McDonald's, others could face shareholder suits over diversity policies

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A McDonald's restaurant logo in Chicago, Illinois, United States, July 23, 2015. REUTERS/Jim Young

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  • Investors claim diversity policies violate anti-bias laws
  • Coca-Cola abandoned ex-GC's law firm proposal targeted by shareholders

(Reuters) - Shareholders of McDonald's Corp, Starbucks Corp and Novartis AG are pressuring the companies to withdraw diversity policies for employees, suppliers and outside law firms that they claim violate federal and state anti-discrimination laws.

The American Civil Rights Project (ACRP), which represents the shareholders and opposes affirmative action policies, sent letters to the companies on Friday threatening to sue over the policies if they are not retracted. The ACRP had threatened legal action last year over a Coca-Cola Co policy requiring outside law firms to meet diversity benchmarks, which the company in February said was never implemented.

In Friday's letters, ACRP officials said policies outlined on the companies' websites appeared to violate laws prohibiting discrimination based on race, sex and other traits in employment and in the formation of contracts. The group did not disclose the identities of shareholders it represents.

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For example, McDonald's has set a goal of having 45% of its senior leadership be female by 2025, while Novartis requires outside law firms to ensure that up to 30% of billable work they provide to the company is done by diverse lawyers.

A Novartis spokesperson said in an email: "We have received the letter and we will respond to the American Civil Rights Project directly."

McDonald's and Starbucks did not respond to requests for comment.

Dan Morenoff, executive director of ACRP, said in a statement that the companies seemed to have ignored their policies' apparent conflicts with civil rights laws.

"It’s even more amazing that so many other sophisticated, American corporations have similarly disregarded obvious legal problems to adopt comparably ‘woke’ policies," Morenoff said.

The ACRP in the letters said the companies' officers and directors by adopting and retaining allegedly unlawful policies that could invite a wave of litigation by workers and contractors are in breach of their fiduciary duties to shareholders.

The ACRP on Friday also released a letter that Coca-Cola General Counsel Monica Howard Douglas sent to the group on Feb. 7 saying the law firm policy floated by her predecessor, Bradley Gayton, had never been adopted.

Under the proposal by Gayton, who resigned last April after less than a year in the post, law firms handling new matters for Coca-Cola would have had to commit to having at least 30% of billable hours be from diverse attorneys, including people of color, LGBTQ people, women and people with disabilities.

Scott Leith, global vice president at Coca-Cola, in an email on Monday confirmed the authenticity of the letter and said Douglas scrapped the proposal after becoming general counsel last April.

"Coca-Cola remains fully committed to advancing equity, diversity and inclusion in the legal profession and will continue to evaluate the best way to support these fundamental values," Leith said.

(NOTE: This article has been updated to include a statement from Novartis.)

Read more:

IN BRIEF: Coca-Cola investors threaten suit over law firm diversity policy

Coca-Cola GC requires law firms to improve diversity or take a fee cut

Coca-Cola GC who pushed law firms on diversity resigns post after less than a year

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Dan Wiessner (@danwiessner) reports on labor and employment and immigration law, including litigation and policy making. He can be reached at daniel.wiessner@thomsonreuters.com.