Good Intentions Gone Haywire
October 1, 2010
Section 342 of the Dodd-Frank Wall Street Reform & Consumer Protection Act imposes gender and racial employment quotas on the financial services industry, which accounts for one-tenth of our economy. The quota provisions will affect over 50,000 financial services firms and other businesses, and the consequences will be enormous, says Forbes Magazine.
What does this mean for the financial services sector?
- Assuming each firm hires at least one new worker to satisfy the new law, this provision could raise costs $4 billion or more annually, depending how far forthcoming regulations will extend.
- Firms doing business with the government will face additional expenses because they will now have to monitor the hiring practices of their subcontractors as well.
- In addition to these reporting burdens, firms must prove to regulators and government offices with which they do business that they are meeting or working toward racial and gender hiring guidelines.
Forcing America's private firms to hire on the basis of racial and gender "guidelines," rather than solely on need and qualifications, is inefficient and makes our businesses less competitive than their global counterparts. Moreover, four out of the eight members of the U.S. Commission on Civil Rights wrote a letter to Congress stating that this section of the act would likely promote discrimination, and urged its removal from the bill, says Forbes.
There is a better, more cost-efficient solution: Let private companies come up with their own approaches. Deloitte's Women's Initiative, for example, has boosted the percentage of female partners, principals and directors from 7 percent in 1994 to 23 percent in 2010.
Source: Mallory Factor, "Good Intentions Gone Haywire," Forbes Magazine, September 27, 2010.
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