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After listening to weeks of heated debate among those in the minority business community, the board of directors of the National Minority Suppliers Development Council recently announced changes in its guidelines that would lower its threshold for businesses to be qualified as minority-owned.
The NMSDC’s traditional 51% rule-requiring a business be at least 51% owned by minorities to be certified as “minority-owned” by the council-will remain for most companies. But members of the group voted February 1, 2000, to alter the nearly 28-year-old definition to include a new category of companies.
According to the new guidelines, publicly held companies can be just 30% minority-owned and retain their certifications. NMSDC officials say the rule change reflects the council’s commitment to keeping black businesses competitive in the changing economy. Council President Harriet Michel envisioned the new guidelines as a stimulus to growth. In order for minority companies to win contracts with big corporations, they must grow to provide an array of products and services. The biggest hurdle to minority business growth is the lack of access to capital, said NMSDC spokesperson Donna Long.
“The Growth Initiative creates a new category-certified minority-controlled firms-that can retain minority status and control while accepting equity capital from institutional investors. This will allow minority companies to grow and be more competitive,” says Michel.
The NMSDC is a nonprofit group of 3,500 major American corporations committed to doing a large portion of its business with minority and women-owned firms. The council certifies minority-owned businesses for its members, who in 1998 bought nearly $41 billion from over 15,000 minority-owned companies, according to the council.
Opponents of the rule change criticized the council, saying the new definition may mean the end of truly minority-owned enterprises. George Herrera, CEO of the Washington, D.C.-based U.S. Hispanic Chamber of Commerce, suggested the rise of “front” organizations, where minorities lead companies but are, in reality, no more than mouthpieces for white investors. But the 30% category does have its stipulations. Minorities must retain a majority of company voting stock and manage daily operations.
The U.S. Small Business Administration is opposed to the changes, and maintains its own 51% rule as mandated by federal law.
Earl G. Graves, publisher of black enterprise magazine and CEO of New York-based Earl G. Graves Ltd., says the NMSDC should not be able to single-handedly redefine the state of minority business. “I continue to take issue with the idea that a single organization…can single-handedly decide that [it] will create a category of minority business ownership that goes contrary to the law of the land…,” said Graves.
Many major minority groups, including the NAACP and the National Urban League, expressed their concern over the seemingly lowered standards. In November, a coalition of officials, including Graves, NAACP President and CEO Kweisi Mfume, NUL President and CEO Hugh B. Price and National Council of Negro Women Chair Dorothy I. Height, engaged in an editorial-writing campaign in national newspapers to protest the proposed changes. At that time, the proposal was to be voted on at the NMSDC’s annual convention. But
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