Why Do Corporations Participate?
Major corporations value inclusion of disability-owned businesses based on a business case that indicates inclusive procurement practices positively influence the position of a corporation within the larger community. With recent U.S. Census data indicating that one in five Americans is a person with a disability, and 30 percent of the nation's 69.9 million families have at least one member with a disability, corporations view the disability community as a viable and large marketing segment. Corporations recognize that their potential customer base is further saturated with individuals who support the disability community, as 25 percent of all customers either have a disability or have a close friend or relative who has a disability. As individuals with a disability continue to coalesce into an economic and social power, corporations realize capturing the brand loyalty of these consumers is a solid strategy for increasing sales within this segment.
Thus, including people with a disability in every aspect of the operations of a corporation, from marketing, to employing, to purchasing, has become increasingly important. Corporations partner with the USBLN DSDP to access a reliable source for identifying potential suppliers that are disability-owned businesses, including businesses owned by service-disabled veterans. Corporations that join the USBLN DSDP receive access to the list of certified disability-owned businesses, recognition as a Corporate Partner of the DSDP, matchmaking opportunities at USBLN procurement events, and access to best practices in working with certified disability-owned businesses.
Advising Clients About Certification
From starting up, to reorganizing, to dealing with legal matters, business owners turn to legal counsel for advice on how to properly establish their business, avoid liability, and create a strong foundation for growth and development. Lawyers are sources of information and advice for business owners, and sharing knowledge about certification programs can help your clients become more aware of the benefits of certification. When you are working with clients in establishing or reorganizing their business, you may want to keep a client's eligibility for certification in mind.
Governance documents hold critical details about the function of the business, and can impact eligibility for certification as a diverse business in more ways than many business owners realize. During the DSDP review process for an applicant business, a certification committee carefully reviews the governance documents of an applicant to ensure the company not only meets the requirements of ownership by an individual with a disability, but also the requirements of operation, management, and control. Businesses applying for certification sometimes encounter problems within the process due to the use of boilerplate governance documents.
From a legal perspective, meeting the criterion for ownership is fairly straightforward. For sole proprietors, sole-member LLCs, and single-shareholder corporations, the individual must meet the diverse status requirement of the certification. For the USBLN DSDP, a corporation is eligible for certification if at least 51 percent of each class of voting stock outstanding and at least 51 percent of the aggregate stock outstanding are held by a person with a disability. Similarly, partnerships and LLCs must have 51 percent of the interests of the company held by an individual with a disability, and risks, profits, and benefits assumed by the ownership of the company must be commensurate with the percentage of ownership interest.
Businesses held in a trust can be eligible for USBLN DSDP certification. In an irrevocable trust, the beneficial owners of securities must be an individual with a disability who is not a minor, and all trustees must be individuals with a disability or a financial institution. In a revocable trust, the beneficial owner of the securities held must be a person with a disability who is not a minor, all the grantors must be individuals with a disability, and all the trustees must be individuals with a disability or a financial institution. ESOPs are also eligible for certification provided all the trustees are a person with a disability or a financial institution. Businesses held as a trust must also meet all the other requirements for ownership, operation, management, and control.
Looking beyond ownership, the certification committees also review the composition and the functioning of the governing body of the business to determine the extent to which the board of directors or management committee causes the direction and forms the policies of the company. A person with a disability must hold the highest defined office within the governance documents of the company, regardless of what the title is. If a person with a disability is the CEO, but the highest defined office within the corporation's bylaws is "president," the company will likely be denied certification.
Voting agreements of a firm also impact the control criterion. Agreements must not restrict or dilute the benefits or rights associated with the ownership interest of the company held by an individual with a disability. For example, within corporate bylaws, if an individual with a disability owns the majority of the issued stock, he or she should not be restricted in his or her ability to transfer stock, to enter binding agreements on behalf of the company, or to exercise any other privilege associated with having title stock ownership. Voting agreements that restrict the decision-making authority of the business owner with a disability or require consensus among all shareholders can be found to be unduly restrictive and therefore could result in a denial of certification.
Businesses that have subsidiaries, affiliates, or franchises also have specific considerations that can impact their eligibility for certification. Any affiliate, subsidiary, or franchise agreement undergoes specific review procedures outlined by the certification agency, and is examined to determine the management and operational authority of the business ownership.
Is Certification Right for My Client?
There are several different questions you should recommend a client consider before initiating the certification process. Good questions to ask include
- Does your business meet the requirements for ownership and operation by one or more persons with disability (minority, woman, or LGBT) status? Review the requirements and definitions carefully to help ensure a positive certification outcome. The Certification Committees consider all evidence presented in an application when making a certification decision, so one negative answer does not necessarily make a business ineligible. If you have questions regarding specific criteria, contact the certifying agency.
- Does your company have the capacity to fill large contracts while maintaining quality? Corporations and government agencies expect their suppliers to maintain high standards of quality while meeting project specifications, often on a very large scale. Having flexible production and staffing capacity is a common requirement for many corporate opportunities. If a company is small, consider the possibility of building strategic alliances with other businesses that have obtained certification from the same program before going after large corporate contracts.
- Are you willing to share detailed information about your company, including financial and governance documentation, with a third-party agency? The USBLN places a high priority on maintaining the confidentiality of the documents submitted by applicants. In order to identify an applicant's eligibility for certification, the Certification Committees require detailed information about the business. To serve on a Certification Committee, committee members must sign a nondisclosure agreement and are expected to follow strict ethical standards. If a business owner is unwilling to furnish all requested documentation, the business may be denied certification. The various certification organizations all have different requirements regarding disclosure, so check with the certifying agency for confidentiality information.
- Are you prepared to incorporate the certification into a multipronged, long-term strategy for new business development? Understanding that certification is not a guarantee for or entitlement to a contract is critical to being successful in using the certification. In order to win new business with a certification, a business owner must research appropriate opportunities within corporations, build relationships with procurement representatives, and be patient. There are many opportunities, but there are also many businesses competing for each one. Certification may get a business in the door, but strong research, relationships, and internal practices are necessary to seal the deal.
As supplier diversity programs continue to grow, they will create many more opportunities for minority, women, LGBT, and disability-owned businesses. With a strong knowledge of best practices in supplier diversity, you can harness the innovation and agility of certified diverse vendors and embrace diversity as a critical component of business. By encouraging involvement with certifying agencies, you can help your clients and your firm succeed in a marketplace where diversity and inclusion are increasingly linked to the bottom line.