Evolving the Rooney Rule: Identifying the Rooney Rule’s Potential Impact on Corporate Board Diversity

The National Football League (“NFL”) implemented the Rooney Rule for hiring head coaches in 2003. (Julie Goldsmith Reiser, Lori Nishiura Mackenzie, Bloomberg Law). The Rooney Rule requires any NFL franchise interviewing candidates for head coaching positions to interview at least one minority candidate or be subject to a $500,000 fine. Id. When the Rooney Rule was first implemented, it appeared to be successful in achieving its goal of increasing the number of diverse head coaches in the NFL. Id. However, statistics now show otherwise. Can United States companies learn from the NFL and realize the benefit of diversity?

Between 2001 and 2005, the number of black head coaches, while still a minority of all NFL coaches, tripled from two to six. Id. The Rooney Rule’s success continued for over a decade, culminating with black coaches representing 25% of all NFL coaches in 2015.  Id. However, the Rooney Rule faltered. From 2017 through 2019, the percentage of black head coaches in the NFL fell from approximately 22% to about 9% of the NFL’s head coach population. Id. This drop in representation indicates a presence of “tokenism,” – interviewing a candidate to avoid a fine or “check a box” approach – rather than interviewing for the value and experience the diverse candidate brings. (Christina Pazzanese and Khalil Gibran Muhammed, The Harvard Gazette). Tokenism is the basis for a law suit that was recently filed by Brian Flores, the former head coach of the Miami Dolphins and a candidate for a multitude of head coaching vacancies in the 2022 NFL hiring period. Id.

In a lawsuit filed in January 2022, Brian Flores (“Flores”) alleged that the NFL engages in discriminatory hiring and retention practices that deny black candidates an equal opportunity despite the Rooney Rule. Id. Flores further alleged that black coaches are paid less and fired more quickly than white coaches, even when their job performance is better in terms of wins and losses. Id. Flores was the head coach for the Miami Dolphins for only two seasons, both of which ended in winning records. Id. Yet, Flores has been rejected for other head coaching jobs in the NFL. Id. Additionally, other black coaches have spoken out about the frustration of being interviewed for what they claim is solely to comply with the Rooney Rule without receiving serious consideration for the head coaching position that white applicants receive. Id. These allegations and behavior raise two questions: First, is there a flaw with the Rooney Rule as it is currently constructed? Second, how can corporations apply an enhanced version of the Rooney rule to in order to increase diversity in leadership roles? 

Khalil Gibran Muhammad, Ford Foundation Professor of History and Race and Public Policy at Harvard Kennedy School, believes that the first potentially important outcome of the Flores lawsuit is the impact of a settlement. Id. A settlement creates legal precedent that can be cited by future coaches who experience tokenism in the application of the Rooney Rule by stating the same prima facie case as Mr. Flores. Id. This would increase pressure on each NFL franchise hiring for a head coaching position to seriously consider minority candidates to avoid costly legal fees and damages. Id.  Two additional plaintiffs joined Flore’s lawsuit on April 8, 2022, which legal scholars in professional sports believe will add additional merit to the lawsuit against the NFL. (Mike Florio, Pro Football Talk NBC).

The major flaw in the Rooney Rule, as it is currently constructed, is that only one minority candidate must be interviewed for a head coaching position. The Rooney Rule, through implicit bias and the concept of tokenism, unintentionally sets an artificial ceiling for the number of minority candidates to be hired. The impact of this implicit bias and tokenism creates, as seen in the Rooney Rule’s implementation in the NFL, an important takeaway for corporate America about diverse candidate interview requirements: corporations should develop an authentic commitment to increasing diversity in leadership positions. (Julie Goldsmith Reiser, Bloomberg Law). While interviewing one candidate from an underrepresented group does not change the status quo, interviewing at least two may lead to change. Id. Researchers have found that when there is a requirement that more than one diverse candidate be interviewed for a position, the hiring committee is less likely to look at the candidate as a “check the box” interview and more likely to consider the qualifications of the candidate. Id.Implementing a new diverse candidate requirement for corporations by revising the NFL’s Rooney Rule to require that corporations’ interview at least two candidates from underrepresented groups for any board or executive position can help corporations demonstrate a mindset and culture that truly values diversity while also realizing financial value for the shareholders. Id. 

Second, creating a diverse interview committee for Board member and executive positions can help ensure the effectiveness of a potential revised Rooney Rule for non-NFL corporations, and by increasing diversity on corporate boards and within the employee pool. Id. Implementing a diverse hiring committee can help these staffing groups resist individual biases and facilitate better decision-making by reducing the impact of groupthink that originates from non-diverse committees. Id.

In addition, corporations that have diverse leadership have been shown to maximize shareholder value. Id.Credit Suisse conducted a six-year study and reported that companies with female board members outperformed industry peers with all-male boards by 26% per share. Id. Morgan Stanley conducted a similar study that also found that U.S. companies with three or more female directors on their board outperformed the earnings of companies without female directors by 45% per share. Id. This finding was also the basis for the recent NASDAQ rule requiring that boards of directors of corporations registered on its exchange either meet a minimum level of diverse representation or explain why the board does not meet that threshold and provide disclosure to stakeholders about the makeup of its board. (Jeffrey S. Hochman, William J. Stellmach, and Todd G. Cosenza;  Bloomberg Law). BoardReady, a Seattle based non-profit focusing on helping companies with board diversity, published a study that found companies in the S&P 500 with at least 30% of its board made up of non-white directors saw a 54% year-over-year revenue growth in 2020, while all other companies that did not saw their revenues decline. (BoardReady, Lessons from the Pandemic).

In summary, the following actions can eliminate the “tokenism” phenomenon that some argue resulted from the Rooney Rule: (1) requiring that multiple candidates from underrepresented groups be interviewed for each director or executive position; (2) creating a diverse interview committee; and (3) fostering a true commitment to diversity as part of a corporate culture which recognizes that diversity brings unique skill sets and can maximize shareholder value. Corporations should take note of these actions, especially because boards of directors have a clear legal duty to maximize shareholder value. These actions can also facilitate the creation of diverse board rooms.