Same-sex Marriage: What’s at Stake for Corporate America

When nearly 300 U.S. corporations and other groups signed on to a friend-of-the-court brief urging the U.S. Supreme Court to overturn a portion of the Defense of Marriage Act (DOMA), the gesture may have been corporate America’s most emphatic statement ever in support of a gay-rights issue.

The brief, filed February 27 for consideration in this week’s Supreme Court hearing on the matter, claims that the lack of federal rights for gays and lesbians — ones that already exist for heterosexual couples — places administrative and financial burdens on corporations. The brief lists page after page of legal and business arguments.

But the bottom-line rationale is that denying federal rights to same-sex couples is bad for American business. The filing says that the current 1996 law, by defining marriage as solely between a man and a woman, infringes upon the rights of companies to conduct business as they see fit by asking these companies to renounce their principles, “or worse yet, betray them.”

That the filing gathered so many signatories suggests a rapid and dramatic change in corporate culture, experts say — an unprecedented level of support for Gay America by Business America. “I think this is one of the most dramatic and fastest cultural changes in a long time, or maybe ever,” says Mario Moussa, a management consultant who teaches in Wharton’s executive educaton program. “Fifty years ago, the gay rights movement started, and within a relatively short time there has been a dramatic change. Companies are smart to get on board with it.”

“It is an eye-popping level of support,” adds Beth I.Z. Boland, a corporate attorney with the Boston law firm Bingham McCutchen, counsel for the filing. “It was absolutely astonishing how the business community came together on this issue [as evidenced by] the number of businesses that wanted to sign on.” While friend-of-the-court briefs in favor of keeping DOMA were filed by various religious groups, as well as the National Organization for Marriage, no such briefs were filed by employers, Boland adds.

The U.S. Supreme Court is hearing arguments today in the case, United States v. Windsor, and yesterday heard a challenge to California’s Proposition 8 ban on gay marriage. A decision is expected on both cases at the end of June.

Pros and Cons

If there was once peril for companies throwing their weight behind a progressive gay issue, now the calculation has flipped, says Moussa. “I think the risk is not acting quickly enough.”

Signing on in support of gay marriage are some of America’s largest corporations — and smallest. Apple, Bain & Co., Bank of New York Mellon, BlackRock, CBS, Facebook, Goldman Sachs Group, Jet Blue, Johnson & Johnson, Starbucks, Twitter, Viacom and Walt Disney are signatories. But so are a four-employee sheet-metal firm in Seattle and a balloon company in Brooklyn. Though the friend-of-the-court brief (also referred to as amicus curiae) records 278 signatories, it actually represents a much larger swath of business than that number would indicate, since 16 trade groups and chambers of commerce — as well as the U.S. Conference of Mayors — are among them.

John S. Woerth, a spokesman for the Vanguard Group, said that although the 14,000-employee company was not a signatory to the brief, Vanguard is behind it in substance and spirit — and in fact advocated for it as a board member of the American Benefits Council, which did sign it.

“Vanguard believes that support of the amicus brief is consistent with our mission to hire and develop a diverse workforce that reflects our community and society at large,” he says. “In particular, Vanguard supports the amicus brief because it effectively explains the burdens DOMA places on employers like Vanguard, who are committed to … providing comparable benefits for all members of a dedicated and diverse workforce.”

For the Boston Foundation, a group dedicated to community development philanthropy, signing on to the brief is an act in support of social justice. But as an employer, it also sees a federal right to the benefits of marriage for same-sex couples as a practical matter. “We have as a mission to make our region a more vibrant place to live, work and raise a family,” says Keith Mahoney, the community foundation’s director of public affairs. In addition, “It’s very hard to provide a benefit to one employee and not another.”

Nine states plus Washington, D.C. (and some Native American tribes) currently allow same-sex marriage.

Many are eager to see DOMA undisturbed, however. In a 2011 defense of DOMA published in The Wall Street Journal, attorneys David B. Rivkin, Jr. and Lee A. Casey, who served in the Justice Department during the Ronald Reagan and George H.W. Bush administrations, argued that society would be divided for decades to come if the state-by-state political process of approving same-sex marriage were shut down.

