Definition of Minority Ownership Eased

In an expected but highly controversial move, the board of the National Minority Supplier Development Council has voted to loosen the definition of what constitutes minority business ownership, a change the group hopes will steer crucial equity capital to minority-run enterprises.

The proposal by the organization--which certifies minority ownership of suppliers for 3,500 corporations nationwide--has unleashed a firestorm of opposition from minority business groups and leaders, including the Rev. Al Sharpton and the U.S. Hispanic Chamber of Commerce. They fear it will cause corporations to do less business with small minority-owned firms in favor of a select group of big enterprises with watered-down minority ownership.

The initiative, approved by mail-in votes late Tuesday, allows companies with as little as 30% minority ownership to receive minority certification as long as the minority owner retains day-to-day control, 51% of voting stock and a majority of board seats. Until now, the private sector has required 51% minority ownership, a standard that persists for government contracts.

The measure was endorsed by 76% of board members who cast votes on the issue, but the New York-based organization declined to say how many of its 78 corporate board members voted. A planned vote on the issue last October was delayed in the wake of protests.

NMSDC President Harriet R. Michel said opponents of the measure have confused the messenger with the message. In recent years, Fortune 500 corporations as well as government agencies have restructured procurement practices to do bigger deals with fewer suppliers. Few minority-owned companies can compete in such a landscape. The so-called Growth Initiative will allow qualified companies to shop for venture capital without losing the advantage that minority certification offers, Michel said.

“At the Super Bowl last Sunday there were small ‘dot-com’ companies who went out and raised venture capital to pay those enormous fees. Wouldn’t it have been wonderful if there had been a minority company among them?” she said. “We’re trying to grow some minority businesses so they can compete with large white businesses. Right now we are locked into competing with each other.”

Opponents of the measure, however, fear it will lead to similar changes in federal contracting.

U.S. Small Business Administration Administrator Aida Alvarez announced her opposition to the initiative late last year. An SBA spokeswoman said Wednesday Alvarez is “disappointed with the vote but it will in no way affect what we are doing in terms of federal contracting opportunities.”

However, U.S. Hispanic Chamber of Commerce President George Herrera said members of Congress may now push for changes in federal law. “We think we have now opened Pandora’s box,” he said.

Herrera’s organization plans to pressure corporations to increase contracting with small minority-owned firms to reflect the corporations’ percentage of Latino consumers. The San Francisco-based Greenlining Institute, a nonprofit coalition of civic and business organizations, is also pushing corporations to increase contract dollars with small minority firms.