This past June, in two cases involving Harvard University and the University of North Carolina, the Supreme Court ended affirmative action, which enabled colleges and universities to consider race in their admissions process. The effect of this ruling is quickly making its way into the business world, and many programs and initiatives designed to help minorities are in jeopardy.
A conservative group called America First Legal recently took action against racing giant NASCAR, claiming that the organization’s efforts to increase diversity among its drivers and pit crews is discriminatory against white men.
“NASCAR shouldn’t be picking drivers based on their race and sex, but on their ability to drive,” a representative from the organization said. “All racial discrimination is wrong, even if it is the in-vogue.”
That same group is also targeting Hello Alice, an online resource and training platform that facilitates grants for small business. The group represents a small-business owner who was denied such funding that was to be used to purchase a new truck “solely because of the amount of pigment in his skin.” In other words, no grant was awarded because the owner is white.
The Small Business Administration, which has many programs targeted toward minority-owned small businesses, was forced to briefly suspend and then amend the applications used for a popular loan program for disadvantaged businesses after a judge ruled that it was “discriminatory and presumed minority business owners were socially disadvantaged based solely on their race.”
Last month, a U.S. Circuit Court of Appeals in Atlanta blocked a grant contest operated by a venture capital fund that was geared toward minority-owned businesses, saying that it was “racially discriminatory.”
A retired economics professor, Mark Perry, has for years filed hundreds of lawsuits against universities for violating Title IX of the 1964 Civil Rights Act, accusing these institutions of reverse discrimination by sponsoring programs directly aimed at minorities and excluding all others. He has prevailed in many.
I think this is just the beginning.
For years, and especially since the 2020 George Floyd protests, a proliferation of programs providing aid, grants, loans and other resources to minority-owned businesses were launched by large corporations and the government. Thanks to the Harvard/UNC ruling by the Supreme Court, every one of these programs — both private and public — can now come under scrutiny for discrimination if there’s even a chance that the program is excluding non-minorities.
What will become of the Merchant Maverick Opportunity Grants Program, which offers funding opportunities to Native American small-business owners? Or the Hawaii FoundHer accelerator program that provides funding for small businesses in the state, but only for Native Hawaiian, Asian and Pacific Islander women owners? Will the Restaurant Business Development Program, which is open only to food businesses that are at least 51 percent owned by Black, Indigenous, Latinx, LGBTQ+ or military veterans, survive? How about the REI Navigate Program Open, which is available for businesses as long as they have at least one founder who identifies as Black, Indigenous, Latinx or Asian American or a Pacific Islander? Can even J.P. Morgan Chase get away with its Breakthrough Program, which offers grants to female small-business owners who are Black or Latina?
I’m not sure. Already, some big corporations are reading the writing on the wall. Comcast, for example, launched its RISE Investment Fund originally for minorities but has since opened it up to all. FedEx offered grants to minority business but is now including everyone.
On the government side, there are just as many concerns. Government financing and contracting programs like the Minority Business Development Agency, the 8(a) Business Development Program and supplier diversity requirements are sure to be scrutinized because they’re including some businesses at the expense of others.
No one’s debating that minority business owners need help. Racial biases impact loan approvals. Venture funding leans more towards men. Black business owners in particular face bigger challenges than their white counterparts (in my hometown of Philadelphia, Black businesses represent only 6 percent of total businesses even though Blacks make up 40 percent of the population.)
Should a business owner be entitled to a grant just because of the color of their skin or their gender preference or their cultural background? Shouldn’t private organizations be allowed to fund minorities if they choose to do so? Is it fair for taxpayer money to go to special interests? But then again, isn’t all government spending about special interests? Obviously these answers are nuanced. But based on my reading of the Supreme Court’s Harvard/UNC ruling, these activities are likely discriminatory.
This is not to fault groups like America First Legal or advocates like Mark Perry. According to the Supreme Court, their arguments seem very legitimate. They’re doing a good job of bringing these inequities to light. And they’re not wrong when they claim these programs are discriminatory. There is reverse discrimination — I’ve personally lost opportunities to perform services to prospective customers not because of the quality of my work but because the organizers wanted more diversity.
What does this mean for minority small-business owners? It’s not good. Like Comcast and FedEx, expect to see more corporations and other organizations either expanding the candidates for aid to include non-minorities or abandoning their programs altogether. I also expect to see more scrutiny of government programs.
I get it: Discrimination works in both directions. But unfortunately, the business owners these programs help the most will now likely find it harder to get that help.
Gene Marks is founder of The Marks Group, a small-business consulting firm. He frequently appears on CNBC, Fox Business and MSNBC.