“Marriage is unlike any other governmental benefit,” they wrote. “License to marry carries with it far more than mere permission, as in obtaining a license to drive or practice a profession.” They go on to note that the reason gay rights supporters “are so determined to achieve equal status for same sex unions, and the reason that so many others vigorously oppose that recognition, is that marriage is an affirmative statement of societal approval.”

Complexities of a Two-tier System

The burdens employers and employees confront by placing same-sex marriages in a separate class are numerous and complex, say many observers. In duplicating benefits granted to married different-sex couples, such as the extension of health insurance to spouses or partners, employers have inadvertently created other problems. For example, in the case of a gay employee whose partner (married or not) receives health insurance, the benefit is counted as extra income, and that income is taxed. The employer must then track these employees differently, reporting the income to the IRS and issuing an extra W-2 form at the end of the year. The extra taxation means that the employee is effectively making less money than a heterosexual married colleague earning the same salary.

Many employers have compensated for the inequity by increasing salaries to cover the difference — a gesture that levels the playing field, but which obviously creates additional financial costs for the employer. “On average, the W-2 form of the employee married to a same-sex spouse will show $1,069 more in federal taxes paid than that of her colleague married to a different-sex spouse,” states the friend-of-the-court brief, citing a study by UCLA’s Williams Institute.

Other inequities include the fact that same-sex partners cannot reduce taxable income by contributing to a flexible-savings account; the inability to extend COBRA benefits; a lack of protected leave in times of illness and family crisis; and tax disadvantages when a same-sex partner is designated as beneficiary of pension, annuity and life insurance plans.

Corporations recruiting talent from abroad are precluded from “offering a foreign national’s same-sex spouse the shared visa status that a different-sex spouse would receive,” the brief says. “For obvious reasons, this is a considerable impediment to attracting foreign nationals. Many may decline to come to a country that will not recognize a marriage that is lawful at home ….”

The Defense of Marriage Act also adds expenses by forcing corporations to keep two systems for payroll and benefits. “These dual regimes have spawned an industry of costly compliance specialists,” according to the brief. “The burden on the small employer is especially onerous.”

In addition, the dissonance between DOMA and state laws creates a risk of litigation, forcing employers to choose where state law supercedes federal law, and vice versa. Conflicts typically end up in an organization’s human resources department, where “every benefits administrator must become a constitutional scholar, or give uncertain advice,” the brief says. Indeed, experts say married different-sex couples are entitled to about 1,000 benefits not enjoyed by same-sex married couples.

Boycotts on Both Sides

It is not unusual for the business community to weigh in, legally, on issues of equality.

Notably, in the University of Michigan affirmative action cases, decided in 2003 as Gratz v. Bollinger and Grutter v. Bollinger, the business community favored keeping race-based affirmative action legal, says Michael C. Dorf, professor at Cornell University Law School. “That brief — along with a brief from retired military officers — was generally credited with influencing the [Supreme] Court,” he said. “The business community has also filed briefs to the same effect in the current affirmative action case, Fisher v. Univ. of Texas.”

One leading gay-rights scholar says it’s perfectly natural that corporate America should be agitating for change on behalf of sexual minorities. “Corporate America has largely led the way, well ahead of public agencies and often public opinion, on LGBT supportive policies,” says Gary J. Gates, a scholar at the Williams Institute at the UCLA School of Law. “Anti-discrimination policies and recognition of same-sex couples is much more pervasive in the Fortune 500 than in U.S. federal policy and the laws of most states. So it should not be surprising that these companies have taken stances supportive of marriage equality. Many have had LGBT supportive policies for a decade or more.”

Such support has come with dangers in the past, with some corporations becoming boycott targets after announcing a progressive stance on a gay and lesbian issue. Conversely, several large corporations and their CEOS who have given money to anti-gay politicians or causes — Chick-fil-A and Urban Outfitters among them — have drawn a critical response from gay groups.

But the thinking at corporations and public opinion have been leapfrogging with each other during the past decade. A recent ABC News/Washington Post poll indicates unprecedented support. Results published March 18 show 58% of Americans now in favor of same-sex marriage, with 36% saying it should be illegal. A decade ago, 37% approved of gay marriage and 55% opposed it.

