversity in corporate America through the PUC's Supplier Diversity Program.
I am delaying action on AB 366 until next year in order to continue good faith discussions with minority business enterprises about how to maximize the bill’s benefits on small businesses.