Statistics like these suggest that the risk for corporations isn’t what it once was. “The incident at the recent Starbucks shareholders meeting suggests that public stances are not without controversy,” said Gates, referring to widely publicized comments from one anti-gay marriage activist to Starbucks CEO Howard Schultz. “However, there’s little evidence that boycotts targeting companies like Starbucks and Disney have garnered sufficient support to make the companies reassess their supportive positions in favor of LGBT equality.”

As for the current brief, Marc Solomon, national campaign director of Freedom to Marry, the established U.S. advocacy group for same-sex marriage, asks: “What are [DOMA supporters] going to do, boycott 280 companies?”

Toward Diversity

One interesting question is why the issue of gay marriage has taken up so much psychic energy when one recent survey puts the number of Americans who identify as gay or lesbian at about 3.5%. That gay rights organizations are as well-organized and funded as they are is one reason. Some observers cite the AIDS crisis as a formative template for organizing succeeding battles.

But another factor, according to Wharton’s Moussa, is that the consciousness-raising surrounding same-sex marriage is part of a larger trend. “There is no question that corporate America is more focused on diversity in general,” he says. “I was recently at American Express, [which] has a chief diversity officer. I think it’s a time of greater diversity, which means more acceptance of other minorities.”

Beyond the practical business factors of competition for talent and streamlining costs and administration, much of the energy feeding change is being generated by the small, interpersonal interactions of gay and lesbian employees coming out on the job and elsewhere. “You meet parents on the soccer field who have the same concerns you do, and it really humanizes the issue. It presents the issue as a fact of life rather than an activist issue,” says the Boston Foundation’s Mahoney.

“Attitudes and practices are changing rapidly in corporations,” adds Steve Salbu, dean of the Georgia Institute of Technology’s Scheller College of Business and a former visiting professor at Wharton. “Gay-friendly policies and cultures are thriving in most Fortune 500 companies. Successful companies compete for top LGBT talent, as well as for LGBT customers, based in part on their reputation around LGBT policies.

“But the trend toward LGBT-friendly policies also reflects broader, rapidly changing attitudes,” adds Salbu, the only openly gay dean at a top business school. “As we’ve observed recently in Ohio Sen. Rob Portman’s altered stance on gay marriage, knowledge that some among one’s family and friends are gay can play a role in changing beliefs, as well as in changing policies and practices.” Portman recently came out in favor of gay marriage after announcing that one of his children is gay.

Progress, but Not Always Protection

But even today, many gays and lesbians work in environments where they do not feel comfortable outing themselves. “It’s one thing to have policies in place and that certainly has an impact, but you can’t legislate water-cooler conversation. We found that 50% of LGBT Americans are closeted on the job,” says Deena Fidas, deputy director of the Human Rights Campaign’s Workplace Project. “Culture and policy are not one and the same.”

The American workplace is not completely safe for LGBT employees, notes Gates. “Most large corporations now have LGBT supportive policies and procedures, but ‘legal’ equality does not always translate into ‘social’ equality. Further, the bulk of jobs in the U.S. are in small- and medium-sized companies that are much more mixed in terms of LGBT-supportive policies and workplace climates. The majority of states still do not provide protection against discrimination based on sexual orientation or gender identity in private employment. For many people who may experience discrimination as a result of their sexual orientation or gender identity, regardless of employer policies, options for seeking legal remedies to address the discrimination are quite limited.”

Even so, Fidas says, the number of businesses endorsing same-sex marriage is a “huge and unprecedented” development. “Eight or nine years ago, it was still a rarity for business to weigh in on marriage.” Indeed, the Human Rights Campaign’s 2013 Corporate Equality Index found that for the first time in its 11-year history, the majority of Fortune 500 companies now afford both sexual orientation and gender identity protection to employees.

It may be about fairness, but according to Wharton’s Moussa, it’s also about being practical: “Corporate America is all about getting along, working on teams, collaborating. If you start drawing lines in the sand, pretty soon you’re going to be working by yourself.”

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